<PAGE>



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

                                    FORM 10-Q

(MARK ONE)

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

                  For the quarterly period ended June 30, 2002

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

           For the transition period from           to

                                 METALLURG, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                 <C>
                Delaware                                         13-1661467
         (State of organization)                    (I.R.S. Employer Identification No.)

           6 East 43rd Street                                  (212) 835-0200
        New York, New York 10017                      (Registrant's telephone number,
(Address of principal executive offices)                    including area code)
</TABLE>


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

      The number of shares of common stock, $0.01 par value, issued and
outstanding as of August 13, 2002 was 5,000,000.




<PAGE>



                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>

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

            Item 1 - Financial Statements (Unaudited)

                     Condensed Statements of Consolidated Operations for the Quarters and the Two
                     Quarters Ended June 30, 2002 and 2001.......................................................2

                     Condensed Consolidated Balance Sheets at June 30, 2002 and
                     December 31, 2001...........................................................................3

                     Condensed Statements of Consolidated Cash Flows for the Two Quarters Ended June
                     30, 2002 and 2001...........................................................................4

                     Notes to Condensed Unaudited Consolidated Financial Statements...........................5-13

            Item 2 - Management's Discussion and Analysis of Financial Condition and Results
                     of Operations...........................................................................15-21

            Item 3 - Quantitative and Qualitative Disclosure of Market Risk.....................................22

Part II.    OTHER INFORMATION:

            Item 6. (a) EXHIBITS................................................................................23

            Item 6. (b) REPORTS ON FORM 8-K.....................................................................23

            Signature Page......................................................................................24

</TABLE>

                                       1



<PAGE>


                         PART I - FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS

                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

           CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                              Quarters Ended June 30,       Two Quarters Ended June 30,
                                                            --------------------------      ----------------------------
                                                               2002            2001           2002                2001
                                                            ---------       ---------       ---------          ----------

<S>                                                         <C>             <C>             <C>                <C>
Sales .....................................................  $108,501        $128,462        $206,715           $262,207
Commission income .........................................       330             259             645                665
                                                             --------        --------        --------           --------
   Total revenue ..........................................   108,831         128,721         207,360            262,872
                                                             --------        --------        --------           --------

Operating costs and expenses:
   Cost of sales ..........................................    97,835         108,561         185,823            221,576
   Selling, general and administrative expenses ...........    13,802          12,532          27,217             25,949
   Environmental expense recoveries .......................         -            (282)         (3,000)              (600)
   Restructuring charges, net .............................     1,361               -           1,361                  -
                                                             --------        --------        --------           --------
   Total operating costs and expenses .....................   112,998         120,811         211,401            246,925
                                                             --------        --------        --------           --------
   Operating (loss) income ................................    (4,167)          7,910          (4,041)            15,947

Other income (expense):
   Other income, net ......................................        61              75             118                132
   Interest expense, net ..................................    (3,302)         (3,216)         (6,710)            (6,286)
                                                             --------        --------        --------           --------
   (Loss) income before income tax (benefit)
     provision, minority interest and discontinued
     operation ............................................    (7,408)          4,769         (10,633)             9,793
Income tax (benefit) provision ............................      (188)          2,717              (5)             4,967
                                                             --------        --------        --------           --------
   (Loss) income before minority interest and
     discontinued operation ...............................    (7,220)          2,052         (10,628)             4,826
Minority interest .........................................         -             (16)              2                 52
                                                             --------        --------        --------           --------
   (Loss) income from continuing operations ...............    (7,220)          2,036         (10,626)             4,878
Discontinued operation (Note 6):
   Income from discontinued operation (net of tax of
     $41 and $86 in the quarter and the two quarters
     ended June 30, 2001, respectively) ...................         -             112               -                258
   Gain on disposition of discontinued operation
     (net of tax of nil) ..................................         -               -          10,076                  -
                                                             --------        --------        --------           --------
   Income from discontinued operation .....................         -             112          10,076                258
                                                             --------        --------        --------           --------
   Net (loss) income ......................................    (7,220)          2,148            (550)             5,136

Other comprehensive income (loss):
   Foreign currency translation adjustment ................     3,553              11           2,938             (2,814)
   Deferred loss on derivatives, net ......................      (119)           (126)            (74)              (192)
                                                             --------        --------        --------           --------
   Comprehensive (loss) income ............................  $ (3,786)       $  2,033        $  2,314           $  2,130
                                                             ========        ========        ========           ========
</TABLE>

       See notes to condensed unaudited consolidated financial statements

                                       2




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                              June 30,          December 31,
                                                                                                2002                 2001
                                                                                             -----------        ------------
                                                                                             (Unaudited)
<S>                                                                                           <C>                <C>
ASSETS
Current Assets:
   Cash and cash equivalents ...........................................................      $ 23,317           $ 25,819
   Accounts receivable, net ............................................................        66,084             62,711
   Inventories..........................................................................        87,812             87,469
   Prepaid expenses and other current assets (including restricted cash
     of $1,901 in 2002 - Note 6)........................................................        16,684             13,565
                                                                                              --------           --------
     Total current assets ..............................................................       193,897            189,564
Property, plant and equipment, net .....................................................        74,471             67,321
Other assets (including restricted cash of $1,901 in 2002 - Note 6).....................        16,389             13,042
                                                                                              --------           --------
     Total .............................................................................      $284,757           $269,927
                                                                                              ========           ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
   Short-term debt and current portion of long-term debt ...............................       $ 6,371           $  5,714
   Accounts payable ....................................................................        46,578             39,554
   Accrued expenses ....................................................................        22,497             22,117
   Other current liabilities ...........................................................         2,303              3,092
                                                                                              --------           --------
     Total current liabilities .........................................................        77,749             70,477
                                                                                              --------           --------
Long-term Liabilities:
   Long-term debt ......................................................................       123,465            122,504
   Accrued pension liabilities .........................................................        47,904             42,581
   Environmental liabilities, net ......................................................        27,918             29,049
   Other liabilities ...................................................................         1,322              1,297
                                                                                              --------           --------
     Total long-term liabilities .......................................................       200,609            195,431
                                                                                              --------           --------
     Total liabilities .................................................................       278,358            265,908
                                                                                              --------           --------
Minority Interest ......................................................................           542                521
                                                                                              --------           --------
Shareholder's Equity:
   Common stock ........................................................................            50                 50
   Due from parent company .............................................................       (19,714)           (19,714)
   Additional paid-in capital ..........................................................        50,574             50,529
   Accumulated other comprehensive loss ................................................       (22,506)           (25,370)
   Retained deficit ....................................................................        (2,547)            (1,997)
                                                                                              --------           --------
     Total shareholder's equity ........................................................         5,857              3,498
                                                                                              --------           --------
     Total .............................................................................      $284,757           $269,927
                                                                                              ========           ========
</TABLE>

       See notes to condensed unaudited consolidated financial statements.

                                       3




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

           CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                         Two Quarters Ended June 30,
                                                                                         ---------------------------
                                                                                             2002            2001
                                                                                          ---------       ----------
<S>                                                                                       <C>             <C>
Cash Flows from Operating Activities:
Net (loss) income ..................................................................      $   (550)       $  5,136
Adjustments to reconcile net (loss) income to net cash used in operating activities:
   Depreciation and amortization ...................................................         4,682           5,271
   Gain on sale of discontinued operation ..........................................       (10,076)              -
   Deferred income taxes ...........................................................          (456)          2,097
   Restructuring charges, net ......................................................         1,361               -
   Change in operating assets and liabilities:
    Decrease (increase) in accounts receivable .....................................         1,801          (9,051)
    Decrease (increase) in inventories .............................................         1,728         (10,381)
    (Increase) decrease in other current assets ....................................        (3,973)          2,095
    Increase in accounts payable and accrued expenses ..............................         2,360           2,520
    Environmental payments .........................................................        (1,392)         (1,069)
    Restructuring payments .........................................................          (523)            (45)
    Other assets and liabilities, net ..............................................        (1,326)         (1,947)
                                                                                          --------        --------
      Net cash used in operating activities ........................................        (6,364)         (5,374)
                                                                                          --------        --------
Cash Flows from Investing Activities:
Additions to property, plant and equipment .........................................       (10,022)         (5,535)
Net proceeds from sale of discontinued operation ...................................        13,643               -
Other, net .........................................................................          (297)             98
                                                                                          --------        --------
      Net cash provided by (used in) investing activities ..........................         3,324          (5,437)
                                                                                          --------        --------
Cash Flows from Financing Activities:
(Repayment of) proceeds from long-term debt ........................................          (481)          7,851
Net repayments of short-term debt ..................................................          (486)         (3,085)
                                                                                          --------        --------
      Net cash (used in) provided by financing activities ..........................          (967)          4,766
                                                                                          --------        --------
Effects of exchange rate changes on cash and cash equivalents ......................         1,505          (1,396)
                                                                                          --------        --------
Net decrease in cash and cash equivalents ..........................................        (2,502)         (7,441)
Cash and cash equivalents - beginning of period ....................................        25,819          33,402
                                                                                          --------        --------
Cash and cash equivalents - end of period ..........................................      $ 23,317        $ 25,961
                                                                                          ========        ========

</TABLE>

       See notes to condensed unaudited consolidated financial statements.

