SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549

                                      FORM 10-K

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

                     For the fiscal year ended October 31, 1998

                           Commission File Number 0-24312

                             AGRI-NUTRITION GROUP LIMITED
               (Exact name of registrant as specified in its charter)

          Delaware                                       43-1648680
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                     Identification Number)

Riverport Executive Center II
13801 Riverport Drive, Suite 111
Maryland Heights, Missouri                                  63043
(Address of principal executive offices)                  (Zip Code)

        Registrant's telephone number, including area code:  (314) 298-7330

         Securities registered pursuant to Section 12(b) of the Act:  None

         Securities registered pursuant to Section 12(g) of the Act:  Common 
Stock, $.01 par value

         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 .

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [    ]

         The  aggregate  market value of the  registrant's  Common Stock held by
non-affiliates  of the  registrant as of January 28, 1999 (computed by reference
to  the  closing  price  of  such  stock  on  the  NASDAQ/National  Market)  was
$8,649,724.

         As of January 28, 1999, there were 9,275,696 shares of the registrant's
Common Stock outstanding.

                    DOCUMENTS INCORPORATED BY REFERENCE

            DOCUMENT                                         WHERE INCORPORATED

Portions of the Registrant's definitive Proxy Statement
  regarding the 1999 Annual Meeting of Stockholders               Part III




<PAGE>




                         Agri-Nutrition Group Limited

                                 FORM 10-K


                           Cross Reference Sheet
<TABLE>
<CAPTION>

Item                                                                                                           Page

                                   Part I
<S>     <C>                                                                                                   <C>
1        Business............................................................................................    2
2        Properties..........................................................................................    6
3        Legal Proceedings...................................................................................    7
4        Submission of Matters to a Vote of Security Holders.................................................    7
4A       Executive Officers of the Registrant................................................................    8

                                    Part II

5        Market for Registrant's Common Equity and Related Stockholder Matters...............................    9
6        Selected Financial Data.............................................................................   10
7        Management's Discussion and Analysis of Financial Condition
            and Results of Operations........................................................................   12
8        Financial Statements................................................................................   20
9        Changes in and Disagreements With Accountants on Accounting
           and Financial Disclosure..........................................................................   21

                                     Part III

10       Directors and Executive Officers of the Registrant..................................................   22
11       Executive Compensation..............................................................................   22
12       Security Ownership of Certain Beneficial Owners and Management......................................   22
13       Certain Relationships and Related Transactions......................................................   22

                                       Part IV

14       Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................   23
         Signatures .........................................................................................   26
</TABLE>



                                                         1

<PAGE>



                                   Part I

Item 1.  Business.

General

     The Company manufactures and distributes a wide variety of health, grooming
and nutritional  products for the pet and animal health industries and selective
products for the chemical  specialties  industry.  The Company's Pet Health Care
Division  represents the consolidation of four businesses  acquired between 1995
and 1997 -- Zema  Corporation  in  Raleigh,  North  Carolina  ("Zema"),  St. JON
Laboratories,  Inc. in Los Angeles, California ("St. JON"), St. JON VRx Products
in London,  England ("St. JON VRx"), and Mardel  Laboratories,  Inc. of Glendale
Heights,  Illinois  ("Mardel").  Its PM Resources division,  based in St. Louis,
Missouri ("Resources"),  formulates private-label products for the animal health
and specialty chemical industries.

Recent Developments

     Proposed  Virbac  Merger.  In October  1998,  the  Company  entered  into a
definitive merger agreement with Virbac, Inc. ("Virbac"), the U.S. subsidiary of
Virbac S.A.  ("VBSA"),  a French  veterinary  pharmaceutical  manufacturer  with
international operations, (the "Merger Agreement") whereby Virbac will be merged
into the  Company and VBSA will become the  Company's  controlling  stockholder.
Virbac,  based in Fort Worth,  Texas,  develops,  manufactures  and  distributes
throughout the U.S. and Canada a variety of animal health products,  focusing on
dermatological,  parasiticide and dental products. If the merger is consummated,
the Company's Board of Directors will be  reconstituted to include a majority of
Directors  designated  by VBSA and the  Company  will  change its name to Virbac
Corporation.  The merger will be accounted for as a reverse  acquisition  of the
Company by Virbac under the purchase method.

         The merger  agreement  provides that  immediately  prior to the merger,
Virbac will  receive a cash  infusion  from VBSA of $6.7  million plus an amount
sufficient  to  eliminate  Virbac's  approximately  $9.0  million  of  debt.  In
addition,  the merger  agreement  requires  that  within 60 days  following  the
merger,  the Company will conduct a public tender offer,  utilizing $3.0 million
of the cash infusion, to purchase 1,000,000 shares, or approximately 10%, of the
Company's  outstanding  Common Stock at $3.00 per share. If the closing price of
the Common Stock has not reached  $3.00 for 40  consecutive  trading days within
two years  after the merger,  the  Company  will be required to conduct a second
tender  offer,   funded  by  VBSA,  for  an  additional   1,395,000  shares,  or
approximately 15% of the shares currently outstanding, also at $3.00 per share.

         The merger, which is subject to approval by the Company's  stockholders
and various other customary  conditions,  will be submitted to stockholders  for
their  approval at the 1999  Annual  Meeting of  Stockholders,  expected to take
place in February 1999.

Products

         The Company's  products are generally ingested by or used on animals or
in animal husbandry to promote health and production efficiency, or, in the case
of  companion  animals,  to  promote  health  and  hygiene.   The  Company  also
manufactures  several products,  including home, lawn, and garden products,  and
other specialty  compounds unrelated to animal health and pet care. The products
manufactured by the Company include:


                                                         2

<PAGE>



o    medicated  treatments to prevent and treat disease and/or promote growth in
     livestock and pets, including fish;

o    anthelmetics,  or dewormers, to prevent gastrointestinal worms in livestock
     and pets;

o    nutritional  supplements  to promote  animal  growth and  reproduction  and
     ensure efficient feed utilization, and vitamins for dogs and cats;

o    aquarium water conditioners and test strips;

o    pest control products, including pesticides and rodenticides;

o    flea and tick products, including shampoos, dip concentrates,  collars, and
     sprays for dogs and cats, and flea traps;

o    oral  hygiene  products  for  dogs  and  cats,   including  toothpaste  and
     toothbrushes, sprays, and enzymatic rawhide chews;

o    gastrointestinal products for dogs and cats, including hairball remedies;

o    dermatological  products for dogs and cats, including anti-itch lotions and
     shampoos;

o    cleaners  and  disinfectants  for use on  animals  and in  animal  quarters
     including  shampoos,  dip  concentrates,  animal sprays,  surface cleaners,
     dairy pipeline cleaners, and all-purpose detergents;

o    home,  lawn, and garden products to prevent insect  infestation in turf and
     shrubs; and

o    specialty  compounds used by  manufacturers  in the formulation of plastics
     and related products.

