<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-Q/A
                                (Amendment No. 1)
(Mark One)

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

           For the quarterly period ended July 31, 1998

                                       OR

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

           For the transition period from _____________ to ______________

                            METALLURG HOLDINGS, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

             DELAWARE                                       23-2967577
  --------------------------------                     ---------------------
  (State or Other Jurisdiction of                        (I.R.S. Employer
   Incorporation or Organization)                       Identification No.)

                           800 The Safeguard Building
                              435 Devon Park Drive
                            Wayne, Pennsylvania 19087
                   ------------------------------------------
                    (Address of Principal Executive Offices)
                                   (Zip Code)

                                 (610) 293-0838
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 Yes [  ]   No [ X ]

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
                               Yes  X       No
                                  -----       -----
At September 9, 1998, the outstanding capital of Metallurg Holdings, Inc. was
comprised of 5,202.335 shares of Series A Voting Convertible Preferred Stock and
4,500 shares of Series B Non-Voting Preferred Stock, $.01 par value.


<PAGE>

                             EXPLANATORY INFORMATION

This Quarterly Report on Form 10-Q/A (Amendment No. 1) for the period ended 
July 31, 1998 is being filed to reflect a change in the accounting by 
Metallurg Holdings, Inc. for its purchase of Metallurg, Inc. on July 13, 1998 
and its calculation of goodwill in accordance with APB No. 16, "Business 
Combinations". Previously, a $3.5 million payment to cancel compensatory 
options of Metallurg, Inc. was recorded as merger-related costs in the period 
June 10, 1998 (inception) to July 31, 1998 and Metallurg Holdings, Inc. 
reported a net loss of approximately $4.6 million. The condensed consolidated 
financial statements of Metallurg Holdings, Inc. and related notes thereto 
are amended and restated in their entirety to reflect the $3.5 million 
payment, net of taxes of $0.8 million, as a component of the purchase price. 
Upon revision, (i) the excess of the purchase price over the fair value of 
the net assets acquired is approximately $102 million, versus $99.2 million 
previously reported, (ii) goodwill amortization, net of tax, has been 
adjusted in the period ended July 31, 1998 and (iii) the net loss for the 
period is reduced to approximately $1.8 million.








                                       2
<PAGE>

             METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES

                                      INDEX
<TABLE>
<CAPTION>
                                                                                                    Page
No.                                                                                                 ----
---
<S>                                                                                                 <C>
Part I.    FINANCIAL INFORMATION:

           Item 1 -  Financial Statements (Unaudited)

                Condensed Statement of Consolidated Operations of Metallurg Holdings,
                Inc. for the Period June 10, 1998 (inception) to July 31, 1998                        4

                Condensed Statements of Consolidated Operations of Metallurg, Inc.
                for the Quarter and the Two Quarters Ended July 31, 1998 and for
                the Quarters Ended July 31, 1997 and March 31, 1997                                   5

                Condensed Statement of Consolidated Comprehensive Income of
                Metallurg Holdings, Inc. for the Period June 10, 1998 (inception) to
                July 31, 1998                                                                         6

                Condensed Statements of Consolidated Comprehensive Income of
                Metallurg, Inc. for the Quarter and the Two Quarters Ended July 31,
                1998 and for the Quarters Ended July 31, 1997 and March 31, 1997                      7

                Condensed Consolidated Balance Sheet of Metallurg Holdings at
                July 31, 1998                                                                         8

                Condensed Consolidated Balance Sheets of Metallurg, Inc. at
                July 31, 1998 and January 31, 1998                                                    9

                Condensed Consolidated Balance Sheet of Metallurg, Inc. at
                March 31, 1997                                                                        10

                Condensed Statement of Consolidated Cash Flows of Metallurg Holdings,
                Inc. for the Period June 10, 1998 (inception) to July 31, 1998                        11

                Condensed Statements of Consolidated Cash Flows of Metallurg, Inc.
                for the Two Quarters Ended July 31, 1998 and for the Quarters Ended
                July 31, 1997 and March 31, 1997                                                      12

                Notes to Condensed Unaudited Consolidated Financial Statements                       13-17

           Item 2 - Management's Discussion and Analysis of Financial 
                Condition and Results of Operations                                                  18-23


Part II.   OTHER INFORMATION

           Item 6. (a)  EXHIBITS                                                                      24

                6. (b)  REPORT ON FORM 8-K                                                            24


           Signature Page                                                                             25
</TABLE>

                                       3

<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                   For the Period
                                                                                    June 10, 1998
                                                                                   (inception) to
                                                                                    July 31, 1998
                                                                                --------------------
<S>                                                                             <C>
Total revenue ................................................................           $ 2,274
                                                                                --------------------
Operating costs and expenses:
    Cost of sales ............................................................             2,174
    Selling, general and administrative expenses .............................               786
    Merger-related costs .....................................................               875
                                                                                --------------------
    Total operating costs and expenses .......................................             3,835
                                                                                --------------------

      Operating loss .........................................................            (1,561)

Interest expense, net ........................................................               833
                                                                                --------------------

Loss before income tax provision .............................................            (2,394)

Income tax benefit ...........................................................               574
                                                                                --------------------
Net loss .....................................................................           $(1,820)
                                                                                --------------------
                                                                                --------------------
</TABLE>













       See notes to condensed unaudited consolidated financial statements

                                       4
<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
METALLURG, INC. CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                    Predecessor
                                                          Reorganized Company                          Company
                                              ---------------------------------------------------  ----------------
                                               Quarter        Two Quarters        Quarter              Quarter
                                                Ended             Ended            Ended                Ended
                                               July 31,          July 31,         July 31,             March 31,
                                                 1998             1998              1997                 1997
                                              (Unaudited)      (Unaudited)       (Unaudited)           (Audited)
                                            ---------------  ---------------   ---------------     ----------------
<S>                                         <C>              <C>               <C>                 <C>              

Total revenue ..............................  $  170,013       $  337,843       $  166,879           $  155,587
                                            ---------------  ---------------   ---------------     ----------------
Operating costs and expenses:
   Cost of sales ...........................     142,671          281,679          142,135              134,060
   Selling, general and administrative
     expenses ..............................      15,147           29,908           14,427               15,046
   Merger-related costs ....................       4,416            4,416                -                    -
                                            ---------------  ---------------   ---------------     ----------------
   Total operating costs and expenses ......     162,234          316,003          156,562              149,106
                                            ---------------  ---------------   ---------------     ----------------
      Operating income .....................       7,779           21,840           10,317                6,481

Other income (expense):
   Other income (expense), net .............        (333)             545              (76)               3,179     
   Interest expense, net ...................      (2,544)          (4,616)          (1,479)                (245)
   Reorganization expense ..................           -                -                -               (2,663)
   Fresh-start revaluation .................           -                -                -                5,107
                                            ---------------  ---------------   ---------------     ----------------

Income before income tax provision
   and extraordinary item ..................       4,902           17,769            8,762               11,859

Income tax provision (benefit) .............       3,404            9,481            5,111               (3,063)
                                            ---------------  ---------------   ---------------     ----------------
Net income before extraordinary item .......       1,498            8,288            3,651               14,922
Extraordinary item .........................           -                -                -               43,032
                                            ---------------  ---------------   ---------------     ----------------
Net income .................................  $    1,498        $   8,288       $    3,651           $   57,954
                                            ---------------  ---------------   ---------------     ----------------
                                            ---------------  ---------------   ---------------     ----------------
</TABLE>

       See notes to condensed unaudited consolidated financial statements.