                                       4




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

         NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

      The accompanying condensed unaudited consolidated financial statements
include the accounts of Metallurg, Inc. and its majority-owned subsidiaries
(collectively, "Metallurg"). These financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information pursuant to Accounting Principles Board Opinion No. 28. Accordingly,
these financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The condensed consolidated balance sheet as of December 31, 2001 was
derived from audited 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.

      Metallurg is a wholly owned subsidiary of Metallurg Holdings, Inc.
("Metallurg Holdings") since the acquisition date of July 13, 1998. The
financial statements do not reflect the pushdown of purchase accounting
adjustments recorded by Metallurg Holdings.

      For further information, see the financial statements and footnotes
thereto included in Metallurg's audited consolidated financial statements for
the year ended December 31, 2001.

      Certain prior year amounts were reclassified to conform to current year
presentations. See "Note 6. Discontinued Operation".

2. Segments and Related Information

      Metallurg operates in one significant industry segment, the manufacture
and sale of performance-enhancing additives mainly for the metallurgical
industry. Metallurg is organized around its major production facilities in the
U.S., the U.K., Germany and Brazil, which are supported by an established
worldwide sales network. In addition to its own products, Metallurg distributes
complementary products manufactured by third parties.

    Reportable Segments

      Shieldalloy Metallurgical Corporation ("Shieldalloy") - This unit is
comprised of two production facilities in the U.S. The New Jersey plant
currently manufactures and sells alloying tablets for the aluminum industry and
metal powders for the welding industry. In prior periods it also manufactured
aluminum alloy grain refiners and specialty ferroalloys for the superalloy and
steel industries. The Ohio plant manufactures and sells ferrovanadium and
vanadium-based chemicals used mostly in the steel and petrochemical industries.

      London & Scandinavian Metallurgical Co Limited and its subsidiaries
(collectively, "LSM") - This unit is comprised mainly of three production
facilities in the U.K. and another in Norway which manufacture and sell aluminum
alloy grain refiners and alloying tablets for the aluminum industry, chromium
metal and specialty ferroalloys for the steel and superalloy industries and
aluminum powder for various metal powder-consuming industries.

      GfE Gesellschaft fur Elektrometallurgie mbH and its subsidiaries
(collectively, "GfE") - This unit is comprised of a production facility and a
sales office in Germany. The Nuremberg plant manufactures and sells a wide
variety of specialty products, including vanadium-based chemicals and
sophisticated metals, alloys and powders used in the titanium, superalloy,
electronics, telecommunications, biomedical and optics industries. The
prosthetics company, which was sold in January 2002, produced medical
prostheses, implants and surgical instruments for orthopedic applications. See
"Note 6. Discontinued Operation".

      Elektrowerk Weisweiler GmbH ("EWW") - This production unit, also located
in Germany, produces various grades of low carbon ferrochrome used in the
superalloy, welding and steel industries.

                                       5




<PAGE>



                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

2. Segments and Related Information - (Continued)

      Companhia Industrial Fluminense ("CIF") - This unit is comprised mainly of
two production facilities in Brazil. The Sao Joao del Rei plant manufactures and
sells aluminum alloy grain refiners and alloying tablets for the aluminum
industry and metal oxides used in the telecommunications, superalloy and
specialty metal industries. The Nazareno mine extracts and concentrates ores
containing tantalum and niobium that are processed, along with other raw
materials, into metal oxides at the Sao Joao del Rei plant.

      In addition to their manufacturing operations, Shieldalloy, LSM and GfE
import and distribute complementary products manufactured by affiliates and
third parties.

      Summarized financial information concerning Metallurg's reportable
segments is shown in the following table (in thousands). Each segment records
direct expenses related to its employees and operations. The "Other" column
includes corporate-related items and results of subsidiaries not meeting the
quantitative thresholds as prescribed by applicable accounting rules for
determining reportable segments. Metallurg does not allocate general corporate
overhead expenses to operating segments. The accounting policies of the segments
are the same as those of the consolidated group. Transactions among segments are
established based on negotiation among the parties. There have been no material
changes in segment assets from the amounts disclosed in the last annual report,
except as noted in "Note 6. Discontinued Operation".

<TABLE>
<CAPTION>
                                                                                                 Intersegment  Consolidated
                             Shieldalloy    LSM       GfE        EWW        CIF        Other     Eliminations     Totals
                             -----------    ---       ---        ---        ---        -----     ------------     ------
<S>                            <C>        <C>       <C>         <C>        <C>       <C>          <C>             <C>
Quarter Ended
     June 30, 2002
Revenue from external
  customers...............     $22,891    $29,013   $15,979     $4,231     $4,653    $32,064                      $108,831
Intergroup revenue........       1,675     10,658     3,040      1,771      3,940      4,197       $(25,281)             -
Income tax (benefit)
  provision...............      (1,448)      (325)       38       (207)       (10)     1,764              -           (188)
Net (loss) income.........      (1,507)      (802)     (267)      (215)       280     (6,606)         1,897         (7,220)

Quarter Ended
     June 30, 2001
Revenue from external
  customers...............     $25,940    $35,614   $19,808     $3,415     $3,766    $40,178                      $128,721
Intergroup revenue........       1,202     10,408     2,749      7,129      5,792      5,595       $(32,875)             -
Income tax provision......         111        559       280        634        313        820              -          2,717
Income from
  discontinued operation..           -          -       112          -          -          -              -            112
Net (loss) income.........        (360)       927       731        677      1,159      7,311         (8,297)         2,148
</TABLE>

                                       6





<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

2. Segments and Related Information - (Continued)

<TABLE>
<CAPTION>
                                                                                                Intersegment   Consolidated
                            Shieldalloy     LSM       GfE        EWW        CIF       Other     Eliminations      Totals
                            -----------     ---       ---        ---        ---       -----     ------------      ------
<S>                            <C>        <C>       <C>         <C>        <C>       <C>         <C>              <C>
Two Quarters Ended
     June 30, 2002
Revenue from external
  customers...............     $44,597    $54,446   $31,400     $8,483     $8,461    $59,973                      $207,360
Intergroup revenue........       2,698     19,454     6,269      5,647      8,229      7,231       $(49,528)             -
Environmental expense
  recoveries..............      (3,000)         -         -          -          -          -              -         (3,000)
Income tax (benefit)
  provision...............      (1,697)      (591)       60       (117)        47      2,293              -             (5)
Gain on disposition of
  discontinued operation .           -          -    10,076          -          -          -              -         10,076
Net (loss) income.........      (1,735)    (1,602)    9,047        (95)       549     11,261        (17,975)          (550)

Two Quarters Ended
     June 30, 2001
Revenue from external
  customers...............     $51,105    $70,807   $41,843    $ 6,847    $ 7,861    $84,409                      $262,872
Intergroup revenue........       2,512     19,325     6,506     13,885     11,877     11,402       $(65,507)             -
Environmental expense
  recoveries..............        (600)         -         -          -          -          -              -           (600)
Income tax (benefit)
  provision...............        (314)       706       785      1,339        501      1,950              -          4,967
Income from
  discontinued operation..           -          -       258          -          -          -              -            258
Net (loss) income.........      (1,115)     1,316     1,546      2,178      2,429     15,834        (17,052)         5,136

</TABLE>

3. Inventories

      Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>

                                                                     June 30,           December 31,
                                                                       2002                 2001
                                                                       ----                 ----
<S>                                                                  <C>                  <C>
Raw materials.............................................           $16,457              $19,783
Work in process...........................................             4,083                4,018
Finished goods............................................            63,965               60,635
Other.....................................................             3,307                3,033
                                                                     -------              -------
     Total................................................           $87,812              $87,469
                                                                     =======              =======
</TABLE>
                                       7




<PAGE>



                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

4. Contingent Liabilities

      Metallurg defends, from time to time, 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 matters will not have a material adverse effect on
Metallurg's consolidated financial position, results of operations or liquidity.
There can be no assurance, however, that future litigation or proceedings will
not result in an adverse judgment against Metallurg that could have a material
adverse effect on Metallurg's future results of operations or cash flows.