Customers

         The  Company  sells its  products  to  national  or  dominant  regional
companies serving the animal health and specialty compound markets,  pet product
distributors,  specialty pet retail stores and superstores,  mass merchandisers,
warehouse  clubs,  grocery,  drug,  discount,  and feed stores,  and  veterinary
clinics. Sales are effected through a combination of full-time sales persons and
independent sales representatives, utilizing telemarketing and other means.

         The Company's pet care products are sold primarily  under its own brand
names,  including  C.E.T.(R),  Petrodex(R),  Maracyn(R)  and Zema(R),  and, to a
lesser extent,  on a private-label  basis.  The Company's animal health products
other than pet care products are sold primarily on a  private-label  basis under
its  customers'  brand  names.  During  1998,  branded  products  accounted  for
approximately 48% of the Company's net sales.


                                                         3

<PAGE>



Services

         The Company offers its private-label customers a wide range of services
in connection with the products it provides,  including  laboratory  formulation
and  services,  technical  support,  registration  services,  and  business  and
marketing consulting services. Laboratory formulation and services and technical
support  includes  assisting  customers in  developing  and  refining  products,
advising them as to suitable forms for their products or suitable packaging, and
assisting them in testing their products to enable them to provide data to their
customers or regulators.  Registration services consist primarily of maintaining
the  Company's  Environmental  Protection  Agency  ("EPA")  and  Food  and  Drug
Administration   ("FDA")  product   registrations  and  assisting  customers  in
maintaining  their  registrations.  Business and marketing  consulting  services
consist  of  assisting   customers  in  determining   new  products  they  might
successfully  market, as well as assisting them with the distribution of new and
existing  products.  The Company  also  provides  distribution  and  warehousing
services to a number of its customers.

Registrations, Trademarks, and Patents

         The  Company  has  numerous  EPA  and  FDA  product  registrations  and
trademarks  and  patents.  Its  EPA  product  registrations  permit  it to  sell
pesticide and rodenticide  products,  as well as  ectoparasite  products for the
treatment of fleas and ticks on dogs and cats.  While EPA  registrations  do not
expire,  registrants are required  periodically to reregister  certain  products
with  the  EPA.  Certain  of  the  Company's  facilities  are  qualified  as EPA
registered  manufacturing  sites,  which  permits  the  Company  to  manufacture
products  not only under its own EPA product  registrations,  but also under the
registrations of other companies.

         The Company's FDA new animal drug  applications  ("NADAs") permit it to
sell medicated treatments,  anthelmetics,  feed additives, and other animal drug
products.  NADAs do not expire, but are subject to modification or withdrawal by
the FDA based upon the related  drugs'  performance  in the market.  The Company
also has FDA  manufacturing  site approvals  enabling the Company to manufacture
animal drugs covered by NADAs held by other companies.

         The  Company's  trademarks  relate  primarily to its pet care  products
which are marketed under the St. JON Pet Care(R), Mardel(R), VRx(R), Zema(R) and
Pulvex(R) labels. The Company's trademarks also include Petromalt(R), a hairball
remedy for cats originally introduced in 1923; Petrodex(R) and C.E.T.(R),  lines
of dental  products for dogs and cats;  Petrelief(R),  a line of  dermatological
products for cats and dogs;  Doggydent(R),  a line of oral hygiene  products for
dogs;  Maracyn(R),  a leading fish antibiotic introduced in 1969; and Trounce(R)
used to  market  rodenticides,  the  Company  also has  trademark  registrations
pending for various additional pet care products.

         The Company also has several patents covering pet toothbrushes,  tartar
remover,  pet shampoo,  and flea traps,  which expire between 2004 and 2009, and
the  exclusive  right to use  several  patents  relating  to  enzyme  generation
formulae for use in animal  toothpaste and on rawhide  chews.  In December 1997,
the Company obtained  exclusive rights to patents supporting a bioadhesive patch
technology,   including  exclusive  distribution  rights  to  Stomadhex(TM),   a
chlorhexidine  based  antibacterial  patch  that can be placed in a pet's  mouth
following  dental  procedures to maintain oral health.  In May 1998, the Company
obtained  exclusive  world-wide  rights  to  manufacture  and  market  a line of
palatable medications for companion animals including  Palaprin(R),  PalaBIS(TM)
and Palapectate(TM). In August 1998, the Company obtained the North American and
U.K. rights to market and distribute certain proprietary, patented,

                                                         4

<PAGE>



biology-based  products for the  treatment of  periodontal  disease  marketed to
companion animals as Emdovet(TM) and Profgel(TM).  In addition, the Company owns
the worldwide  patents for  Bromethalin(R),  a highly  effective and proprietary
rodenticide  serving  agricultural  and Pest Control Operator  markets.  Certain
Bromethalin(R) patents expired in 1997 with remaining patents expiring in 1999.

Procurement of Raw Materials

         The active  ingredients in the Company's  products are not manufactured
by  the  Company,   but  are  generally   purchased  from  major  raw  materials
manufacturers.  The Company generally purchases materials on an as-needed basis,
as it is generally  unnecessary for the Company to maintain large inventories of
such materials in order to meet rapid delivery  requirements or assure itself of
adequate  supply.  The Company  purchases  certain raw  materials  from multiple
suppliers; some materials,  however, are proprietary,  and the Company's ability
to procure such materials is limited to suppliers with proprietary  rights.  The
Company considers its  relationships  with its suppliers to be good. The Company
also  purchases  certain raw materials the  availability  of which is subject to
EPA, FDA, or other regulatory approvals. Some of the Company's customers provide
the Company with the raw materials used in the production of their products.

Competition

         The Company's  competitors  fall into roughly four  categories:  animal
health distributors;  manufacturers,  formulators, and blenders of animal health
products;  pet care product producers and suppliers;  and specialty chemical and
pest control manufacturers. Each of these groups, with the exception of pet care
product  producers and  suppliers,  are comprised  primarily of privately  owned
regional and local  companies,  although each also includes  national  companies
that produce or distribute  certain  animal health and other  products.  The pet
care product  producer and supplier  group is comprised of national and regional
companies.