                                       5

<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)
(IN THOUSANDS)
-------------------------------------------------------------------------------




<TABLE>
<CAPTION>
                                                                                For the Period
                                                                                June 10, 1998
                                                                                (inception) to
                                                                                July 31, 1998
                                                                                ----------------
<S>                                                                             <C>
Net loss......................................................................     $   (1,820)
Other comprehensive income ...................................................              -
                                                                                ----------------
Comprehensive loss ...........................................................     $   (1,820)
                                                                                ----------------
                                                                                ----------------
</TABLE>













       See notes to condensed unaudited consolidated financial statements


                                       6

<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
METALLURG, INC. CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE
  INCOME
(IN THOUSANDS)
-------------------------------------------------------------------------------

                                                                             
<TABLE>
<CAPTION>
                                                             Reorganized Company                     Predecessor
                                               -------------------------------------------------       Company
                                                                                                   --------------
                                                  Quarter        Two Quarters         Quarter          Quarter 
                                                   Ended            Ended              Ended            Ended
                                                  July 31,         July 31,           July 31,         March 31, 
                                                    1998             1998              1997              1997
                                                 (Unaudited)     (Unaudited)        (Unaudited)       (Audited)
                                               --------------   --------------    --------------   --------------
<S>                                            <C>              <C>               <C>              <C>
Net income .....................................  $   1,498       $   8,288          $   3,651        $  57,954

Other comprehensive income (loss):
  Foreign currency translation
    adjustments (a).............................     (1,152)         (1,076)             1,245           (1,224)
                                                --------------  --------------     --------------   --------------

Comprehensive income ...........................  $     346       $   7,212          $   4,896        $  56,730
                                                --------------  --------------     --------------   --------------
                                                --------------  --------------     --------------   --------------
</TABLE>




(a)  The Company does not provide for U.S. income taxes on foreign currency
     translation adjustments because it does not provide for such taxes on
     undistributed earnings of foreign subsidiaries.






       See notes to condensed unaudited consolidated financial statements




                                       7

<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                  July 31,
                                                                                    1998
                                                                              ---------------
<S>                                                                           <C>
ASSETS
Current assets:
   Cash and cash equivalents ...............................................     $   46,482
   Accounts and notes receivable, net ......................................         95,192
   Inventories .............................................................        121,651
   Other assets ............................................................         16,055
                                                                              ----------------
      Total current assets .................................................        279,380
Property, plant and equipment, net .........................................         43,851
Goodwill ...................................................................        101,804
Other assets ...............................................................         23,609
                                                                              ----------------
      TOTAL ................................................................     $  448,644
                                                                              ----------------
                                                                              ----------------

LIABILITIES
Current liabilities:
   Short-term debt and current portion of long-term debt ...................     $    1,868
   Trade payables ..........................................................         59,226
   Accrued expenses ........................................................         32,938
   Other current liabilities ...............................................          9,262
                                                                              ----------------
      Total current liabilities ............................................        103,294
                                                                              ----------------

Long-term debt .............................................................        168,234
Accrued pension liabilities ................................................         38,134
Environmental liabilities, net .............................................         37,161
Other liabilities ..........................................................          6,618
                                                                              ----------------
      Total long-term liabilities ..........................................        250,147
                                                                              ----------------

      Total liabilities ....................................................        353,441
                                                                              ----------------

SHAREHOLDERS' EQUITY
Common and preferred stock .................................................              -
Additional paid-in capital .................................................         97,023
Retained earnings (deficit) ................................................         (1,820)
                                                                              ----------------
   Total shareholders' equity ..............................................         95,203
                                                                              ----------------
      TOTAL ................................................................     $  448,644
                                                                              ----------------
                                                                              ----------------
</TABLE>

       See notes to condensed unaudited consolidated financial statements.

                                       8

<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
METALLURG, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                           Reorganized Company
                                                                 --------------------------------------
                                                                     July 31,             January 31,
                                                                       1998                  1998
                                                                 ----------------      ----------------
<S>                                                              <C>                   <C>
ASSETS
Current assets:
   Cash and cash equivalents ..................................     $    44,423            $   43,003
   Accounts and notes receivable, net .........................          95,192                83,931
   Inventories ................................................         121,651               117,589
   Other assets ...............................................          15,708                14,239
                                                                 ----------------      ----------------
      Total current assets ....................................         276,974               258,762
Property, plant and equipment, net ............................          43,851                41,502
Other assets ..................................................          20,505                19,522
                                                                 ----------------      ----------------
      TOTAL ...................................................     $   341,330            $  319,786
                                                                 ----------------      ----------------
                                                                 ----------------      ----------------
LIABILITIES
Current liabilities:
   Short-term debt and current portion
      of long-term debt .......................................     $     1,868            $    4,016
   Trade payables .............................................          59,226                51,308
   Accrued expenses ...........................................          31,559                30,575
   Other current liabilities ..................................           9,262                 5,106
                                                                 ----------------      ----------------
      Total current liabilities ...............................         101,915                91,005
                                                                 ----------------      ----------------
Long-term debt ................................................         102,641               103,133
Accrued pension liabilities ...................................          38,134                38,351
Environmental liabilities, net ................................          37,161                38,527
Other liabilities .............................................           6,618                 6,999
                                                                 ----------------      ----------------
      Total long-term liabilities .............................         184,554               187,010
                                                                 ----------------      ----------------

      Total liabilities .......................................         286,469               278,015
                                                                 ----------------      ----------------

SHAREHOLDERS' EQUITY
Common stock ..................................................               -                    50
Additional paid-in capital ....................................          46,137                40,209
Accumulated other comprehensive income (loss)..................            (403)                  673
Retained earnings .............................................           9,127                   839
                                                                 ----------------      ----------------
   Total shareholders' equity .................................          54,861                41,771
                                                                 ----------------      ----------------
      TOTAL ...................................................     $   341,330            $  319,786
                                                                 ----------------      ----------------
                                                                 ----------------      ----------------
</TABLE>

       See notes to condensed unaudited consolidated financial statements.