5. Environmental Expense Recoveries

      Shieldalloy realized environmental expense recoveries of $3,000,000 and
$600,000 in 2002 and 2001, respectively, upon receipt of settlements with
insurance companies relating to coverage for certain environmental claims.

6. Discontinued Operation

      On January 1, 2002, GfE completed the sale of its prosthetics company in
Morsdorf, Germany and recorded a gain of $10,076,000. In connection with the
sale, GfE was required to deposit cash to collateralize certain bank guarantees.
Deposits of DM 7,500,000 ($3,802,000) relating to guarantees, of which half
expires in September 2002 and the balance in September 2003, are recorded as
restricted cash at June 30, 2002. These deposits are excluded from cash and cash
equivalents in Metallurg's consolidated balance sheet.

      Summary financial information for the prosthetics company is presented
below (in thousands):

<TABLE>
<CAPTION>

                                                                          December 31,
                                                                              2001
                                                                          ------------
<S>                                                                           <C>
Accounts receivable, net ..............................................      $  669
Inventories ...........................................................       2,406
Prepaid expenses and other current assets .............................         196
Property, plant and equipment, net ....................................       1,496
Accounts and loans payable ............................................       2,855
Other liabilities .....................................................         810
Shareholder's equity ..................................................       1,102
</TABLE>

<TABLE>
<CAPTION>
                                                                           Year Ended
                                                                          December 31,
                                                                              2001
                                                                          ------------
<S>                                                                          <C>
Total revenue .........................................................      $7,812
Net income ............................................................         624
</TABLE>

      The consolidated statement of operations and the related notes for the
quarter and the two quarters ended June 30, 2001 have been restated, where
applicable, to reflect the discontinued operation. Cash provided by operating
activities for the prosthetics company was $72,000 in the two quarters ended
June 30, 2001.

                                       8




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

7. Restructuring

      During the second quarter of 2002, Metallurg initiated a restructuring
program intended to reduce the cost structure at corporate headquarters,
Shieldalloy and LSM. The restructuring plan includes the discontinuation of
certain production activities, the termination of employees and the write-down
of redundant plant and equipment. As a result of the restructuring and other
cost reduction activities, Metallurg currently expects to generate cost savings
of approximately $7 million annually in future periods. Details of the
restructuring charge are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                  Balance
                                                                              Utilized               at
                                                          Original     -----------------------    June 30,
                                                           Accrual       Cash        Non-cash       2002
                                                          --------     ---------     --------     --------
<S>                                                        <C>            <C>         <C>              <C>
Severance and other employee costs.....................    $1,395         $435                      $960
Write-down of plant and equipment......................       103            -         $103            -
                                                           ------         ----         ----         ----
      Total............................................    $1,498         $435         $103         $960
                                                           ======         ====         ====         ====
</TABLE>

      At corporate headquarters, Metallurg, Inc.'s restructuring charge of
$875,000 was for severance costs of three corporate executives who were
terminated at the end of the second quarter of 2002. Under the terms of their
employment and severance agreements, the severance will be paid over a period of
up to 18 months. None of this amount was paid as of June 30, 2002.

      LSM's restructuring charge of $350,000 was for severance costs of 11
production employees who were terminated during the second quarter. The entire
amount was paid during the second quarter.

      SMC's restructuring charge of $273,000 included $170,000 for severance
costs of 16 production employees and six administrative employees who were
notified of termination during the second quarter. The remaining $103,000 was
for the write-down of property and equipment no longer used in operations.
Twenty-one employees were terminated, and severance payments of $85,000 were
made, by June 30, 2002.

      The restructuring charge of $1,361,000 in the second quarter of 2002 is
net of the reversal of the remaining balance of $137,000 on an earlier accrual
following the completion of a restructuring program at EWW.

8. Earnings Per Share

      Earnings per share is not presented since Metallurg, Inc. is a wholly
owned subsidiary of Metallurg Holdings.

9. Borrowings

       LSM has four revolving term loan facilities with Barclays Bank plc
("Barclays") and HSBC Bank plc ("HSBC") that provide for borrowings up to
'L'12.0 million ($18.4 million), all of which were outstanding at June 30, 2002.
Interest is currently charged at a rate per annum of LIBOR plus 0.75% - 0.95%.
Two of the facilities expire during the second quarter of 2004 while the other
two expire during the second quarter of 2006. These term loan facilities are
unsecured and require LSM to comply with various covenants, including the
maintenance of minimum net worth and interest coverage.

     Following a decline in operating results, LSM obtained a waiver from
Barclays regarding the required minimum interest coverage ratio covenant for the
period ended December 31, 2001. In the second quarter of 2002, LSM amended its
loan agreement with Barclays, which deferred the measurement date of the
required minimum interest coverage ratio covenant from June to July. In August
2002, the agreement was further amended to modify this covenant and other terms.
Compliance with the amended interest coverage ratio covenant will next be
measured at December 31, 2002 and will be based on the results for the six
months ended December 31, 2002. As a result of the amendments, interest on the
two revolving term loan facilities will be charged at a rate per annum of LIBOR
plus 1.75%. Also as a result of the amendments, LSM's overdraft facility with
Barclays will be reduced by 'L'1.0 million ($1.5 million).

10. Recent Accounting Pronouncements

      Effective January 1, 2002, Metallurg adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets",
which addresses the accounting and reporting of acquired goodwill and other
intangible assets. The adoption of SFAS No. 142 did not have a material effect
on Metallurg's financial statements.

      In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations"
was issued. This statement covers all legally enforceable obligations associated
with the retirement of tangible long-lived assets and provides the accounting
and reporting requirements for such obligations. SFAS No. 143 is effective on
January 1, 2003. Management has not yet determined the impact, if any, that the
adoption of SFAS No. 143 will have on Metallurg's consolidated financial
statements.

      In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" was issued. This statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" and related literature and establishes a single accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale, but it retains the fundamental provisions of SFAS No.
121 for the recognition of the impairment of long-lived assets to be held and
used. SFAS No. 144 was effective for Metallurg on January 1, 2002. While the
adoption of SFAS No. 144 did not have a material impact on Metallurg's
consolidated financial statements, it requires that GfE's prosthetics company be
reflected as a discontinued operation upon its disposal. See "Note 6.
Discontinued Operation".

                                       9




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

10. Recent Accounting Pronouncements - (Continued)

      In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities" was issued. This statement requires the recording of costs
associated with exit or disposal activities at their fair values only once a
liability exists. Under previous guidance, certain exit costs were accrued when
management committed to an exit plan, which may have been before an actual
liability arose. SFAS No. 146 is effective for exit or disposal activities
initiated after December 31, 2002. Metallurg does not believe the adoption of
SFAS No. 146 will have a material impact on its consolidated financial
statements.

11. Supplemental Guarantor Information

      In November 1997, Metallurg, Inc. issued $100 million principal amount of
its 11% Senior Notes due 2007 (the "Senior Notes"). Under the terms of the
Senior Notes, Shieldalloy, Metallurg Holdings Corporation, Metallurg Services,
Inc., Metallurg International Resources, LLC and MIR (China), Inc.
(collectively, the "Guarantors"), wholly owned subsidiaries of Metallurg, Inc.,
have fully and unconditionally guaranteed on a joint and several basis
Metallurg, Inc.'s obligations to pay principal, premium and interest relative to
the Senior Notes. Management has determined that separate, full financial
statements of the Guarantors would not be material to potential investors and,
accordingly, such financial statements are not provided. Supplemental financial
information of the Guarantors is presented below.