         Many of the Company's  competitors in specific market niches are larger
and have greater financial resources than the Company.  In addition,  regulatory
surveillance  and  enforcement  are  accelerating,  which is likely to result in
fewer competitors that have even greater  resources.  Much of the competition in
the  industries  served by the  Company  centers  around  price.  The Company is
focusing  on  the  production  of  high-performance,  valued-added  and  branded
products designed to be marketed on the basis of quality as well as price.

Regulatory and Environmental Matters

         The Company's  operations subject it to federal,  state, and local laws
and regulations  relating to environmental  affairs,  health, and safety.  These
laws and  regulations  are  administered  by the EPA, the FDA, the  Occupational
Safety and Health Administration ("OSHA"), the Department of Transportation, and
various state and local regulatory agencies.  Governmental  authorities,  and in
some cases third parties,  have the power to enforce  compliance with health and
safety  laws  and  regulations,  and  violators  may be  subject  to  sanctions,
including  civil and  criminal  penalties  and  injunctions.  While the  Company
believes  that  the  procedures  currently  in  effect  at  its  facilities  are
consistent  with industry  standards and that it is in material  compliance with
applicable  health and safety laws and regulations,  failure to comply with such
laws and regulations could have a material adverse effect on the Company.


                                                         5

<PAGE>



         The Company's operations also subject it to numerous environmental laws
and regulations administered by the EPA, including the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive  Environmental  Response,  Compensation
and Liability  Act, the Federal Water  Pollution  Control Act, the Federal Clean
Air Act, the Federal  Insecticide,  Fungicide and Rodenticide Act, and the Toxic
Substances  Control Act, as well as various  state and  municipal  environmental
laws and regulations.  See "Legal  Proceedings" for a description of a Notice of
Order to Abate Violations and a Notice of Violations  issued to Resources by the
Missouri Department of Natural Resources ("MDNR") relating to alleged violations
of Missouri's  hazardous waste laws and regulations.  Resources has discontinued
the use of underground storage tanks subject to RCRA and has submitted a closure
plan  to  the  MDNR  relating  to  closure  of  its  permitted  hazardous  waste
operations.

         Although  the  Company  believes  it is  in  material  compliance  with
applicable  environmental  laws,  regulations,  and  permits  and  has a  policy
designed  to  ensure  that  it  continues  to  operate  in  material  compliance
therewith,  there can be no  assurance  that the Company  will not be exposed to
significant  environmental  liability.  The  Company  could be held  liable  for
property  damage or  personal  injury  caused by the  release,  spill,  or other
discharge of hazardous substances or materials and could be held responsible for
cleanup of any affected sites.  In connection  with the  acquisitions of HIB (as
defined  below),  Zema, St. JON and Mardel,  the Company entered into agreements
pursuant to which the former owners of such  companies  have agreed to indemnify
the Company against liabilities,  including certain  environmental  liabilities,
relating  to the  use,  condition,  ownership,  or  operation  of the  Company's
facilities prior to the acquisitions.

         The   Company  has   environmental   compliance   programs   addressing
environmental and other regulatory compliance issues. Future developments,  such
as stricter  environmental  laws,  regulations  or enforcement  policies,  could
increase the Company's environmental  compliance costs. While the Company is not
aware of any pending legislation or proposed regulations that, if enacted, would
have a material  adverse  effect on the Company,  there can be no assurance that
future legislation or regulation will not have such effect.

Employees

         The  Company  has  approximately  210  full-time  employees,  of  which
approximately  120 are engaged in  manufacturing  activities and 22 in sales and
marketing  activities.  Forty-five  of the  full-time  employees  located at the
Bridgeton, Missouri facility are represented by the International Longshoremen's
Association,  and eight are  represented  by the  International  Brotherhood  of
Electrical  Workers.   Such  employees'  wages  and  benefits  are  governed  by
bargaining  agreements  negotiated with the unions, which will expire on January
31, 1999.  Management is currently  negotiating an extension of these  contracts
and  does  not  anticipate  that  such  negotiations,   or  the  result  of  the
negotiations will have a materially adverse impact on the Company's  operations.
The Company also employs an average of  approximately  26 persons on a temporary
basis. The number of temporary  employees  fluctuates on an annual basis because
demand for the  Company's  products  is  seasonal.  The  Company  considers  its
employee and union relations to be good.

Item 2.  Properties.

         The Company owns the Bridgeton,  Missouri  facility at which Resources'
operations  are  conducted and most of the  equipment  located on the site.  The
facility consists of a 176,600-square-foot

                                                         6

<PAGE>



manufacturing and warehousing  building and three buildings for  administration,
retained sample storage, equipment, and maintenance.

         AGNU leases its corporate  headquarters in Maryland Heights,  Missouri,
and manufacturing,  office,  warehouse, and distribution facilities located near
Los Angeles,  California,  Glendale  Heights,  Illinois  and Yeovil,  the United
Kingdom,  under  non-cancelable  leases expiring  August 2000,  October 1999 and
December  2002,   respectively.   AGNU  also  leases  certain   equipment  under
non-cancelable  operating leases. The Raleigh, North Carolina facility, which is
under a non-cancelable lease expiring in April 2000, has been substantially shut
down and is in the process of being subleased.  Management  believes that AGNU's
facilities are adequate and suitable for its current operations.

Item 3.  Legal Proceedings.

         On  November  27,  1994,  the MDNR  issued  a Notice  of Order to Abate
Violations to the Company relating to alleged  violations of Missouri's laws and
regulations  relating  to the  storage  of  hazardous  waste  at  the  Bridgeton
facility.   The  order  alleges  that  the  Company  had  not  remedied  certain
deficiencies  relating to the storage of hazardous waste cited in inspections by
the MDNR in May 1993 and March 1994, and directs remedial action.

         On December 21,  1995,  the MDNR issued a Notice of  Violations  to the
Company relating to  contamination in the vicinity of an underground  collection
system that was removed from the Bridgeton  facility in 1994. The notice alleges
that the collection system should have been included in the Company's  hazardous
waste storage  permit,  states that the collection  system was classified by the
MDNR as a leaking underground storage tank, and directs remedial action.