                                       9
<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
METALLURG, INC. CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

The effect of the consummation of the Plan (as defined herein) and the
implementation of fresh-start reporting on Metallurg's consolidated balance
sheet as of March 31, 1997 was as follows:


<TABLE>
<CAPTION>
                                                                                                  Adoption of           Opening
                                                    Prior to Joint Plan    Effects of Joint       Fresh-Start           Balance
                                                       Effectiveness           Plan (a)            Reporting             Sheet
                                                    -------------------  ------------------    ------------------  -----------------
<S>                                                  <C>                  <C>                  <C>                 <C>
  ASSETS
  Current Assets:
     Cash and cash equivalents ..................       $      66,670      $     (36,330)                            $      30,340
     Trade receivable, less allowance for
       doubtful accounts ........................              94,255               (105)                                   94,150
     Inventories ................................             109,258                  -                                   109,258
     Prepaid expenses and other current assets ..              16,382                180          $     (250)  (b)          16,312
     Assets held for sale .......................                 341                  -                 839   (b)           1,180
                                                    -------------------  ------------------     ------------------  ----------------
        Total current assets ....................             286,906            (36,255)                589               251,240

  Investments in affiliates......................               2,779                  -              (1,318)  (c)           1,461
  Property, plant and equipment, net ............              42,348                  -              (3,441)  (c)          38,907
  Other assets ..................................              14,243                614                (761)  (c)          14,096
                                                    -------------------  ------------------     ------------------  ----------------
        Total ...................................       $     346,276      $     (35,641)         $   (4,931)        $     305,704
                                                    -------------------  ------------------     ------------------  ----------------
                                                    -------------------  ------------------     ------------------  ----------------
  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
  Current Liabilities:
     Short-term debt ............................       $      13,500                                                $      13,500
     Current portion of long-term debt ..........               1,277                                                        1,277
     Trade payables .............................              55,947                                                       55,947
     Accrued expenses ...........................              22,736      $       2,338          $      277   (b)          25,351
     Current portion of environmental  
      liabilities ...............................               5,270                  -                   -                 5,270
     Taxes payable ..............................               7,136               (557)                  -                 6,579
                                                    -------------------  ------------------     ------------------  ----------------
        Total current liabilities ...............             105,866              1,781                 277               107,924
                                                    -------------------  ------------------     ------------------  ----------------

  Long-term Liabilities:
     Long-term debt .............................               4,248             47,463                   -                51,711
     Accrued pension liabilities ................              39,610             (1,345)              2,825   (b)          41,090
     Environmental liabilities, net .............              37,495              5,370                   -                42,865
     Other liabilities ..........................              10,293                  -               1,821   (b)          12,114
                                                    -------------------  ------------------     ------------------  ----------------
        Total long-term liabilities .............              91,646             51,488               4,646               147,780
                                                    -------------------  ------------------     ------------------  ----------------
  Liabilities Subject to Compromise .............             180,247           (180,247)                  -                     -
                                                    -------------------  ------------------     ------------------  ----------------

        Total liabilities .......................             377,759           (126,978)              4,923               255,704 
                                                    -------------------  ------------------     ------------------  ----------------
  Commitments and Contingencies .................

  Shareholders' Equity (Deficit): 
     Common stock ...............................                  20                 30                   -                    50
     Additional paid in capital .................                   -             49,950                   -                49,950
     Cumulative foreign currency
         translation adjustment .................              14,531                 56             (14,587)  (d)               -
     Retained (deficit) earnings ................             (46,034)            41,301               4,733   (d)               -
                                                    -------------------  ------------------     ------------------  ----------------
        Total shareholders' equity (deficit) ....             (31,483)            91,337              (9,854)               50,000
                                                    -------------------  ------------------     ------------------  ----------------

        Total ...................................       $     346,276      $     (35,641)         $   (4,931)        $     305,704
                                                    -------------------  ------------------     ------------------  ----------------
                                                    -------------------  ------------------     ------------------  ----------------
</TABLE>


      NOTES:

(a)   To record the distribution of cash and securities, the settlement of
      liabilities subject to compromise and other transactions in accordance
      with the Plan.
(b)   To adjust assets and liabilities to their estimated fair value.
(c)   To reduce long-term assets for the excess of the fair value of
      identifiable net assets over the total reorganization value as of the
      Effective Date.
(d)   To eliminate the accumulated deficit and cumulative foreign currency
      translation adjustment in accordance with fresh-start reporting.

                                       10
<PAGE>


METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                   For the Period
                                                                                   June 10, 1998
                                                                                  (inception) to
                                                                                   July 31, 1998
                                                                                -------------------
<S>                                                                             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................................    $    (1,820)
Adjustments to reconcile net loss to net cash
 provided by operating activities:
  Amortization of executive stock awards ........................................           354
  Depreciation and amortization .................................................           256
  Interest accretion on Discount Notes ..........................................           416
                                                                                -------------------
    Total .......................................................................          (794)

Change in operating assets and liabilities:
  Increase in trade receivables .................................................           162
  Increase in trade payables and accrued expenses ...............................         1,379
                                                                                -------------------
    Net cash  provided by operating activities ..................................           747
                                                                                -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment ....................................            (3)
  Cash paid for acquisition of Metallurg, Inc., net of cash acquired ............      (112,345)
                                                                                -------------------
    Net cash used in investing activities .......................................      (112,348)
                                                                                -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Capital contribution ..........................................................        97,023
  Proceeds from long-term debt, net .............................................        62,895
  Other .........................................................................        (1,835)
                                                                                -------------------
     Net cash provided by financing activities ..................................       158,083
                                                                                -------------------

Net increase in cash and cash equivalents .......................................        46,482
Cash and cash equivalents - beginning of period .................................             -
                                                                                -------------------
Cash and cash equivalents - end of period .......................................   $    46,482
                                                                                -------------------
                                                                                -------------------
</TABLE>


       See notes to condensed unaudited consolidated financial statements


                                       11

<PAGE>



METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
METALLURG, INC. CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                       Predecessor
                                                                      Reorganized Company                Company
                                                                ----------------------------------  -----------------
                                                                   Two Quarters       Quarter            Quarter
                                                                      Ended            Ended              Ended
                                                                     July 31,         July 31,           March 31,
                                                                       1998             1997               1997
                                                                -----------------  ----------------  -----------------
<S>                                                             <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................      $     8,288      $     3,651         $   57,954
Adjustments to reconcile net income to net cash provided by
operating activities: ........................................
  Executive stock awards .....................................              750              500                500
  Extraordinary item .........................................                -                -            (43,032)
  Fresh-start revaluation ....................................                -                -             (5,107)
  Depreciation and amortization ..............................            4,282            1,962              2,143
  Gain on sale of assets .....................................             (592)              (6)            (3,266)
  Reorganization expense, net of payments ....................             (144)          (3,989)             1,538
  Deferred income taxes ......................................            2,029            1,661             (3,767)
  Provision for doubtful accounts ............................              606               61                162
  Provision for environmental costs, net of payments .........           (1,006)            (393)              (256)
  Other, net .................................................            2,791            1,628              3,057
                                                                -----------------  --------------     ---------------
    Total ....................................................           17,004            5,075              9,926

Change in operating assets and liabilities:
  (Increase) decrease in trade receivables ...................          (12,596)           8,032            (20,272)
  Increase in inventories ....................................           (5,774)          (8,953)            (6,120)
  Decrease (increase) in other current assets ................            1,586            1,769               (355)
  Increase (decrease) in trade payables and accrued expenses .           16,542           (2,890)            18,895
  Decrease in prepetition liabilities ........................                -                -                (39)
  Receipt from environmental trust, net ......................                -                -              5,928
  Other assets and liabilities, net ..........................           (8,270)            (523)            (1,547)
                                                                -----------------  --------------     ---------------
    Net cash provided by operating activities ................            8,492            2,510              6,416
                                                                -----------------  --------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment .................           (6,998)          (3,309)            (2,774)
  Proceeds from asset sales ..................................            1,286            1,205              4,966
  Other, net .................................................           (2,254)              33                (25)
                                                                -----------------  --------------     ---------------
    Net cash (used in) provided by investing activities ......           (7,966)          (2,071)             2,167
                                                                -----------------  --------------     ---------------