           Condensed Consolidating Statement of Operations (Unaudited)
                           Quarter Ended June 30, 2002
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             Combined          Combined
                                           Metallurg,        Guarantor       Non-Guarantor
                                              Inc.         Subsidiaries       Subsidiaries    Eliminations      Consolidated
                                           ----------      ------------      --------------   ------------      ------------
<S>                                       <C>               <C>                <C>             <C>               <C>
Total revenue ............................                    $30,327            $91,218        $(12,714)        $108,831
                                                              -------            -------        --------         --------
Operating costs and expenses:
   Cost of sales .........................                     30,142             80,999         (13,306)          97,835
   Selling, general and administrative
     expenses ............................  $ 1,327             2,580              9,895               -           13,802
   Restructuring charges, net ............      875               273                213               -            1,361
                                            -------           -------            -------        --------         --------
   Total operating costs and expenses ....    2,202            32,995             91,107         (13,306)         112,998
                                            -------           -------            -------        --------         --------
   Operating (loss) income ...............   (2,202)           (2,668)               111             592           (4,167)

Other income (expense):
   Other income, net .....................        -                 -                 61               -               61
   Interest (expense) income, net ........    2,679)              393             (1,016)              -           (3,302)
   Equity in earnings of subsidiaries ....   (1,106)             (141)               (58)          1,305                -
                                            -------           -------            -------        --------         --------
   Loss before income tax provision
     (benefit) and minority interest .....   (5,987)           (2,416)              (902)          1,897           (7,408)
Income tax provision (benefit) ...........    1,233            (1,212)              (209)              -             (188)
                                            -------           -------            -------        --------         --------
   Loss before minority interest .........   (7,220)           (1,204)              (693)          1,897           (7,220)
Minority interest ........................        -                 -                  -               -                -
                                            -------           -------            -------        --------         --------
   Net loss ..............................   (7,220)           (1,204)              (693)          1,897           (7,220)
Other comprehensive income (loss):
   Foreign currency translation adjustment    3,553             3,482              6,524         (10,006)           3,553
   Deferred loss on derivatives, net .....     (119)             (118)              (228)            346             (119)
                                            -------           -------            -------        --------         --------
   Comprehensive (loss) income ...........  $(3,786)          $ 2,160            $ 5,603        $ (7,763)        $ (3,786)
                                            =======           =======            =======        ========         ========
</TABLE>


                                       10




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

11. Supplemental Guarantor Information - (Continued)

           Condensed Consolidating Statement of Operations (Unaudited)
                        Two Quarters Ended June 30, 2002
                                 (In thousands)


<TABLE>
<CAPTION>
                                                              Combined          Combined
                                                 Metallurg,   Guarantor       Non-Guarantor
                                                    Inc.     Subsidiaries      Subsidiaries     Eliminations      Consolidated
                                                 ----------  ------------     --------------    ------------      -----------
<S>                                              <C>           <C>                <C>             <C>              <C>
Total revenue ...............................                   $58,018           $175,707        $(26,365)         $207,360
                                                                -------           --------        --------          --------
Operating costs and expenses:
   Cost of sales ............................                    57,072            156,501         (27,750)          185,823
   Selling, general and administrative
     expenses ...............................     $ 2,738         5,898             18,581               -            27,217
   Environmental expense recoveries .........           -        (3,000)                 -               -            (3,000)
   Restructuring charges, net ...............         875           273                213               -             1,361
                                                  -------       -------           --------        --------          --------
   Total operating costs and expenses .......       3,613        60,243            175,295         (27,750)          211,401
                                                  -------       -------           --------        --------          --------
   Operating (loss) income ..................      (3,613)       (2,225)               412           1,385            (4,041)

Other income (expense):
   Other income, net ........................           -             -                118               -               118
Interest (expense) income, net ..............      (5,419)          843             (2,134)              -            (6,710)
   Equity in earnings of subsidiaries .......       9,555         9,805                  -         (19,360)                -
                                                  -------       -------           --------        --------          --------
    Income (loss) before income tax
      provision (benefit), minority interest
      and discontinued operation ............         523         8,423             (1,604)        (17,975)          (10,633)
Income tax provision (benefit) ..............       1,073          (991)               (87)              -                (5)
                                                  -------       -------           --------        --------          --------
   (Loss) income before minority interest and
     discontinued operation .................        (550)        9,414             (1,517)        (17,975)          (10,628)
Minority interest ...........................           -             -                  2               -                 2
                                                  -------       -------           --------        --------          --------
   (Loss) income from continuing operations .        (550)        9,414             (1,515)        (17,975)          (10,626)
Discontinued operation ......................           -             -             10,076               -            10,076
                                                  -------       -------           --------        --------          --------
   Net (loss) income ........................        (550)        9,414              8,561         (17,975)             (550)

Other comprehensive income (loss):
   Foreign currency translation adjustment ..       2,938         2,881              5,381          (8,262)            2,938
   Deferred loss on derivatives, net ........         (74)          (74)              (150)            224               (74)
                                                  -------       -------           --------        --------          --------
   Comprehensive income .....................     $ 2,314       $12,221           $ 13,792        $(26,013)          $ 2,314
                                                  =======       =======           ========        ========           =======
</TABLE>

                                       11




<PAGE>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

11. Supplemental Guarantor Information - (Continued)

                Condensed Consolidating Balance Sheet (Unaudited)
                                  June 30, 2002
                                 (In thousands)

<TABLE>
<CAPTION>

                                                            Combined       Combined
                                            Metallurg,      Guarantor    Non-Guarantor
                                               Inc.       Subsidiaries    Subsidiaries      Eliminations    Consolidated
                                            ----------    ------------    -------------     ------------    ------------
<S>                                         <C>              <C>             <C>              <C>            <C>
ASSETS
Current Assets:
  Cash and cash equivalents .............   $ 16,683         $    226        $ 15,780         $ (9,372)      $  23,317
  Accounts and loans receivable, net ....     28,423           18,318          65,217          (45,874)         66,084
  Inventories ...........................          -           28,640          61,001           (1,829)         87,812
  Prepaid expenses and other current
    assets ..............................        250            5,982          14,641           (4,189)         16,684
                                            --------         --------        --------        ---------        --------
       Total current assets .............     45,356           53,166         156,639          (61,264)        193,897
Investments - intergroup ................     82,365           17,328          51,502         (151,195)           --
Property, plant and equipment, net ......        672           22,247          51,552             --            74,471
Other assets ............................      6,346           59,250          58,154         (107,361)         16,389
                                            --------         --------        --------        ---------        --------
       Total ............................   $134,739         $151,991        $317,847        $(319,820)       $284,757
                                            ========         ========        ========        =========        ========
LIABILITIES AND
   SHAREHOLDER'S EQUITY
Current Liabilities:
   Short-term debt and current portion of
     long-term debt .....................                                    $ 15,743         $ (9,372)       $  6,371
   Accounts and loans payable ...........   $  3,340         $ 38,483          50,629          (45,874)         46,578
   Accrued expenses .....................      2,223            7,411          12,863                -          22,497
   Other current liabilities ............      3,367              822           2,303           (4,189)          2,303
                                            --------         --------        --------        ---------        --------
       Total current liabilities ........      8,930           46,716          81,538          (59,435)         77,749
                                            --------         --------        --------        ---------        --------
Long-term Liabilities:
   Long-term debt .......................    100,000                -          23,465                -         123,465
   Accrued pension liabilities ..........      2,076              323          45,505                -          47,904
   Environmental liabilities, net .......          -           25,569           2,349                -          27,918
   Other liabilities ....................     17,876                -          43,974          (60,528)          1,322
                                            --------         --------        --------        ---------        --------
       Total long-term liabilities ......    119,952           25,892         115,293          (60,528)        200,609
                                            --------         --------        --------        ---------        --------
       Total liabilities ................    128,882           72,608         196,831         (119,963)        278,358
                                            --------         --------        --------        ---------        --------
Minority Interest .......................          -                -             542                -             542
                                            --------         --------        --------        ---------        --------
Shareholder's Equity:
   Common stock .........................         50            1,227         120,935         (122,162)             50
   Due from parent company ..............    (19,714)               -               -                -         (19,714)
   Additional paid-in capital ...........     50,574          104,945           8,090         (113,035)         50,574
   Accumulated other comprehensive loss .    (22,506)         (18,782)        (10,940)          29,722         (22,506)
   Retained (deficit) earnings ..........     (2,547)          (8,007)          2,389            5,618          (2,547)
                                            --------         --------        --------        ---------        --------
       Total shareholder's equity .......      5,857           79,383         120,474         (199,857)          5,857
                                            --------         --------        --------        ---------        --------
       Total ............................   $134,739         $151,991        $317,847        $(319,820)       $284,757
                                            ========         ========        ========        =========        ========