         The  Company is  currently  in  negotiations  with the MDNR  related to
certain  issues raised in the November 1994 Notice of Order to Abate  Violations
and the December 1995 Notice of Violations  issued by the MDNR.  Management does
not believe that either of the matters pose a  significant  risk to human health
or the  environment,  or that the resolution of either of the claims made by the
MDNR will have a material adverse effect on the Company's  financial position or
results of operations.

         The Company is aware of various  disputes and potential claims and is a
party to certain litigation involving claims against the Company. Based on facts
currently known to the Company, it believes that the ultimate liability, if any,
which may result from these  disputes,  claims and  litigation  would not have a
material adverse effect on the Company's  consolidated financial position or its
results of operations with or without  consideration of insurance coverage.  See
Note 15 to the Consolidated Financial Statements included as part of this Annual
Report.

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

         No matters were submitted to a vote of the  stockholders of the Company
during the fourth quarter of the fiscal year covered by this Report.



                                                         7

<PAGE>



Item 4A.  Executive Officers of the Registrant.

         The  following  table  sets forth  certain  information  regarding  the
Company's executive officers:

       Name                  Age                     Position 
   Bruce G. Baker             55     President and Chief Executive Officer
   Robert J. Elfanbaum        35     Vice President and Chief Financial Officer

         Bruce G. Baker has been  President and Chief  Executive  Officer of the
Company  since  November 1, 1996.  From March 1994 through  October 1996, he was
Vice  President and Deputy Chief  Executive  Officer of the Company,  and he has
been a Director  since August 1993.  From 1965 to February 1993, he held various
management  positions  with  Ralston  Purina and Purina  Mills,  including  Vice
President  Research and  Marketing  of Purina Mills from 1990 to February  1993.
This was  preceded  by  responsibilities  as Vice  President  - Consumer  Group,
directing research,  marketing,  manufacturing,  sales, and administration for a
division  of Purina  Mills.  Mr.  Baker also has  served in  various  capacities
relating to European, Canadian, and Mexican market development.

         Robert  J.  Elfanbaum,  C.P.A.,  has  been  Vice  President  and  Chief
Financial  Officer of the Company  since August 23,  1996.  From  November  1994
through August 22, 1996, he served the Company as Assistant Corporate Controller
and Corporate  Controller.  He was Manager of Internal Auditing for Brown Group,
Inc., an  international  footwear company from February 1993 until he joined the
Company.  From August  1985  through  February  1993,  he was  employed by Price
Waterhouse in St.  Louis,  MO, most recently as a manager in their Middle Market
Group.  Mr.  Elfanbaum  is a past  president  of the St.  Louis  Chapter  of the
Institute of Management  Accountants and currently is serving as Chairman of the
Nominating Committee.



                                                         8

<PAGE>



                                     Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         The  Company's  Common  Stock is traded on the NASDAQ  National  Market
under the symbol AGNU.  The following  table sets forth the  quarterly  range of
high and low  closing  sale  prices  per share for the Common  Stock  during the
period indicated.

<TABLE>
<CAPTION>

                                                                     High               Low 
<S>                                                                <C>               <C> 
         Fiscal year ended October 31, 1997
                  First Quarter..................................     1.63             1.13
                  Second Quarter.................................     1.75             1.13
                  Third Quarter..................................     1.38             1.06
                  Fourth Quarter.................................     1.69             1.13
         Fiscal year ended October 31, 1998
                  First Quarter..................................     1.50             1.06
                  Second Quarter.................................     1.44             1.13
                  Third Quarter..................................     1.31             1.00
                  Fourth Quarter.................................     1.50             0.81
         Fiscal 1999
                  Through January 28, 1999.......................     1.38             1.00
</TABLE>

         The Company has not paid any  dividends  on its Common  Stock since its
formation.  It presently  intends to retain its earnings for use in its business
and does not  anticipate  paying any cash dividends in the  foreseeable  future.
Further,  the Company is prohibited from paying dividends without the consent of
the  Company's  lender.  As of  December  31,  1998,  the Company had a total of
approximately  1,900  stockholders,  including  267  stockholders  of record and
approximately 1,600 persons or entities holding Common Stock in nominee name.



                                                         9

<PAGE>



Item 6.  Selected Financial Data.

         The  selected   financial  data  presented  below  should  be  read  in
conjunction with the Consolidated  Financial  Statements of the Company, and the
related  notes  thereto,"Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations," and other financial  information  included
elsewhere in this report.





<TABLE>
<CAPTION>

                                                                      Year Ended October 31,                    
                                                ----------------------------------------------------------------
                                                    1994         1995         1996         1997         1998    
                                                -----------  -----------   -----------  -----------  -----------
<S>                                             <C>          <C>          <C>          <C>           <C>
Net sales (1).................................  $13,671,588  $20,062,942  $28,661,307  $31,051,537   $32,944,020

Operating income (loss)
    from continuing
    operations................................     (484,272)    (484,315)      47,399      978,481      (42,894)
Income (loss) from
    continuing operations.....................     (482,817)    (108,333)    (241,320)     118,671     (662,832)
Income from discontinued
    operations................................      147,206      139,766      113,900       14,659            --
Net income (loss).............................     (335,611)      31,433     (127,420)     133,330     (662,832)

Basic earnings (loss).........................
    per share:
    Continuing
      operations..............................        (0.07)       (0.01)       (0.03)        0.01         (.07)
    Discontinued
      operations..............................         0.02         0.01         0.01           --            --
    Net income................................        (0.05)          --        (0.02)        0.01         (.07)

Diluted earnings (loss) per share:
    Continuing operations.....................        (0.07)       (0.01)       (0.03)        0.01         (.07)
    Discontinued
      operations..............................         0.02         0.01         0.01           --            --
    Net income................................        (0.05)          --        (0.02)        0.01         (.07)

Weighted average number of shares outstanding:
    Basic.....................................    6,636,811    8,112,851    8,397,686    8,483,897     9,309,184
    Diluted...................................    6,636,811    8,112,851    8,397,686    8,699,914     9,309,184