CASH FLOWS FROM FINANCING, MERGER AND REORGANIZATION
  ACTIVITIES:
  Capital contribution from Safeguard ........................            3,541                -                  -
  Cash distribution pursuant to plan of reorganization .......                -                -            (59,366)
  Drawdown of prepetition letters of credit ..................                -                -              9,700
  Proceeds from long-term debt, net ..........................                -                -              8,100
  Net short-term borrowings...................................           (1,851)          (1,608)             1,062
  Repayment of long-term debt ................................             (548)             (83)              (487)
                                                                -----------------  --------------     ---------------
    Net cash provided by (used in) financing, merger and
       reorganization activities .............................            1,142           (1,691)           (40,991)
                                                                -----------------  --------------     ---------------
Effects of exchange rate changes on cash and cash
  equivalents ................................................             (248)              75               (526)
                                                                -----------------  --------------     ---------------
Net increase (decrease) in cash and cash equivalents .........            1,420           (1,177)           (32,934)
Cash and cash equivalents - beginning of period ..............           43,003           30,340             63,274
                                                                -----------------  --------------     ---------------
Cash and cash equivalents - end of period ....................      $    44,423      $    29,163         $   30,340
                                                                -----------------  --------------     ---------------
                                                                -----------------  --------------     ---------------
</TABLE>

      See notes to condensed unaudited consolidated financial statements.

                                       12
<PAGE>

METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION

      This Quarterly Report on Form 10-Q/A (Amendment No. 1) for the period 
      ended July 31, 1998 is being filed to reflect a change in the 
      accounting by Metallurg Holdings, Inc. ("Metallurg Holdings") for its 
      purchase of Metallurg, Inc. on July 13, 1998 and its calculation of 
      goodwill in accordance with APB No. 16, "Business Combinations". 
      Previously, a $3.5 million payment to cancel compensatory options of 
      Metallurg, Inc. was recorded as merger-related costs in the period June 
      10, 1998 (inception) to July 31, 1998 and Metallurg Holdings, Inc. 
      reported a net loss of approximately $4.6 million. The condensed 
      consolidated financial statements of Metallurg Holdings, Inc. and 
      related notes thereto are amended and restated in their entirety to 
      reflect the $3.5 million payment, net of taxes of $0.8 million, as a 
      component of the purchase price. Upon revision, (i) the excess of the 
      purchase price over the fair value of the net assets acquired is 
      approximately $102 million, versus $99.2 million previously reported, 
      (ii) goodwill amortization, net of tax, has been adjusted in the period 
      ended July 31, 1998 and (iii) the net loss for the period is reduced to 
      approximately $1.8 million.

      Metallurg Holdings' accompanying condensed unaudited consolidated 
      financial statements as of July 31, 1998 and for the period ended July 
      31, 1998 include the accounts of Metallurg Holdings and its 
      majority-owned subsidiaries (collectively, the "Company"). Metallurg, 
      Inc.'s condensed consolidated financial statements for the quarters 
      ended July 31, 1998 (unaudited), July 31, 1997 (unaudited), and March 
      31, 1997 (audited), the two quarters ended July 31, 1998 (unaudited) 
      and as of July 31, 1998 (unaudited), January 31, 1998 (audited) and 
      March 31, 1997 (audited), include the accounts of Metallurg, Inc. and 
      its majority-owned subsidiaries ("Metallurg"). These financial 
      statements have been prepared in accordance with generally accepted 
      accounting principles for interim financial information pursuant to 
      Accounting Principles Board ("APB") Opinion No. 28. Accordingly, they 
      do not include all of the information and footnotes required by 
      generally accepted accounting principles for complete financial 
      statements. In the opinion of management, all adjustments (consisting 
      of normal recurring adjustments) considered necessary for a fair 
      presentation have been included. Operating results for the interim 
      periods presented are not necessarily indicative of the results to be 
      expected for a full year.

      On February 26, 1997, the Fourth Amended and Restated Joint Plan of 
      Reorganization (the "Plan") of Metallurg, Inc. and one of its 
      subsidiaries, Shieldalloy Metallurgical Corporation ("Shieldalloy"), 
      was confirmed by the U.S. Bankruptcy Court for the Southern District of 
      New York. Transactions contemplated by the Plan were consummated on 
      April 14, 1997 (the "Effective Date"). For financial reporting 
      purposes, Metallurg has reflected the effects of the Plan consummation 
      as of March 31, 1997. As a result of the consummation of the Plan and 
      the adoption of fresh-start reporting under the American Institute of 
      Certified Public Accountants' ("AICPA") Statement of Position 90-7, 
      "Financial Reporting by Entities in Reorganization Under the 
      Bankruptcy Code", financial statements for the quarter ended March 31, 
      1997, which includes the effects of the adoption of fresh-start 
      reporting and consummation of the Plan are referred to as the 
      "Predecessor Company". Financial statements for periods subsequent to 
      March 31, 1997 are referred to as the "Reorganized Company". The 
      financial statements of Metallurg after consummation of the Plan are 
      not directly comparable to Metallurg's financial statements of prior 
      periods.

      Metallurg Holdings and Metallurg, the two holding companies, report on a
      fiscal year ending January 31. The operating subsidiaries report on a
      one-month lag. Accordingly, the period ended July 31, 1998 includes (i)
      the results of Metallurg Holdings from its inception (June 10, 1998) to
      July 31, 1998 (a loss of $653,000) and (ii) the results of Metallurg,
      Inc., the holding company, for the period subsequent to the Merger, as
      defined below (a loss of $1,167,000). The results of Metallurg's operating
      subsidiaries are not included in

                                       13
<PAGE>

      these results. The results of operations of Metallurg for the quarter
      ended July 31, 1998 includes operating subsidiaries' results for the
      period April 1, 1998 to June 30, 1998 and Metallurg, Inc.'s, the holding
      company's, results for the period May 1, 1998 to July 31, 1998. The
      results of operations of Metallurg for the two quarters ended July 31,
      1998 include the operating subsidiaries' results from January 1, 1998 to
      June 30, 1998 and Metallurg, Inc.'s, the holding company's results from
      February 1, 1998 to July 31, 1998. The consolidated balance sheet at July
      31, 1998 reflects the positions of Metallurg Holdings and Metallurg, Inc.
      at July 31, 1998 and of Metallurg's operating subsidiaries at June 30,
      1998. Metallurg changed its reporting period on April 1, 1997.
      Accordingly, the quarter ended July 31, 1997 includes three months of
      operating results for the operating subsidiaries plus, in this
      transitional period, an additional month of operating results of
      Metallurg, Inc., the holding company, in the amount of an $803,000 loss.

2.    THE ACQUISITION TRANSACTIONS

      Metallurg Holdings, a Delaware corporation formed on June 10, 1998, is 
      a wholly owned subsidiary of a group of investors led by and including 
      Safeguard International Fund, L.P. ("Safeguard"), an international 
      private equity fund that invests primarily in equity securities of 
      companies in process industries. On July 13, 1998, Metallurg 
      Acquisition Corp., a wholly owned subsidiary of Metallurg Holdings, 
      merged with and into Metallurg, Inc., with Metallurg, Inc. being the 
      surviving company and Metallurg Holdings becoming the sole parent of 
      Metallurg, Inc. (the "Merger"). Metallurg, founded in 1911, is a 
      leading international producer and seller of high-quality metal alloys 
      and specialty metals used by manufacturers of steel, aluminum, 
      superalloys and chemicals and other metal consuming industries.