</TABLE>

                                       12




<PAGE>



                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                    NOTES TO CONDENSED UNAUDITED CONSOLIDATED
                       FINANCIAL STATEMENTS - (Continued)

11. Supplemental Guarantor Information - (Continued)

           Condensed Consolidating Statement of Cash Flows (Unaudited)
                        Two Quarters Ended June 30, 2002
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                Combined        Combined
                                                  Metallurg,    Guarantor     Non-Guarantor
                                                     Inc.      Subsidiaries    Subsidiaries    Eliminations    Consolidated
                                                  ---------    ------------   --------------   ------------    ------------
<S>                                                <C>            <C>               <C>         <C>              <C>
Cash Flows from Operating Activities.......        $(9,465)       $ 3,026         $    75                        $ (6,364)
                                                   -------        -------         -------                        --------
Cash Flows from Investing Activities:
   Additions to property, plant and
     equipment.............................            (13)        (4,280)         (5,729)                        (10,022)
   Net proceeds from sale of discontinued
     operation.............................              -              -          13,643                          13,643
   Other, net..............................             40              -            (337)                           (297)
                                                   -------        -------         -------                        --------
        Net cash provided by (used in)
          investing activities.............             27         (4,280)          7,577                           3,324
                                                   -------        -------         -------                        --------
Cash Flows from Financing Activities:
   Intergroup borrowings (repayments)......          4,396            207          (4,603)                              -
   Net repayment of long-term debt.........              -              -            (481)                           (481)
   Net repayment of short-term debt .......              -              -          (2,740)         $2,254            (486)
   Dividends received (paid)...............          3,204              -          (3,204)              -               -
                                                   -------        -------         -------        --------        --------
        Net cash provided by (used in)
          financing activities.............          7,600            207         (11,028)          2,254            (967)
                                                   -------        -------         -------        --------        --------
Effects of exchange rate changes on cash
   and cash equivalents....................              -              -           1,505               -           1,505
                                                   -------        -------         -------        --------        --------
Net decrease in cash and cash equivalents..         (1,838)        (1,047)         (1,871)          2,254          (2,502)
Cash and cash equivalents -
   beginning of period.....................         18,521          1,273          17,651         (11,626)         25,819
                                                   -------        -------         -------        --------        --------
Cash and cash equivalents -
   end of period...........................        $16,683        $   226         $15,780        $ (9,372)       $ 23,317
                                                   =======        =======         =======        ========        ========
</TABLE>

                                       13




<PAGE>


    ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS
Forward-Looking Statements

      Certain matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this Form 10-Q may
constitute forward-looking statements for purposes of Section 21E of the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of Metallurg to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Factors which may cause Metallurg's results to be
materially different include the cyclical nature of Metallurg's business,
Metallurg's dependence on foreign customers, the impact of changes in foreign
exchange rates and foreign trade regulations on Metallurg's competitive
standing, the economic strength of Metallurg's markets generally and
particularly the strength of the demand for aluminum, superalloys, titanium
alloys, iron and steel in those markets, the accuracy of Metallurg's estimates
of the costs of environmental remediation and the extension or expiration of
existing anti-dumping duties.

Overview

      Metallurg is a leading international producer and seller of high-quality
specialty metals, alloys and metallic chemicals, which are essential to the
production of high-performance aluminum and titanium alloys, superalloys, steel
and certain non-metallic materials for various applications in the aerospace,
power supply, automotive, petrochemical processing and telecommunications
industries. The industries that Metallurg supplies are cyclical.

      Western world* primary aluminum consumption fell by over 6% in 2001 which
caused a more pronounced weakening of demand for Metallurg's products as the
year progressed. The downward trend continued in the first quarter of 2002, but
there has been a slight increase in demand as the second quarter progressed.
Over the past year, Metallurg has rationalized its aluminum master alloy and
grain refiner production to concentrate on its lowest cost melting, casting and
finishing facilities in the U.K., Norway and Brazil.

      The aerospace sector saw its fortunes drop sharply after September 11th
last year, and since then it has grappled with the difficult financial situation
of much of the airline industry. This year has also seen the cancellation of
many land-based turbine power generation projects in the U.S. These market
developments led the producers of super alloys and titanium alloys to cut their
production rates very sharply, particularly in the U.S., and thus reduce
similarly their demand for Metallurg's chromium and niobium products and alloys
for the titanium industry. Sales of our materials in the smaller European market
have held up substantially better.

      The U.S. steel industry operated at low production levels throughout most
of 2001 and into 2002 but, with the imposition of protective duties in March
2002, production rates increased significantly. Thus we have seen demand and
pricing for our U.S. ferrovanadium production improve a little over the second
quarter from what were historically very low levels. Steel production in the
rest of the world largely continued on a fairly steady path allowing improved
sales of ferrotitanium and normal grade low carbon ferrochrome.

      Although market price and demand for tantalum declined in 2001, Metallurg
had continued to benefit in the first quarter of 2002 from fixed price sales
contracts that had been negotiated in late 2000 when prices were much higher.
Demand and consumption of tantalum has been extremely weak in 2002, and this has
resulted in much lower prices for Metallurg's tantalum products in the second
quarter.

      Metallurg is currently completing investments in new facilities in the
U.S., the U.K. and Brazil aimed at reducing the cost of raw materials and
expanding capacity for the production of specialty grade products; in addition
further significant cost reduction programs have been initiated and partly
implemented in the second quarter, and will continue during the remainder of the
year. The benefits of these investments and cost saving initiatives are expected
to improve operating results as 2002 progresses.

* Defined as the world, excluding the Commonwealth of Independent States (CIS),
Eastern Europe and China.

                                       14




<PAGE>



Results of Operations - The Quarter Ended June 30, 2002 Compared to the Quarter
Ended June 30, 2001

      Metallurg operates in one significant industry segment, the manufacture
and sale of performance-enhancing additives mainly for the metallurgical
industry. Metallurg is organized around its major production facilities in the
U.S., the U.K., Germany and Brazil, which are supported by an established
worldwide sales network. In addition to its own products, Metallurg distributes
products manufactured by third parties. This is a natural complement to
Metallurg's manufacturing operations and leverages its global sales staff by
providing a broader product offering to existing customers without incurring
significant additional overhead.