</TABLE>











                                                        10

<PAGE>



<TABLE>
<CAPTION>

                                                                            October 31,                         
                                                    1994         1995         1996         1997         1998    
                                                -----------  -----------   -----------  -----------  -----------
<S>                                             <C>          <C>          <C>          <C>           <C>
Balance Sheet Data:
    Cash......................................  $11,185,943  $ 2,330,685  $ 2,186,877  $   145,505   $    97,971
    Working capital...........................   13,195,940    7,808,433    9,928,248    7,772,318     9,263,115
    Total assets..............................   21,141,513   23,473,103   25,850,052   26,596,150    28,042,588
    Current portion of
      long-term debt..........................      607,165      252,692      291,817      201,636     1,209,912
    Long-term debt............................    3,066,667    4,914,614    7,824,012    7,236,204     9,114,226
    Stockholders' equity......................   14,095,359   14,416,918   14,322,335   15,553,360    14,884,813
</TABLE>

(1) Net sales from continuing operations to Purina were as follows for the 
    respective periods:
      Fiscal year ended October 31, 1994.........................   $7.7 million
      Fiscal year ended October 31, 1995.........................   $7.1 million
      Fiscal year ended October 31, 1996.........................   $5.4 million
      Fiscal year ended October 31, 1997.........................   $4.3 million
      Fiscal year ended October 31, 1998.........................   $3.1 million



                                                        11

<PAGE>




Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Overview

         Organized in 1993,  the Company  manufactures  and  distributes  animal
health and pet care  products.  In  September  1993,  the  Company,  through its
subsidiary  Resources,  acquired the Health Industries Business of Purina Mills,
Inc. which formulates,  manufactures and distributes  animal health products and
to a lesser extent, home, lawn and garden, and other products. In July 1994, the
Company completed its initial public offering ("IPO"), the net proceeds of which
were  approximately  $12.1  million.  Effective  March  31,  1995,  the  Company
purchased  substantially  all  of  the  net  assets  and  business  of  Zema,  a
formulator,  manufacturer  and supplier of health care and grooming  products to
the pet industry. Effective August 31, 1995, the Company purchased substantially
all of the net assets and  business of St. JON, a  developer,  manufacturer  and
marketer of oral hygiene,  dermatological and gastrointestinal products for dogs
and cats. In September 1997, the Company purchased  substantially all of the net
assets and business of Mardel. Mardel is a developer,  manufacturer and marketer
of high quality care  products to the pet industry with  expertise  extending to
fresh  water  and  marine  fish,  birds,  dogs,  cats,  small  animals  and pond
accessories.

         The Company's results of operations presented and discussed herein only
include the results of Zema's, St. JON's and Mardel's  operations  subsequent to
their  acquisition by the Company in April 1995, August 1995 and September 1997,
respectively.

         The Company historically reported certain financial information for two
segments - ingredients  and specialty  products.  Ingredients  consisted of feed
products  that were  purchased  or blended by the  Company and  distributed  for
Purina (see Note 14 to the Company's  Consolidated Financial Statements included
elsewhere  in this  Annual  Report).  Specialty  products  consist  of all other
products  formulated,  manufactured,  and  distributed by the Company to various
customers,  including  Purina.  Included in the specialty  products  segment are
sales of private label and branded  products for which the Company  manufactures
goods using  registrations  and/or  formulas owned by the Company,  and sales of
products manufactured under contract for which the Company manufactures products
using the customers' registrations and/or formulas.

         Given the  acquisitions of businesses  with branded,  consumer-targeted
products and the continued  emphasis on growth of the specialty product segment,
the  significance  of the  ingredients  segment had decreased in fiscal 1996 and
1997.  Management  expected this trend to continue in the future.  In June 1997,
the Company  discontinued  the  distribution  of ingredients to Purina.  In July
1997, the Company distributed all of its remaining  ingredients  inventories and
discontinued  operations in its ingredients  segment.  This segment is accounted
for as discontinued  operations in accordance with Accounting  Principles  Board
Opinion No. 30, "Reporting the Results of Operations." Accordingly,  the Company
has  reported  the  ingredients  segment  as  discontinued  operations  and  the
consolidated  financial  statements have been  reclassified to report separately
the  financial  position and  operating  results of the segment.  The  Company's
consolidated operating results for year ended October 31, 1997 has been restated
to reflect the Company's continuing operations related to its specialty products
business.  There were no activities from discontinued  operations in fiscal year
1998.

         In the fourth  quarter of 1997,  the Company formed the Pet Health Care
Division,  which is  comprised  of St. JON,  St. JON VRx,  Zema and Mardel.  The
integration of these companies is expected

                                                        12

<PAGE>



to produce  certain  operating  synergies,  creating a  platform  for  continued
expansion.  The benefits from such  integration  started to impact the Company's
operating  results  in the third  quarter of fiscal  1998.  During the first six
months of fiscal 1998  production  shifted from Zema's  Raleigh  facility to the
Company's other manufacturing  locations.  The distribution functions within the
Pet Health Care Division were  consolidated  by the end of the fourth quarter of
fiscal 1998.  During August 1998, the Raleigh facility was effectively shut down
and  is in  the  process  of  being  sublet.  Consolidation  of  the  sales  and
administration  functions of the Pet Health Care Division was  completed  during
the third quarter of fiscal 1998. The Company has incurred  certain  incremental
costs  associated with the integration,  but such costs, in the aggregate,  have
not been nor are expected to be material to the Company's  consolidated  results
of  operations.   The  Company  continues  to  pursue  selective   complementary
acquisitions, alignments and/or licenses in support of its core businesses.

         The following  table  represents  certain  summary  operating data on a
comparative basis:
<TABLE>
<CAPTION>

                                                               Fiscal Year Ended October 31,                  
                                                   1996                     1997                  1998        
                                          Dollar       % of       Dollar         % of       Dollar     % of
                                          amount     net sales    amount       net sales    amount   net sales
                                                             (In thousands, except percentages)
<S>                                      <C>           <C>        <C>            <C>       <C>        <C>
Net Sales.............................   $  28,661      100.0     $   31,052      100.0    $ 32,944     100.0

Cost of sales.........................      20,784       72.5         22,851       73.6      24,008      72.9

Gross profit..........................       7,877       27.5          8,201       26.4       8,936      27.1

Selling, general and
     administrative expense...........       7,447       26.0          7,130       23.0       8,812      26.7

Operating income (loss)...............          47        0.2            979        3.2         (43)     (0.1)
</TABLE>

Recent Developments

     Proposed  Virbac  Merger.  In October  1998,  the  Company  entered  into a
definitive merger agreement with Virbac,  the U.S.  subsidiary of VBSA, a French
veterinary pharmaceutical  manufacturer with international  operations,  whereby
Virbac  will be merged  into the  Company  and VBSA will  become  the  Company's
controlling   stockholder.   Virbac,  based  in  Fort  Worth,  Texas,  develops,
manufactures and distributes  throughout the U.S. and Canada a variety of animal
health products,  focusing on dermatological,  parasiticide and dental products.
If the  merger  is  consummated,  the  Company's  Board  of  Directors  will  be
reconstituted  to include a majority  of  Directors  designated  by VBSA and the
Company will change its name to Virbac Corporation. The merger will be accounted
for as a reverse acquisition of the Company by Virbac under the purchase method.