      At the time of the Merger, each outstanding share of Metallurg common
      stock, par value $0.01 per share, was converted into the right to receive
      $30 in cash, representing an aggregate cash price of approximately $152.2
      million (including payments for cancellation of compensatory options).
      Metallurg Holding's purchase of Metallurg was recorded under the purchase
      method of accounting in accordance with APB Opinion No. 16, "Business
      Combinations". The total value of the transaction, including existing
      indebtedness and environmental, pension and other liabilities, net of
      cash, was approximately $300 million. The excess of the purchase price
      over the fair value of the net assets acquired is approximately $102
      million and is being amortized over a period of 20 years.

      In order to finance the Merger, (i) Safeguard and certain of its 
      limited partners contributed approximately $97.0 million of capital to 
      Metallurg Holdings (the "Equity Contribution"); and (ii) Metallurg 
      Holdings received approximately $62.9 million net proceeds upon 
      consummation of the offering of $121.0 million aggregate principal 
      amount at maturity of 12 3/4% Senior Discount Notes due 2008 (the 
      "Discount Notes") in a Rule 144A private placement to qualified 
      institutional investors (the "Offering"). As used herein, the term 
      "Acquisition Transactions" means the Equity Contribution, the 
      Offering, the Merger, the Consent Solicitation (as defined herein) and 
      the execution of a supplemental indenture to the indenture governing 
      Metallurg, Inc.'s 11% Senior Notes due 2007 (the "Senior Notes").

      In connection with the Merger, Metallurg received the consents (the
      "Consent Solicitation") of 100% of the registered holders of its Senior
      Notes to a one-time waiver of the change of control provisions of the
      Senior Note Indenture to make such provisions inapplicable to the Merger
      and to amend the definition of "Permitted Holders" under the Senior Note
      Indenture to reflect the post-Merger ownership of Metallurg.

      For further information, see the financial statements and footnotes
      thereto included in Metallurg, Inc.'s Form 10-Q for the quarter ended July
      31, 1998 and report on Form 10-K for the period ended January 31, 1998.


                                       14
<PAGE>

3.    CHANGE OF CONTROL

      Pursuant to existing employment agreements between Metallurg and Michael
      A. Standen, J. Richard Budd, Michael A. Banks, Barry C. Nuss and Eric L.
      Schondorf, each of these individuals is, in certain circumstances,
      entitled to payments of $1.2 million, $474,300, $321,300, $321,300 and
      $313,650, respectively, if their employment is terminated by them or by
      the surviving company in accordance with the terms of their respective
      employment agreements following the Merger. See Metallurg's Annual Report
      on Form 10-K for the year ended January 31, 1998 which has been filed with
      the Securities and Exchange Commission for a discussion of these
      employment agreements and of certain other benefits to which these
      employees may become entitled in the event of their termination.

      As of August 10, 1998, Mr. Standen resigned as Metallurg's President and
      chief executive officer and therefore became entitled to the payments set
      forth in his contract, including the payments described above. No other
      member of management has agreed to waive his right to receive the payments
      described above and, therefore additional payments may need to be made
      under existing contractual arrangements as described above.

4.    CAPITALIZATION

      The total number of shares of all classes of stock which Metallurg
      Holdings is authorized to issue is 50,000 shares, of which 30,000 shares
      shall be Common Stock, $.01 par value ("Common Stock"), 10,000 shares
      shall be Series A Voting Convertible Preferred Stock, $.01 par value
      ("Series A Preferred Stock") and 10,000 shares shall be Series B
      Non-Voting Preferred Stock, $.01 par value ("Series B Preferred Stock").
      At July 31, 1998, no Common Stock was issued and outstanding; however,
      5,202.335 shares of Series A Preferred Stock and 4,500 shares of Series B
      Preferred Stock were issued and outstanding.

5.    EARNINGS PER SHARE

      The presentation of earnings per share is not meaningful since 100% of the
      capital stock of the Company is owned by a group of private investors led
      by and including Safeguard.

6.    INVENTORIES

      Inventories, net of reserves, consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                   Metallurg
                                                                    Holdings                Metallurg
                                                                 --------------  -------------------------------
                                                                    July 31,       January 31,       March 31,
                                                                     1998             1998             1997
                                                                 --------------  --------------   --------------
<S>                                                              <C>             <C>              <C>
           Raw materials ......................................     $   29,751     $   32,938        $  21,769
           Work in process ....................................          2,551          1,981            2,330
           Finished goods .....................................         84,523         77,473           80,500
           Other ..............................................          4,826          5,197            4,659
                                                                 --------------  --------------   --------------
              Total ...........................................     $  121,651     $  117,589        $ 109,258
                                                                 --------------  --------------   --------------
                                                                 --------------  --------------   --------------
</TABLE>

                                       15
<PAGE>


7.    PRO FORMA RESULTS

      The pro forma information presented here is based upon the historical 
      financial statements of Metallurg included elsewhere herein. The pro 
      forma information illustrate the estimated effects of (i) the adoption 
      of fresh-start reporting following the consummation of the Plan, (ii) 
      the issuance of the Senior Notes of Metallurg due 2007 and the 
      application of the proceeds related thereto, (iii) the issuance of the 
      12 3/4% Senior Discount Notes of Metallurg Holdings due 2008 and (iv) 
      the Merger and the transactions related thereto (collectively, the 
      "Pro Forma Transactions"), as if each of the listed transactions had 
      occurred as of January 1, 1997.

<TABLE>
<CAPTION>
                                                               Two Quarters     Quarter      Quarter
                                                                  Ended          Ended        Ended
                                                                 July 31,       July 31,     March 31,
                                                                   1998           1997         1997
                                                              -------------  ------------- -------------
<S>                                                             <C>            <C>           <C>       
      Revenues ...............................................  $  337,843     $  166,879    $  155,587
      Operating income .......................................  $   23,934     $    8,534    $    6,010
      Net income (loss) ......................................  $    5,455     $   (2,318)   $    2,667
</TABLE>

      The pro forma financial information presented is not necessarily
      indicative of either the results of operations that would have occurred
      had the Pro Forma Transactions taken place at the beginning of the
      respective periods or the future operating results of the Company.

      This Merger has been accounted for under the purchase method of accounting
      and accordingly, the results of operations of Metallurg have been included
      in the accompanying consolidated financial statements since the date of
      the Merger. The cost of the Merger was allocated on the basis of the
      estimated fair market value of the assets acquired and liabilities
      assumed. The purchase price allocation has been completed on a preliminary
      basis. Management does not believe that changes in the purchase price
      allocation will be material.

      The pro forma adjustments include the amortization of goodwill over 20
      years, interest expense due to the issuance of the Discount Notes and the
      retirement of certain debt, certain overhead expenses and the tax effect
      of the pro forma adjustments.