      Summarized financial information concerning Metallurg's reportable
segments is shown in the following table (in thousands). Each segment records
direct expenses related to its employees and operations. The "Other" column
includes corporate related items and results of subsidiaries not meeting the
quantitative thresholds as prescribed by applicable accounting rules for
determining reportable segments. Metallurg does not allocate general corporate
overhead expenses to operating segments. The accounting policies of the segments
are the same as those of the consolidated group. Transactions among segments are
established based on negotiation among the parties. There have been no material
changes in segment assets from the amounts disclosed in the last annual report,
except as disclosed in "Note 6. Discontinued Operation" to Metallurg's
Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                                                                                Intersegment    Consolidated
                             Shieldalloy    LSM        GfE         EWW       CIF      Other     Eliminations       Totals
                             ----------- ---------  ----------  --------- --------- ---------   -------------   ------------
 Quarter Ended
     June 30, 2002
<S>                             <C>       <C>        <C>         <C>       <C>       <C>           <C>            <C>
Total revenue..............     $24,566   $39,671    $19,019     $6,002    $8,593    $36,261       $(25,281)      $108,831
Gross profit...............        (249)    3,177      3,156       (158)      865      3,613            592         10,996
SG&A.......................       2,332     3,606      3,386        431       438      3,609              -         13,802
Restructuring charges, net.         273       350          -       (137)        -        875              -          1,361
Operating (loss) income...       (2,854)     (779)      (230)      (452)      427       (871)           592         (4,167)
Interest (expense)
  income, net..............        (101)     (356)       (11)        30      (157)    (2,707)             -         (3,302)
Income tax (benefit)
provision..............          (1,448)     (325)        38       (207)      (10)     1,764              -           (188)
Net (loss) income..........      (1,507)     (802)      (267)      (215)      280     (6,606)         1,897         (7,220)

 Quarter Ended
     June 30, 2001

Total revenue..............     $27,142   $46,022    $22,557    $10,544    $9,558    $45,773       $(32,875)      $128,721
Gross profit...............       1,755     4,642      4,052      1,726     2,107      6,483           (605)        20,160
SG&A.......................       2,092     2,598      2,955        451       464      4,326           (354)        12,532
Operating (loss) income...         (225)    1,878      1,097      1,275     1,643      2,490           (248)         7,910
Interest (expense)
  income, net..............         (24)     (404)      (206)        36      (171)    (2,447)             -         (3,216)
Income tax provision...             111       559        280        634       313        820              -          2,717
Income from
  discontinued operation...           -         -        112          -         -          -              -            112
Net (loss) income..........        (360)      927        731        677     1,159      7,311         (8,297)         2,148

Total Revenue

</TABLE>


      Consolidated total revenue decreased by $19.9 million (15%) in the second
quarter of 2002 as compared to the second quarter of 2001. Shieldalloy revenue
was $2.6 million (9%) below the second quarter of 2001, due primarily to
decreased sales volume of chrome products. LSM revenue was $6.4 million (14%)
below the second quarter of 2001, due primarily to decreased sales volume and
selling prices of aluminum products and chromium metal. GfE revenue was $3.5
million (16%) below the second quarter of 2001, due primarily to decreased sales
volume and selling prices of specialty coating materials and vanadium products.
EWW revenue was $4.5 million (43%) below the second quarter of 2001, due to
decreased sales volume of ferrochrome. EWW's 2001 sales also included one-time
sales of tantalum-containing products. CIF revenue was $1.0 million (10%) below
the second quarter of 2001, due primarily to decreased selling prices of
tantalum products partly offset by increased sales volume of aluminum products.
Decreased revenue from distribution activities included in "Other" above was
primarily the result of decreased volume and selling prices of
tantalum-containing products.

                                       15




<PAGE>




Gross Profit

      Gross profit decreased to $11.0 million (10.1% of total revenue) in the
quarter ended June 30, 2002 from $20.2 million (15.7% of total revenue) in the
quarter ended June 30, 2001, a decrease of $9.2 million (45%). Shieldalloy gross
profit was $2.0 million (114%) below the second quarter of 2001, due primarily
to decreased sales volume of ferrochrome and decreased selling prices of
aluminum products. LSM gross profit was $1.5 million (32%) below the second
quarter of 2001, due primarily to decreased sales volume and selling prices of
aluminum products and chromium metal. GfE gross profit was $0.9 million (22%)
below the second quarter of 2001, due primarily to decreased sales volume and
selling prices of specialty coating materials and vanadium products. EWW gross
profit was $1.9 million (109%) below the second quarter of 2001, due primarily
to decreased sales volume of ferrochrome. CIF gross profit was $1.2 million
(59%) below the second quarter of 2001, due primarily to decreased selling
prices of tantalum products. Decreased gross profit from distribution activities
included in "Other" above was primarily the result of decreased volume and
selling prices of tantalum-containing products.

Selling, General and Administrative Expenses ("SG&A")

      SG&A increased to $13.8 million in the quarter ended June 30, 2002 from
$12.5 million in the quarter ended June 30, 2001, an increase of $1.3 million
(10%). For the quarter ended June 30, 2002, SG&A represented 12.7% of total
revenue compared to 9.7% for the quarter ended June 30, 2001. The increase was
primarily due to an increase in pension expense at LSM.

Restructuring Charges, Net

      During the second quarter of 2002, Metallurg initiated a restructuring
program intended to reduce the cost structure at corporate headquarters,
Shieldalloy and LSM. The restructuring plan includes the discontinuation of
certain production activities, the termination of employees and the write-down
of redundant plant and equipment. As a result of the restructuring and other
cost reduction activities, Metallurg currently expects to generate cost savings
of approximately $7 million annually in future periods. Details of the
restructuring charge are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                  Balance
                                                                               Utilized              at
                                                          Original     -----------------------    June 30,
                                                           Accrual        Cash       Non-cash       2002
                                                          --------     ----------   ----------   ----------
<S>                                                        <C>            <C>          <C>          <C>
Severance and other employee costs...................      $1,395         $435                      $960
Write-down of plant and equipment....................         103            -         $103            -
                                                           ------         ----         ----         ----
      Total..........................................      $1,498         $435         $103         $960
                                                           ======         ====         ====         ====
</TABLE>

      At corporate headquarters, Metallurg, Inc.'s restructuring charge of
$875,000 was for severance costs of three corporate executives who were
terminated at the end of the second quarter of 2002. Under the terms of their
employment and severance agreements, the severance will be paid over a period of
up to 18 months. None of this amount was paid as of June 30, 2002.

      LSM's restructuring charge of $350,000 was for severance costs of 11
production employees who were terminated during the second quarter. The entire
amount was paid during the second quarter.

      SMC's restructuring charge of $273,000 included $170,000 for severance
costs of 16 production employees and six administrative employees who were
notified of termination during the second quarter. The remaining $103,000 was
for the write-down of property and equipment no longer used in operations.
Twenty-one employees were terminated, and severance payments of $85,000 were
made, by June 30, 2002.

      The restructuring charge of $1,361,000 in the second quarter of 2002 is
net of the reversal of the remaining balance of $137,000 on an earlier accrual
following the completion of a restructuring program at EWW.

      See "Note 7. Restructuring" to Metallurg's Consolidated Financial
Statements.

                                       16




<PAGE>


Operating Income

      There was an operating loss of $4.2 million in the quarter ended June 30,
2002 compared to operating income of $7.9 million in the quarter ended June 30,
2001, due primarily to the decrease in gross profit and the restructuring,
discussed above. In addition, Shieldalloy recognized an environmental expense
recovery of $0.3 million in the quarter ended June 30, 2001 upon settlements
with insurance companies relating to coverage for certain environmental claims.

Interest Expense, Net

      Interest expense, net, is as follows (in thousands):

<TABLE>
<CAPTION>

                                                          Quarters Ended June 30,
                                                          -----------------------
                                                           2002            2001
                                                           ----            ----
  <S>                                                    <C>              <C>
  Interest income .............................          $   282          $   486
  Interest expense ............................           (3,584)          (3,702)
                                                         -------          -------
     Interest expense, net.....................          $(3,302)         $(3,216)
                                                         =======          =======
</TABLE>

Income Tax (Benefit) Provision, Net

      Income tax (benefit) provision, net, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                          Quarters Ended June 30,
                                                          -----------------------
                                                            2002            2001
                                                          -------          ------
<S>                                                        <C>             <C>
  Total current ...............................            $ 198           $1,607
  Total deferred ...............................            (386)           1,110
                                                           -----           ------
     Income tax (benefit) provision, net......             $(188)          $2,717
                                                           =====           ======
</TABLE>

      The difference between the statutory federal income tax rate and
Metallurg's effective rate for the quarter ended June 30, 2002 is principally
due to losses in certain jurisdictions for which the related deferred tax was
offset by a valuation allowance.

Net (Loss) Income

      Net loss was $7.2 million in the quarter ended June 30, 2002 compared to
net income of $2.1 million for the quarter ended June 30, 2001. The loss is due
primarily to the decrease in operating income discussed above.