         The merger  agreement  provides that  immediately  prior to the merger,
Virbac will  receive a cash  infusion  from VBSA of $6.7  million plus an amount
sufficient  to  eliminate  Virbac's  approximately  $9.0  million  of  debt.  In
addition,  the merger  agreement  requires  that  within 60 days  following  the
merger,  the Company will conduct a public tender offer,  utilizing $3.0 million
of the cash infusion, to purchase 1,000,000 shares, or approximately 10%, of the
Company's  outstanding  Common Stock at $3.00 per share. If the closing price of
the Common Stock has not reached  $3.00 for 40  consecutive  trading days within
two years  after the merger,  the  Company  will be required to conduct a second
tender  offer,   funded  by  VBSA,  for  an  additional   1,395,000  shares,  or
approximately 15% of the shares currently outstanding, also at $3.00 per share.

                                                        13

<PAGE>



         The merger, which is subject to approval by the Company's  stockholders
and various other customary  conditions,  will be submitted to stockholders  for
their  approval at the 1999  Annual  Meeting of  Stockholders,  expected to take
place in February 1999.

Fiscal Year Ended October 31, 1997 Compared to Fiscal Year Ended October 31, 
1998

         Total net sales  increased  6.1% from $31.1  million in fiscal  1997 to
$32.9 million for 1998. This increase  reflects a 14.9% increase in sales of the
Pet Health Care Division due primarily to the acquisition of Mardel Laboratories
in September  1997 and continued  strong growth in the pet oral hygiene  product
category.  The increase was offset by anticipated  weakness in the  agricultural
portion of PM  Resources'  business,  the timing of certain  rodenticide  orders
anticipated  in the last half of fiscal 1998 were delayed until January 1999 and
the impact of unanticipated  production  shortfalls related to the consolidation
of  manufacturing  operations  within the Pet  Health  Care  Division.  Sales to
Purina,  excluding sales of ingredients which were discontinued in 1997, totaled
approximately  $3.1 million in 1998  compared to  approximately  $4.3 million in
1997.  See Liquidity  and Capital  Resources for a discussion of the purchase of
certain inventories from Purina.

         Gross profit  increased  from $8.2 million in 1997 (26.4% of net sales)
to $8.9  million in 1998 (27.1% of net sales),  primarily  due to changes in the
Company's sales mix, which consisted of an increased  proportion of sales of the
Pet Health Care  Division,  which  generally  has higher  margins as compared to
sales of the Company's  private  label/contract  manufacturing  business.  Gross
profit was negatively  impacted by certain  redundant  costs incurred during the
consolidation of manufacturing  operations  within the Pet Health Care Division;
however such  consolidation was substantially  completed during the last half of
fiscal 1998.

         Selling,  general  and  administrative  expenses  increased  from  $7.1
million in 1997 to $8.8 million in 1998  primarily  due to the  increased  costs
related to Mardel's business, which was acquired in September 1997. The increase
in expenses includes certain  redundant  expenses that are being incurred during
the  consolidation  of certain  manufacturing,  marketing and overhead  expenses
among the operating  companies that comprise the Pet Health Care Division.  Such
consolidation was completed by the end of the Company's 1998 fiscal year.

         The  factors  discussed  above  resulted  in  an  operating  loss  from
continuing  operations  of  approximately  $40,000  during the year ended  1998,
compared to operating income of approximately $1.0 million for the prior year.

         Interest  expense  was  approximately  $0.6  million  in 1997  and $0.8
million in 1998,  reflecting  increased  debt  balances  that  resulted from the
Company's investment in Mardel and additional working capital requirements.

     During  the  fourth   quarter  of  fiscal   1998,   the  Company   incurred
approximately  $0.25 million of expenses related to the merger agreement between
the Company,  Virbac and VBSA. Such amounts were included in interest income and
other on the Company's Consolidated Statement of Operations.

         The effective  income tax rate of the Company was  approximately  38.5%
for both 1997 and 1998. The aggregate amount of the deferred tax asset valuation
allowance at October 31, 1998 was  approximately  $0.1 million.  This  valuation
allowance  reflects  management's view of the portion of deferred tax assets for
which it is more likely than not that tax  benefits  will not be  realized.  The
primary

                                                        14

<PAGE>



factor affecting  management's view in this regard are the Company's losses from
operations in certain prior years.

Fiscal Year Ended October 31, 1996 Compared to Fiscal Year Ended October 31, 
1997

         Total net sales  increased  8.3% from $28.7  million in fiscal  1996 to
$31.1  million for 1997,  which  included net sales of Mardel  subsequent to its
acquisition in September 1997. The ingredients  segment was discontinued in 1997
and  accordingly  sales  related  to this  segment  are  included  in results of
discontinued  operations for all periods  presented and are not reflected in the
table above. The discontinuance of the ingredients segment resulted in a minimal
impact  on  gross  profit  due to its  sales  being of  lower  margin  commodity
products.  Sales of pet care  products  grew 27%  reflecting  the  impact of new
products introduced into the veterinary channel during fiscal 1996 and 1997, and
continued strong growth from the Company's sales and  distribution  operation in
the United Kingdom which was acquired in July 1996.

         The Company's  manufacturing  and supply agreement with Purina pursuant
to which Purina had guaranteed the Company  sufficient  sales to generate annual
income,  net of  ingredient,  direct  manufacturing,  and other  direct costs of
approximately  $2.9 million for the  three-year  period  ended  October 31, 1996
expired as of that date.  See Liquidity and Capital  Resources for discussion of
the  purchase of certain  inventories  from Purina.  Sales to Purina,  excluding
sales of ingredients which were discontinued in July 1997,  totaled $4.3 million
for the year ended  October 31, 1997  compared to $5.4  million  during the year
ended October 31, 1996.  Fiscal 1996 income from Purina was  approximately  $1.2
million less than that required  under the  agreement.  The entire amount of the
shortfall  under the agreement was billed to Purina and included in net sales of
specialty  products  during  October  1996;  such  billing was  collected by the
Company in December 1996.