8.    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      In June 1997, the Financial Accounting Standards Board ("FASB") 
      issued Statement of Financial Accounting Standards ("SFAS") No. 131, 
      "Disclosure about Segments of an Enterprise and Related Information". 
      SFAS No. 131 requires the reporting of profit and loss, specific 
      revenue and expense items and assets for reportable segments. It also 
      requires the reconciliation of total segment revenues, total segment 
      profit or loss, total segment assets and other amounts disclosed for 
      segments to the corresponding amounts in the general purpose financial 
      statements. The Company will adopt this standard in the fourth quarter 
      of 1998.

      In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure 
      About Pensions and Other Postretirement Benefits". SFAS No. 132 
      changes current financial disclosure requirements from those that were 
      required under SFAS No. 87, "Employers' Accounting for Pensions", 
      SFAS No. 88, "Employers' Accounting for Settlement and Curtailments of 
      Defined Benefit Pension Plans and for Termination Benefits" and SFAS 
      No. 106, "Employers' Accounting for Postretirement Benefits Other Than 
      Pensions". The Company will adopt this standard in the fourth quarter 
      of 1998.

                                       16
<PAGE>

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
      Instruments and Hedging Activities". SFAS No. 133 establishes accounting
      and reporting standards for derivative instruments, including certain
      derivative instruments embedded in other contracts, and for hedging
      activities. It requires that an entity recognize all derivatives as either
      assets or liabilities in the statement of financial position and measure
      those instruments at fair value. SFAS No. 133 is effective for all fiscal
      quarters of fiscal years beginning after June 15, 1999. The Company is
      currently evaluating the impact SFAS No. 133 will have on its financial
      statements.

9.    COMMITMENTS AND CONTINGENCIES

      The Company continues defending various claims and legal actions arising
      in the normal course of business, including those relating to
      environmental matters. Management believes, based on the advice of
      counsel, that the outcome of such litigation will not have a material
      adverse effect on the Company's consolidated financial statements.


                                       17

<PAGE>


             METALLURG HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
    ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS



OVERVIEW - On July 13, 1998, Metallurg Holdings, a Delaware corporation formed
on June 10, 1998 by Safeguard and institutional co-investors, acquired
Metallurg. Effective March 31, 1997, Metallurg implemented fresh-start reporting
relating to its emergence from bankruptcy. Accordingly, all assets and
liabilities were restated to reflect their respective fair values and the
consolidated financial statements subsequent to that date include the related
amortization of credits associated with the fair value adjustments. The
consolidated financial statements after that date are those of a new reporting
entity and are not directly comparable to the pre-confirmation periods.

Metallurg's period ended July 31, 1998 includes operating subsidiaries' results
for the period April 1, 1998 to June 30, 1998 and the holding company's results
for the period May 1, 1998 to July 31, 1998. Metallurg's year-to-date financial
statements ended July 31, 1998 include the operating subsidiaries' results from
January 1, 1998 to June 30, 1998 and the holding company's results from February
1, 1998 to July 31, 1998. The consolidated balance sheet data of the Company at
July 31, 1998 reflect the financial position of Metallurg, Inc. and Metallurg
Holdings, Inc. at July 31, 1998 and the operating subsidiaries at June 30, 1998.

In addition, as a result of Metallurg's change in its fiscal year from a
calendar year to January 31, effective as of April 1, 1997, the consolidated
operating results of Metallurg for the quarter ending July 31, 1997 include the
results of Metallurg, Inc., the parent holding company, for the four month
period ended July 31, 1997 and the results of its operating subsidiaries (whose
fiscal years remain the calendar year) for the three month period ended June 30,
1997. The consolidated balance sheet data of the Company at July 31, 1997
reflect the financial position of Metallurg, Inc. at July 31, 1997 and the
operating subsidiaries at June 30, 1997.


METALLURG HOLDINGS' RESULTS OF OPERATIONS - PERIOD ENDED JULY 31, 1998

The net loss of $1.8 million includes the consolidation of Metallurg, Inc. for
the period subsequent to the acquisition (a loss of $1.2 million) plus interest
and certain general administrative expenses of the holding company.

METALLURG INC.'S RESULTS OF OPERATIONS - QUARTER ENDED JULY 31, 1998 COMPARED TO
QUARTER ENDED JULY 31, 1997 AND QUARTER ENDED APRIL 30, 1998 COMPARED TO QUARTER
ENDED MARCH 31, 1997

The following presentation of the Management, Discussion and Analysis for
results of operations are for Metallurg, Inc. and its consolidated subsidiaries
and do not include the results of operations for Metallurg Holdings. As stated
previously, Metallurg Holdings was formed on June 10, 1998 for the purpose of
consummating the acquisition of Metallurg, Inc., which was completed on July 13,
1998.

TOTAL REVENUES
Total revenues for Metallurg increased by 1.9%, from $166.9 million in the
quarter ended July 31, 1997 to $170.0 million in the quarter ended July 31,
1998. Increased volume and selling prices of ferrovanadium accounted for most of
the increase. In addition, revenues from increased sales of ferrotitanium and
chromium metal, due primarily to increased volume, more than offset a reduction
in sales of low carbon ferrochrome, ferroboron and polishing powders due
primarily to increased price competition.

                                       18
<PAGE>

Total revenues for Metallurg increased by 7.9%, from $155.6 million in the first
quarter of 1997 to $167.8 million in the first quarter of 1998. Increased volume
and selling prices of ferrovanadium accounted for substantially all of the
increase. In addition, revenues from increased sales of ferrotitanium and low
carbon ferrochrome, due primarily to increased volume, more than offset a
reduction in sales of ferroboron and polishing powders due to increased price
competition.

GROSS MARGINS
Gross margins increased from $24.7 million in the quarter ended July 31, 1997 to
$27.3 million in the quarter ended July 31, 1998, an increase of 10.5%, due
principally to the price and volume increases in ferrovanadium and
ferrotitanium. In aluminum master alloys and compacted products, a slight
decrease in volume was more than offset by improvements in product mix and
selling prices. Improvement in gross margins was partially offset by decreases
in low carbon ferrochrome margins resulting from lower selling prices and less
favorable product mix. The values of Metallurg's assets were reduced pursuant to
fresh-start reporting, reducing depreciation expense in each of the quarters
ended July 31, 1998 and 1997 by $0.3 million and increasing gross margins by an
equal amount.

Gross margins increased from $21.5 million in the first quarter of 1997 to $28.8
million in the first quarter of 1998, an increase of 33.9%, due principally to
the price and volume increases discussed above. In aluminum master alloys and
compacted products, a slight decrease in volume was more than offset by
improvements in product mix and selling prices, which offset negative production
variances. The values of Metallurg's assets were reduced pursuant to fresh-start
reporting, reducing depreciation expense in the quarter ended April 30, 1998 by
$0.3 million and increasing gross margins by an equal amount.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 
Selling, general and administrative expenses ("SG&A") increased from $14.4
million in the quarter ended July 31, 1997 to $15.1 million in the quarter ended
July 31, 1998, an increase of 5.0%. For the quarter ended July 31, 1997, SG&A
represented 8.7% of Metallurg's sales compared to 8.9% for the quarter ended
July 31, 1998. SG&A were higher in 1998 due partly to the accelerated
amortization of awards under the Stock Award and Stock Option Plan of Metallurg
issued in connection with the consummation of the Plan.