Results of Operations - The Two Quarters Ended June 30, 2002 Compared to the Two
Quarters Ended June 30, 2001

<TABLE>
<CAPTION>
                                                                                                Intersegment    Consolidated
                              Shieldalloy   LSM       GfE         EWW        CIF       Other     Eliminations       Totals
                             -----------  --------- ---------- ---------- ---------  ---------  ------------- ---------------
 Two Quarters Ended
     June 30, 2002
<S>                             <C>       <C>        <C>        <C>       <C>        <C>           <C>            <C>
Total revenue..............     $47,295   $73,900    $37,669    $14,130   $16,690    $67,204       $(49,528)      $207,360
Gross profit...............        (634)    5,321      5,533        429     1,773      7,730          1,385         21,537
SG&A.......................       5,362     6,497      6,391        856       889      7,222              -         27,217
Environmental
  expense recoveries.......      (3,000)        -          -          -         -          -              -         (3,000)
Restructuring charges, net.         273       350          -       (137)        -        875              -          1,361
Operating (loss) income...       (3,269)   (1,526)      (858)      (290)      884       (367)         1,385         (4,041)
Interest (expense)
  income, net..............        (163)     (707)      (134)        78      (288)    (5,496)             -         (6,710)
Income tax (benefit)
provision..............          (1,697)     (591)        60       (117)       47      2,293              -             (5)
Gain on disposition of
  discontinued operation...           -         -     10,076          -         -          -              -         10,076
Net (loss) income..........      (1,735)   (1,602)     9,047        (95)      549     11,261        (17,975)          (550)
</TABLE>

                                       17




<PAGE>


<TABLE>
<CAPTION>
                                                                                                Intersegment    Consolidated
                              Shieldalloy   LSM        GfE        EWW       CIF       Other     Eliminations       Totals
                              ----------- --------  ---------- ---------  ---------  --------  -------------    ------------
 Two Quarters Ended
     June 30, 2001
<S>                             <C>       <C>        <C>        <C>       <C>        <C>           <C>            <C>
Total revenue..............     $53,617   $90,132    $48,349    $20,732   $19,738    $95,811       $(65,507)      $262,872
Gross profit...............       2,772     8,398      8,586      4,426     4,197     14,259         (1,342)        41,296
SG&A.......................       4,437     5,362      6,084      1,007       930      8,469           (340)        25,949
Environmental
  expense recoveries.......        (600)        -          -          -         -          -              -           (600)
Operating (loss) income....      (1,405)    2,695      2,502      3,419     3,267      6,454           (985)        15,947
Interest (expense)
  income, net..............         (24)     (751)      (479)        98      (337)    (4,793)             -         (6,286)
Income tax (benefit)
  Provision................        (314)      706        785      1,339       501      1,950              -          4,967
Income from
  discontinued operation...           -         -        258          -         -          -              -            258
Net (loss) income..........      (1,115)    1,316      1,546      2,178     2,429     15,834        (17,052)         5,136

Total Revenue
</TABLE>

      Consolidated total revenue decreased by $55.5 million (21%) in the first
two quarters of 2002 as compared to the first two quarters of 2001. Shieldalloy
revenue was $6.3 million (12%) below the first two quarters of 2001 due
primarily to decreased sales volume and selling prices of vanadium and chrome
products. LSM revenue was $16.2 million (18%) below the first two quarters of
2001, due primarily to decreased sales volume and selling prices of aluminum
products, chromium metal and ferrotitanium. GfE revenue was $10.7 million (22%)
below the first two quarters of 2001, due primarily to decreased sales volume
and selling prices of specialty coating materials and alloys for the titanium
industry. EWW revenue was $6.6 million (32%) below the first two quarters of
2001, due to decreased sales volume and prices of ferrochrome. EWW's 2001 sales
also included one-time sales of tantalum-containing products. CIF revenue was
$3.0 million (15%) below the first two quarters of 2001, due primarily to
decreased selling prices of tantalum products partly offset by increased sales
volumes of aluminum products. Decreased revenue from distribution activities
included in "Other" above was primarily the result of decreased volume and
selling prices of tantalum-containing products.

Gross Profit

      Gross profit decreased to $21.5 million (10.4% of total revenue) in the
two quarters ended June 30, 2002 from $41.3 million (15.7% of total revenue) in
the two quarters ended June 30, 2001, a decrease of $19.8 million (48%).
Shieldalloy gross profit was $3.4 million (123%) below the first two quarters of
2001, due primarily to decreased sales volume and selling prices of vanadium and
chrome products. LSM gross profit was $3.1 million (37%) below the first two
quarters of 2001, due primarily to decreased sales volume and selling prices of
aluminum products and chromium metal. GfE gross profit was $3.1 million (36%)
below the first two quarters of 2001, due primarily to decreased sales volume
and selling prices of specialty coating materials and alloys for the titanium
industry. EWW gross profit was $4.0 million (90%) below the first two quarters
of 2001, due primarily to decreased sales volume of ferrochrome, but the 2001
gross profit also included one-time sales of tantalum-containing products. CIF
gross profit was $2.4 million (58%) below the first two quarters of 2001, due
primarily to decreased selling prices of tantalum products. Decreased gross
profit from distribution activities included in "Other" above was primarily the
result of decreased volume and selling prices of tantalum-containing products.

Selling, General and Administrative Expenses

      SG&A increased to $27.2 million in the two quarters ended June 30, 2002
from $25.9 million in the two quarters ended June 30, 2001, an increase of $1.3
million (5%). For the two quarters ended June 30, 2002, SG&A represented 13.1%
of total revenue compared to 9.9% for the two quarters ended June 30, 2001. The
increase was primarily due to an increase in pension expense at LSM and bad debt
expense resulting from bankruptcy filings by three customers.

Restructuring Charges, Net

      During the second quarter of 2002, Metallurg initiated a restructuring
program intended to reduce the cost structure at corporate headquarters,
Shieldalloy and LSM. The restructuring plan includes the discontinuation of
certain production

                                       18




<PAGE>


activities, the termination of employees and the write-down of redundant plant
and equipment. As a result of the restructuring and other cost reduction
activities, Metallurg currently expects to generate cost savings of
approximately $7 million annually in future periods. See "Note 7. Restructuring"
to Metallurg's Consolidated Financial Statements and "Restructuring Charges,
Net" in "Results of Operations - The Quarter Ended June 30, 2002 Compared to the
Quarter Ended June 30, 2001".

Operating Income

      There was an operating loss of $4.0 million in the two quarters ended June
30, 2002 compared to an operating income of $15.9 million in the two quarters
ended June 30, 2001, due primarily to the decrease in gross profit and the
restructuring, discussed above. In addition, Shieldalloy recognized an
environmental expense recovery of $3.0 million and $0.6 million in the two
quarters ended June 30, 2002 and 2001, respectively, upon settlements with
insurance companies relating to coverage for certain environmental claims.

Interest Expense, Net

      Interest expense, net, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                       Two Quarters Ended June 30,
                                                       ---------------------------
                                                           2002             2001
                                                       ------------      ---------
  <S>                                                    <C>              <C>
  Interest income ..............................         $   591          $ 1,028
  Interest expense .............................          (7,301)          (7,314)
                                                         -------          -------
     Interest expense, net......................         $(6,710)         $(6,286)
                                                         =======          =======
</TABLE>

Income Tax (Benefit) Provision, Net

      Income tax (benefit) provision, net, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                        Two Quarters Ended June 30,
                                                        ---------------------------
                                                            2002            2001
                                                           ------          ------
  <S>                                                      <C>             <C>
  Total current ................................           $ 451           $2,870
  Total deferred ...............................            (456)           2,097
                                                           -----           ------
     Income tax (benefit) provision, net........           $  (5)          $4,967
                                                           =====           =====
</TABLE>


      The difference between the statutory federal income tax rate and
Metallurg's effective rate for the two quarters ended June 30, 2002 is
principally due to: (i) a tax-free capital gain realized on the sale of GfE's
prosthetics company in January 2002; and (ii) losses in certain jurisdictions
for which the related deferred tax was offset by a valuation allowance.

Net (Loss) Income

      Net loss was $0.6 million in the two quarters ended June 30, 2002 compared
to net income of $5.1 million for the two quarters ended June 30, 2001. The
decrease in 2002 operating income was partly offset by a net gain of $10.1
million on the sale of GfE's prosthetics company in January 2002.