          Gross profit  increased from $7.9 million in 1996 (27.5% of net sales)
to $8.2  million in 1997 (26.4% of net sales),  primarily  due to the  increased
sales in 1997. As a percent of sales,  gross profit decreased  approximately one
percentage point due primarily to changes in product mix.

         Selling,  general and  administrative  expenses were approximately $7.4
million in 1996 and $7.1 million in 1997,  decreasing  as a percent of net sales
from  26.0% in 1996 to 23.0% in 1997.  The  decrease  in  selling,  general  and
administrative  expenses  as a percent  of sales is related to the impact of the
corporate management  restructuring  announced in August 1996, combined with the
impact of cost reduction measures implemented at the operating companies.

         Severance  costs of  $240,000  related  to the August  1996  management
restructuring  were accrued in fiscal 1996 and paid in fiscal  1997.  Such costs
were nonrecurring and did not impact fiscal 1997 results.

         The  factors   discussed  above  resulted  in  operating   income  from
continuing  operations of  approximately  $979,000 during the year ended October
31,  1997,  a  $932,000   improvement   compared  to  the  operating  income  of
approximately $47,000 in the prior year.

         Interest expense was approximately  $0.6 million in both 1996 and 1997,
with a small  increase that reflects  increased debt balances that resulted from
the Company's investment in Mardel and increased sales volume in fiscal 1997.


                                                        15

<PAGE>



         In March 1997,  the Company  terminated its letter of intent related to
its proposed  acquisition of Anthony Products Company.  In conjunction with this
action,  the Company  recorded a $202,000  pre-tax  charge in fiscal 1997.  Such
amount was included in interest  income and other in the Company's  consolidated
statement of operations.

         The effective income tax rate of the Company was  approximately 38% for
1996 and  1997.  The  aggregate  amount  of the  deferred  tax  asset  valuation
allowance at October 31, 1997 was  approximately  $0.1 million.  This  valuation
allowance  reflects  management's view of the portion of deferred tax assets for
which it is more likely than not that tax  benefits  will not be  realized.  The
primary  factor  affecting  management's  view in this regard are the  Company's
losses from operations in certain prior years.

         Ingredients sales were  approximately  $7.7 million and $5.5 million in
1996  and  1997,  respectively.  Income  from  discontinued  operations  in 1997
decreased  approximately  $99,000 from $114,000 in 1996 to $15,000 in 1997. This
is primarily  attributable  to decreasing  margins from the sales of ingredients
compared to the prior year,  combined with decreased  volume of units shipped in
1997. In July 1997, the Company shipped its remaining  ingredients inventory and
discontinued operations related to this segment.

         Net income in 1997 of  $133,000  increased  by  approximately  $260,000
compared  to the net loss of  $127,000  incurred  in  fiscal  1996  based on the
various factors described above.

Liquidity and Capital Resources

     The Company's existing capital requirements are primarily to fund equipment
purchases and working  capital needs.  During April 1995, the Company  completed
the  acquisition of Zema,  which  required  utilization  of  approximately  $3.2
million of net proceeds from its July 1994 IPO for the  acquisition  and related
expenses in 1995 and an additional  payment of $300,000 plus interest  which was
paid in April 1998. In August 1995,  the Company  acquired the net assets of St.
JON,  which  required  approximately  $3.5 million of cash,  the  assumption  of
certain  liabilities  aggregating  approximately  $1.5  million  which were paid
within four months of closing,  and an additional  $2.0 million plus interest to
be paid in annual  installments over six years commencing March 31, 1997. During
fiscal 1997, the Company utilized approximately $1.0 million of cash for payment
of  this  obligation  and  related  accrued  interest,  and  in May  1998,  paid
approximately $1.1 million, the remaining amounts outstanding under this note in
conjunction with the refinancing of its debt as discussed  below.  Effective May
1996, the Company acquired the worldwide  patents and other assets and rights to
Bromethalin,  which required payments of $1.0 million including related expenses
at closing,  and will  require  additional  consideration  based on shipments of
Bromethalin to Purina over a five-year  period.  In September  1997, the Company
acquired  Mardel for cash of  approximately  $1.1  million  and stock  valued at
approximately $1.1 million.  As additional  consideration for the acquisition of
Mardel,  the Company also issued a note payable of $300,000 to the former owners
of the  acquired  company  to be paid in cash and  stock  over a period of three
years.  With the  acquisition  of Mardel,  the Company  utilized  its  remaining
proceeds from the IPO.

         During fiscal 1996, cash used by operations  approximated $2.3 million,
primarily  related  to  increased  working  capital  requirements.   Inventories
increased by  approximately  $1.7 million  reflecting  investments in adding new
products to the Company's lines and moving existing  products and  product-lines
from one operating company's  distribution channel into distribution channels of
other operating

                                                        16

<PAGE>



companies.  Increases  in accounts  receivable  of  approximately  $0.5  million
compared to the prior year reflect  temporary  increases in certain key accounts
that were subsequently collected during fiscal 1997.

         During  fiscal 1997,  cash  generated by operations  approximated  $1.8
million compared to a use of cash by operations of approximately $2.3 million in
1996.  This  improvement  in cash flows in 1997 was  primarily  due to  emphasis
placed on the operating  companies to control and reduce  inventory  levels,  as
well  as  certain  changes  to the  product  mix  at  Resources,  including  the
discontinuation  of the  ingredients  segment.  The Company's  inventories  from
continuing operations decreased $0.7 million during 1997 compared to an increase
of  $1.7  million  in  1996.  The  discontinuation  of the  ingredients  segment
generated cash of $1.3 million during the year ended October 31, 1997,  compared
to a use of cash related to this discontinued segment of $1.0 million during the
comparable  period in the prior year.  Cash generated from  operations in fiscal
1997 was generally utilized for capital expenditures and to pay down debt.

         During   fiscal  1998,   the  Company  used  cash  in   operations   by
approximately  $1.6  million.   This  was  primarily  related  to  an  increased
investment  in inventory and increases in accounts  receivable.  The  additional
inventory  consists  primarily of new product  promotions and a build-up of core
products for the mass markets to reduce the risk of future  stock-outs which had
been  occurring  through  the first  half of fiscal  1998.  Accounts  receivable
increased  primarily  due to increased  sales in  September  and October of 1998
compared to 1997.