SG&A decreased from $15.0 million in the first quarter of 1997 to $14.8 million
in the first quarter of 1998, a decrease of 1.9%. For the first quarter of 1997,
SG&A represented 9.7% of Metallurg's sales compared to 8.8% for the first
quarter of 1998. SG&A was higher in 1997 due to increased bonus accruals and
Stock Awards incurred in connection with the consummation of the Plan and
additional costs related to the audit of March 31, 1997 financial statements.

OPERATING INCOME
Operating income decreased from $10.3 million in the quarter ended July 31, 1997
to $7.8 million in the quarter ended July 31, 1998, a decrease of 24.6%. The
decrease results almost entirely from the merger-related costs of $4.4 million
incurred in July 1998. These costs included (a) $3.5 million for payments to
cancel compensatory options; (b) $0.6 million in consent fees incurred in order
to obtain a one-time waiver of the change of control provisions of the Senior
Note Indenture and to amend the Indenture to reflect the post-Merger ownership
of Metallurg, Inc.; and (c) $0.3 million of other merger costs.

Operating income increased from $6.5 million for the first quarter of 1997 to
$14.1 million for the first quarter of 1998, an increase of 117.0%. The increase
resulted from the improvement in gross margins and decrease in SG&A, mentioned
above.


                                       19
<PAGE>

INTEREST INCOME (EXPENSE), NET  
Interest income (expense), net is as follows (in thousands):

<TABLE>
<CAPTION>
                                                     Quarter        Quarter         Quarter       Quarter
                                                      Ended          Ended           Ended         Ended
                                                     July 31,      April 30,        July 31,      March 31,
                                                       1998          1998             1997          1997
                                                    ----------    ----------       ----------    ----------
<S>                                                 <C>           <C>               <C>          <C>
      Interest income ...........................    $    820      $    828        $    947        $  1,461
      Interest expense ...........................     (3,364)       (2,900)         (2,426)         (1,706)
                                                    ----------    ----------       ----------    ----------
         Interest income (expense), net .........    $ (2,544)     $ (2,072)       $ (1,479)       $   (245)
                                                    ----------    ----------       ----------    ----------
                                                    ----------    ----------       ----------    ----------
</TABLE>

Interest expense increased significantly in 1998. In each of the first two
quarters of 1998, Metallurg accrued approximately $2.8 million of interest
expense on $100 million aggregate principal amount of its 11% senior notes due
2007 (the "11% Senior Notes"), which were issued in November 1997. Metallurg
used a portion of the proceeds from the 11% Senior Notes to retire $39.5 million
of the then outstanding 12% Senior-Secured Notes of Metallurg, Inc. due 2007
(the "12% Senior-Secured Notes"). In each of the first two quarters of 1997,
Metallurg accrued approximately $1.2 million of interest expense on these 12%
Senior-Secured Notes. Metallurg did not accrue interest on debt incurred prior
to entering Chapter 11 proceedings. As a result, approximately $2.1 million of
contractual interest on these unsecured obligations, which were reported as part
of liabilities subject to compromise, was not reflected in the quarter ended
March 31, 1997.

INCOME TAX PROVISION (BENEFIT):
Income tax provision, net of tax benefits, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                     Quarter         Quarter           Quarter         Quarter
                                                      Ended           Ended             Ended           Ended
                                                     July 31,       April 30,          July 31,       March 31,
                                                      1998            1998               1997           1997
                                                   ------------    ------------      ------------   ------------

<S>                                                  <C>             <C>               <C>             <C>     
      Total current ..............................   $  2,512        $  4,690          $  2,410        $    704
      Total deferred .............................        892           1,387             2,701          (3,767)
                                                   ------------    ------------      ------------   ------------
         Income tax provision (benefit), net .....   $  3,404        $  6,077          $  5,111        $ (3,063)
                                                   ------------    ------------      ------------   ------------
                                                   ------------    ------------      ------------   ------------
</TABLE>


The differences between the statutory Federal income tax rate and Metallurg's
effective rate result primarily because of: (i) the excess of foreign tax rates
over the statutory Federal income tax rate; (ii) certain deductible temporary
differences which, in other circumstances would have generated a deferred tax
benefit, have been fully provided for in a valuation allowance; (iii) the
deferred tax effects of certain tax assets, primarily foreign net operating
losses, for which the benefit had been previously recognized approximating
$(0.1) million and $0.5 million in the quarters ended July 31, 1998 and April
30, 1998, respectively; and (iv) the deferred tax effects of certain deferred
tax assets for which a corresponding credit has been recorded to "Additional
paid-in capital" approximating $1.0 million and $0.9 million in the quarters
ended July 31, 1998 and April 30, 1998, respectively. The deferred tax expenses
referred to in items (iii) and (iv) above will not result in cash payments in
future periods.

NET INCOME
Net income decreased from $3.7 million for the quarter ended July 31, 1997 to
$1.5 million for the quarter ended July 31, 1998. The decrease resulted
primarily from the merger-related costs and increased interest expense,
partially offset by increased gross margins, noted above.

                                       20
<PAGE>

Net income was $6.8 million for the first quarter of 1998 compared to $58.0
million for the first quarter of 1997. Included in the 1997 net income is an
extraordinary item of $43.0 million representing the cancellation of debt
resulting from the consummation of Metallurg's Reorganization Plan and a $5.1
million credit representing the effects of revaluing Metallurg's assets and
liabilities under fresh-start reporting. Reorganization expenses for the first
quarter of 1997 were $2.7 million. In March 1998, Metallurg sold its minority
investment in a Luxembourg affiliate and realized a gain of approximately $0.9
million. In the first quarter of 1997, other income included a $2.7 million gain
on the sale of Metallurg's New York office building.

LIQUIDITY AND FINANCIAL RESOURCES

GENERAL
The Company's sources of liquidity include cash from operations and amounts
available under credit facilities. Metallurg believes that these sources are
sufficient to fund the current and anticipated future requirements of working
capital, capital expenditures, pension benefits, potential acquisitions and
environmental expenditures through at least 1999.

In November 1997, Metallurg sold $100 million principal amount of 11% Senior
Notes due 2007, the proceeds of which were used to retire Metallurg's then
existing 12% Senior-Secured Notes (approximately $39.5 million), repay certain
debt of the UK and German subsidiaries (approximately $19.8 million) and to pay
a cash dividend (approximately $20.0 million). The balance of the net proceeds
will be used for general corporate purposes.

In July 1998, Metallurg Holdings issued Senior Secured Discount Notes due 2008
which yielded gross proceeds of $65.2 million, which proceeds were used, in
part, to consummate the acquisition of Metallurg, Inc.

At July 31, 1998, the Company had $46.5 million of cash and cash equivalents and
working capital of $176.1 million. Metallurg had $44.4 million in cash and cash
equivalents and working capital of $175.1 million at July 31, 1998, as compared
to $43.0 million and $167.8 million, respectively, at January 31, 1998. For the
first two quarters of 1998, Metallurg generated $8.5 million in cash from
operations and received proceeds of approximately $1.1 million on the sale of
its Luxembourg affiliate. Capital expenditures approximated $7.0 million in the
first two quarters and in February 1998, Metallurg purchased an additional 5%
interest in a Russian magnesium metal producer for approximately $2.0 million.