Liquidity and Financial Resources

General

      Metallurg's sources of liquidity include cash and cash equivalents, cash
from operations and amounts available under credit facilities. At June 30, 2002,
Metallurg had $23.3 million in cash and cash equivalents and working capital of
$116.1 million as compared to $25.8 million and $119.1 million, respectively, at
December 31, 2001.

      Cash Flows from Operating Activities - Net cash used in operating
activities was $6.4 million for the two quarters ended June 30, 2002, compared
to $5.4 million in the two quarters ended June 30, 2001. In 2002, a net loss,
adjusted for the gain on the sale of GfE's prosthetics company and depreciation
and other non-cash items, was partly offset by a decrease in working capital. In
2001, net income, adjusted for non-cash items, was more than offset by cash used
to fund increases in working capital items.

                                       19




<PAGE>


      Cash Flows from Investing Activities - Net cash provided by investing
activities was $3.3 million for the two quarters ended June 30, 2002, compared
to cash used in investing activities of $5.4 million for the two quarters ended
June 30, 2001. The 2002 cash flows included the receipt of $13.6 million in net
proceeds upon the sale of GfE's prosthetics company in January 2002. In
addition, cash flows for capital expenditures totaled $10.0 million in 2002
compared to $5.5 million in 2001.

      Cash Flows from Financing Activities - Net cash used in financing
activities was $1.0 million for the two quarters ended June 30, 2002, compared
to cash provided by financing activities of $4.8 million in the two quarters
ended June 30, 2001. Cash flows in 2001 reflect primarily long-term borrowings
by LSM for financing of its working capital.

Credit Facilities and Other Financing Arrangements

      Metallurg has a credit facility with certain financial institutions led by
Fleet National Bank as agent (the "Revolving Credit Facility") which provides
Metallurg, Inc., Shieldalloy and certain of their subsidiaries (the "Borrowers")
with up to $50.0 million of financing resources. Interest is charged at a rate
per annum equal to (i) LIBOR plus 2.0% - 2.5% or (ii) Prime, plus up to 1%,
based on the performance of Metallurg, Inc. and certain of its subsidiaries (the
"North American Group" as defined in the Revolving Credit Facility). The
Revolving Credit Facility permits borrowings of up to $50.0 million for working
capital requirements and general corporate purposes, up to $35.0 million of
which may be used for letters of credit. The Revolving Credit Facility prohibits
Metallurg, Inc. from making dividends prior to 2004 and requires the Borrowers
and certain subsidiaries to comply with various covenants, including the
maintenance of minimum liquidity, as defined in the agreement, at a $10.0
million level. Liquidity, as defined, was $13.1 million at June 30, 2002. The
total amount the Borrowers may borrow at any time is limited to a borrowing base
calculation that is based on eligible accounts receivable, inventory and certain
fixed assets. At June 30, 2002, there were no borrowings under this facility;
however, outstanding letters of credit totaled $21.3 million. The Borrowers had
unused borrowing capacity of $5.3 million under this facility.

      LSM has overdraft facilities with Barclays Bank plc ("Barclays") and HSBC
Bank plc ("HSBC") that currently provide LSM with up to 'L'8.5 million
($13.0 million) of borrowings, up to 'L'43.3 million ($66.3 million) of
foreign exchange contracts and options and 'L'4.0 million ($6.1 million) for
other ancillary banking arrangements, including bank guarantees. Borrowings
under these facilities are unsecured and payable on demand. Outstanding loans
under these facilities currently bear interest at a rate of 1.0% over the
lender's base rate. At June 30, 2002, there were no amounts outstanding under
these overdraft facilities.

      LSM also has four revolving term loan facilities with Barclays and HSBC
that provide for borrowings up to 'L'12.0 million ($18.4 million), all of
which were outstanding at June 30, 2002. Interest is currently charged at a rate
per annum of LIBOR plus 0.75% - 0.95%. Two of the facilities expire during the
second quarter of 2004 while the other two expire during the second quarter of
2006. These term loan facilities are unsecured and require LSM to comply with
various covenants, including the maintenance of minimum net worth and interest
coverage.

      Following a decline in operating results, LSM obtained a waiver from
Barclays regarding the required minimum interest coverage ratio covenant for the
period ended December 31, 2001. In the second quarter of 2002, LSM amended its
loan agreement with Barclays, which deferred the measurement date of the
required minimum interest coverage ratio covenant from June to July. In August
2002, the agreement was further amended to modify this covenant and other terms.
Compliance with the amended interest coverage ratio covenant will next be
measured at December 31, 2002 and will be based on the results for the six
months ended December 31, 2002. As a result of the amendments, interest on the
two revolving term loan facilities will be charged at a rate per annum of LIBOR
plus 1.75%. Also, the overdraft facility will be reduced by 'L'1.0 million
($1.5 million).

      LSM obtained a similar waiver from HSBC for the period ended December 31,
2001. The next measurement date on these facilities is December 31, 2002. LSM
does not anticipate the need for a waiver at this date but believes that it
would, if required, be able to obtain a similar waiver, though no assurance of
obtaining such a waiver can be given. The terms of the overdraft and term loan
facilities with HSBC remain unchanged.

      Several of Metallurg's other foreign subsidiaries have term loans and
credit facility arrangements with local banking institutions to provide funds
for working capital, capital expenditures and general corporate purposes. These
local credit facilities contain restrictions that vary from company to company.
At June 30, 2002, these facilities totaled $13.3 million, of which $5.3 million
of loans were outstanding.

                                       20




<PAGE>


      Metallurg believes that existing cash balances and these sources are
sufficient to fund the current and anticipated future requirements of working
capital, capital expenditures, pension benefits, potential acquisitions and
environmental expenditures for the next twelve months.

Other

      The funded status of Metallurg's pension plans continues to be impacted by
decreases in the plans' assets values due to continuing declines in equity
markets in 2002. Management continues to monitor these developments as further
declines in the funded status of these plans may impact future pension expense
and funding requirements.

Capital Expenditures

      Metallurg invested $10.0 million in capital expenditures during the first
two quarters of 2002. Capital expenditures are expected to total approximately
$16 million in 2002. Although Metallurg has projected these items for the year
ended December 31, 2002, Metallurg has not committed purchases to vendors for
all of these projects, as some projects remain contingent on final approvals and
other conditions and the actual timing of expenditures may extend into 2003.
Metallurg believes that these projects will be funded through existing and
future internally generated cash and credit lines.

Environmental Remediation Costs

      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 not discounted to their present value. During the first two
quarters of 2002, Metallurg expended $1.4 million for environmental remediation.

      In 1997, 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 that, as
of June 30, 2002, had an accrual of $29.7 million for the remaining estimated
cost of completion. Of this amount, $2.8 million is expected to be expended in
the last two quarters of 2002, $5.0 million in 2003 and $3.4 million in 2004. In
addition, Metallurg estimates it will make expenditures of $2.6 million with
respect to environmental remediation at its foreign facilities through 2004.
These amounts have been accrued for in prior years and are reflected in
Metallurg's balance sheet.

      While its remediation obligations and other environmental costs, in the
aggregate, will reduce its liquidity, Metallurg believes its cash balances, cash
from operations and cash available under its credit facilities are sufficient to
fund its current and anticipated future requirements for environmental
expenditures.

                                       21




<PAGE>


         ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

      Refer to the Market Risk section of Management's Discussion and Analysis
of Financial Condition and Results of Operations included in Metallurg's annual
report on Form 10-K for the year ended December 31, 2001, which is incorporated
by reference herein.

                                       22




<PAGE>


                           PART II - OTHER INFORMATION

                    ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     (a) EXHIBITS

         None

     (b) REPORTS ON FORM 8-K

         None


                                       23




<PAGE>


                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on August 13, 2002 on its
behalf by the undersigned thereunto duly authorized.

                             METALLURG, INC.
                             By:    /s/ Barry C. Nuss
                                ---------------------------
                             Barry C. Nuss
                             Vice President, Finance and Chief Financial Officer


                                       24


                           STATEMENT OF DIFFERENCES

The British pound sterling sign shall be expressed as....................    'L'