CREDIT FACILITIES AND OTHER FINANCING ARRANGEMENTS

METALLURG, INC.

Metallurg has a credit facility with certain financial institutions led by
BankBoston, N.A. as agent (the "Revolving Credit Facility") which provides
Metallurg, Shieldalloy and certain of their subsidiaries with up to $50.0
million of financing resources at a rate per annum equal to (i) the Alternate
Base Rate plus 1.0% per annum (the Alternate Base Rate is the greater of the
Base Rate or the Federal Funds Effective Rate plus 0.5%) or (ii) the reserve
adjusted Eurodollar rate plus 2.5% for interest periods of one, two or three
months. The Revolving Credit Facility permits borrowings of up to $50.0 million
for working capital requirements and general corporate purposes, up to $30.0
million of which may be used for letters of credit in the U.S. At July 31, 1998,
there were no outstanding loans and $28.3 million of letters of credit
outstanding in the U.S. under the Revolving Credit Facility. On October 20,
1997, BankBoston, N.A., through its Frankfurt office, made available up to DM
20.5 million (approximately $11.3 million) of financing to certain of its German
subsidiaries (the "German Subfacility"), which is guaranteed by Metallurg and
the other U.S. borrowers under the Revolving Credit Facility.

In addition, several of the other foreign subsidiaries of Metallurg have credit
facility arrangements with local banking institutions to provide funds for
working capital and general corporate purposes. These local credit 

                                       21
<PAGE>

facilities contain restrictions that vary from company to company. At July 31,
1998, there were $0.8 million of outstanding loans under these local credit
facilities.

METALLURG HOLDINGS

Metallurg Holdings is a holding company, and its ability to meet its payment
obligations on the Discount Notes is dependent upon the receipt of dividends and
other distributions from its direct and indirect subsidiaries. Metallurg
Holdings does not have, and may not in the future have, any material assets
other than the common stock of Metallurg. Metallurg, Inc. and its subsidiaries
are parties to various credit agreements, including the Senior Note Indenture
and the Revolving Credit Facility, which impose substantial restrictions on
Metallurg, Inc.'s ability to pay dividends to Metallurg Holdings.


CAPITAL EXPENDITURES

Metallurg invested $7.0 million in capital expenditures during the first two
quarters of 1998. Capital expenditures are expected to total approximately $20.0
million in 1998. Although Metallurg has budgeted these items in 1998, Metallurg
has not committed to complete these projects which are contingent on senior
management approval and other conditions. Metallurg believes that these projects
will be funded through internally generated cash, borrowings under the Revolving
Credit Facility and local credit lines.

ENVIRONMENTAL REMEDIATION COSTS

In 1996, Metallurg elected early adoption of the AICPA Statement of Position
96-1, "Environmental Remediation Liabilities", which among other requirements,
states that losses associated with environmental remediation obligations are
accrued when such losses are deemed probable and reasonably estimable. Such
accruals generally are recognized no later than the completion of the remedial
feasibility study and are adjusted as further information develops or
circumstances change. Costs of future expenditures for environmental remediation
obligations are generally not discounted to their present value. During the
first two quarters of 1998, Metallurg expended $1.0 million for environmental
remediation.

As part of the Plan, Shieldalloy entered into settlement agreements with various
environmental regulatory authorities with regard to all of the significant
environmental remediation liabilities of which it is aware. Pursuant to these
agreements, Shieldalloy has agreed to perform environmental remediation which,
as of July 31, 1998, had an estimated cost of completion of $38.9 million. Of
this amount, approximately $2.9 million is expected to be expended in the second
half of 1998, $4.3 million in 1999 and $8.1 million in 2000. In addition,
Metallurg estimates it will make expenditures of $5.0 million with respect to
environmental remediation at its foreign facilities. Of this amount,
approximately $0.5 million is expected to be expended in the second half of
1998, $0.7 million in 1999 and $0.7 million in 2000.


YEAR 2000 COMPLIANCE

Metallurg has completed an internal review of its and its subsidiaries'
information technology systems in connection with its assessment of Year 2000
compliance. Metallurg is in the process of replacing or modifying some of the
management and accounting systems at its subsidiaries to upgrade them generally
and to make them Year 2000 compliant. Metallurg expects to spend between $1.0
million and $2.0 million on these systems changes. Metallurg expects that the
information technology systems for all of its subsidiaries will be Year 2000
compliant by March 31, 1999. Metallurg is currently assessing whether any of its
non-information technology will need to be modified to become Year 2000
compliant.

Metallurg has not received written assurances from its significant suppliers and
customers to determine the state of their readiness with regard to Year 2000
compliance. Metallurg believes that they will be prepared for Year 2000 


                                       22
<PAGE>

based on Metallurg's normal interactions with its customers and suppliers and
because of the wide attention which the issue has received. Metallurg has not
yet seen the need for contingency plans for the Year 2000 issue, but this need
will continue to be monitored as Metallurg obtains more information about the
state of readiness of its suppliers and customers.

Metallurg presently believes that the Year 2000 issue will not pose significant
operational problems for its business systems. However, if any needed
modifications and conversions were not made, or were not completed timely, the
Year 2000 issue could have an adverse impact on Metallurg's operations and
liquidity. If any of Metallurg's suppliers or customers do not, or if Metallurg
itself does not, successfully deal with the Year 2000 issue, Metallurg could
experience delays in receiving or shipping products and in receiving payments.
The severity of these possible problems would depend on the nature of the
problem and how quickly it could be corrected or an alternative implemented,
which is unknown at this time.

The anticipated costs for Metallurg to become Year 2000 compliant and the
anticipated timing for Metallurg to complete the Year 2000 modifications are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including timely performance by third parties who
will provide Metallurg with the software for its new systems. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the ability to locate and
correct all relevant computer codes, the ability to successfully integrate new
business systems with existing operations and similar uncertainties. Some risks
of the Year 2000 issue are beyond the control of Metallurg and its suppliers and
customers. In particular, Metallurg cannot predict the effect that the Year 2000
issue will have on the general economy.













                                       23
<PAGE>


PART II        OTHER INFORMATION



Item 6. (a)    EXHIBITS

               27 Financial Data Schedule


     6. (b)    REPORT ON FORM 8-K

               On August 12, 1998, Metallurg Holdings filed a Form 8-K related
               to the announcement of a new management team at Metallurg, Inc.
               As of the date of such filing, Metallurg Holdings was not
               required by law under the Exchange Act to file this form with the
               SEC. However, pursuant to Section 4.2 of the Indenture, dated as
               of July 13, 1998, by and between the Company and United States
               Trust Company of New York, as trustee, the Company is required to
               file with the SEC such information, documents and other reports
               as are specified under Section 13 and 15(d) of the Exchange Act.
               The Company has chosen to fulfill its obligations under such
               Indenture by filing this report on Form 10-Q with the SEC.



                                       24

<PAGE>


                                   SIGNATURES

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


                                       METALLURG HOLDINGS, INC.



January 28, 1999                       /s/  ARTHUR R. SPECTOR
                                       -----------------------------------------
                                            Arthur R. Spector
                                            Vice President
                                           (Principal Financial Officer and
                                            Principal Accounting Officer)













                                       25