         In May 1998, the Company  consolidated  its existing credit  agreements
increasing  the facility to $9.2 million with a maturity date of March 31, 2001.
The new bank agreement also increased borrowing availability for working capital
demand and  modified  the bank  covenants.  The new  facility  consists  of $4.5
million in  revolving  credit  lines,  the  available  amount  being  based upon
specified percentages of qualified accounts receivable and inventory, and a $4.7
million  revolving credit line with available amounts being reduced $150,000 per
quarter with the first such  reduction  on November 30, 1998.  On August 6, 1998
and October 2, 1998, the Company again amended its existing  credit  facilities,
increasing the latter revolving credit line to $5.2 million from $4.7 million to
meet temporary working capital  requirements.  The interest rate will range from
prime minus 0.25% to prime plus 0.5%,  depending on the Company's  ratio of debt
to net worth, as defined in the new agreement. At October 31, 1998, the interest
rate charged on borrowings outstanding under the new agreement,  as amended, was
8.50% which is the bank's prime rate plus 0.50%. At October 31, 1998,  excluding
outstanding  checks,   approximately  $1.2  million  was  available  under  this
agreement.

         Management  believes that the Company will have sufficient cash to meet
the needs of its current  operations,  including debt service. In order to avoid
the Company's being in  non-compliance  with certain of the financial  covenants
under its amended credit  agreement in future  periods due to legal,  accounting
and other  transaction  costs  related to the proposed  merger with Virbac,  the
Company's  lending bank agreed to exclude such costs from the calculation of its
covenants.  No other instances of non-compliance  with financial  covenants were
present at October 31, 1998. In addition, management is currently in discussions
with its bank, and is also evaluating  other strategic  alternatives  with third
parties,  including  the  proposed  Merger with Virbac as discussed  herein,  to
further address its current and long-term working capital requirements.

         The Board has  authorized the repurchase of up to 500,000 shares of the
Company's Common Stock. The amount of funds required will depend upon the actual
number of shares  repurchased and the market price paid by the Company for those
shares. The Company will utilize available funds to

                                                        17

<PAGE>



implement this stock repurchase.  During the year ended October 31, 1998, 83,111
shares were repurchased under this program at an aggregate cost of approximately
$100,000. As of October 31, 1998, 129,961 shares had been repurchased under this
program at an aggregate cost of $176,007.  The share repurchase program has been
suspended pending the consummation of the Merger Agreement.

         The Company has no plans to significantly increase any of its operating
subsidiaries' plant facilities  capacity.  Capital  expenditures for fiscal 1998
were approximately $0.5 million.  Future capital  expenditures for the Company's
operating  subsidiaries  are not  expected to  significantly  exceed  historical
amounts, which in prior periods approximated current depreciation expense.

         In  January  1999,  the  Company  acquired  certain  assets,  primarily
inventories,  related to Purina  Mill's  animal health  products  business.  The
amount paid for such inventory  aggregated  $400,000,  less future amounts which
would have been due to Purina Mills related to the  acquisition  of  Bromethalin
assets,  as  discussed  in  Note  3  to  the  Company's  Consolidated  Financial
Statements.  Purina's  "additional  consideration"  due for the five-year period
subsequent to the acquisition of Bromethalin was waived in conjunction with this
purchase of inventories.  Prior thereto,  the Company  manufactured and supplied
products to Purina Mills for this  business.  The Company will now supply animal
health products directly to Purina's dealers. Management does not anticipate any
material  adverse  impact on its  financial  position,  cash flows or results of
operations as a result of this change in customer relationships.

Quarterly Effects and Seasonality

         Seasonal  patterns of  Resources'  operations  are highly  dependent on
weather,  feeding  economics and the timing of customer  orders.  The results of
operations of the Pet Health Care Division  historically have been seasonal with
a relatively  lower volume of its sales and earnings being generated  during the
Company's first fiscal quarter. In addition,  consolidation of certain functions
within  the Pet  Health  Care  Division  during  fiscal  1998  will  impact  the
comparative results of the Company between quarters and in future periods.

New Accounting Standards

         In June  1997,  the  FASB  issued  FAS  130,  "Reporting  Comprehensive
Income,"  effective for fiscal years  beginning after December 15, 1997. FAS 130
establishes  standards  for reporting  and display of  comprehensive  income and
components in a financial  statement that is displayed with the same  prominence
as other financial statements. The Company continues to analyze FAS 130 and does
not currently expect it to have a significant impact on its financial  statement
presentation.

         In June 1997, the FASB issued FAS 131,  "Disclosures  about Segments of
an Enterprise and Related  Information,"  effective for periods  beginning after
December 15, 1997. FAS 131 supersedes FAS 14,  "Financial  Reporting of Segments
of a Business  Enterprise."  FAS 131  establishes  standards  for the way public
business  enterprises  report  financial and descriptive  information  about the
reportable

                                                        18

<PAGE>



operating  segments  in  their  financial   statements.   Generally,   financial
information is required to be reported on the basis that is used  internally for
evaluating  segment  performance  and  deciding  how to  allocate  resources  to
segments.  The Company  continues to evaluate the provisions of FAS 131 relative
to additional disclosure requirements for its fiscal 1999 financial statements.

         In June 1998,  the FASB  issued  FAS 133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities."  FAS  133  establishes   accounting  and
reporting  standards for derivative  instruments and for hedging  activities and
requires  recognition  of all  derivatives on the balance sheet measured at fair
value.  FAS 133 is  effective  for  all  fiscal  quarters  of all  fiscal  years
beginning after June 15, 1999. The Company  continues to evaluate the provisions
of FAS 133 to  determine  its  impact  on  financial  position  and  results  of
operations.

Year 2000 Compliance

         The Company utilizes computer  information systems to internally record
and track information, as well as interact with customers,  suppliers, financial
institutions  and other  organizations.  The  Company  has  established  a plan,
utilizing  internal  resources and certain external  consultants,  to assess the
potential impact of the year 2000 on the Company's systems and operations and to
implement  solutions  to address  these  issues.  The  Company  has  completed a
significant  part of the assessment  phase of its year 2000 plan with respect to
all key  hardware and  software  systems.  The  Company's  plan for  remediation
includes a combination of repair and  replacement of affected  systems.  For the
Company's  key systems  located in St.  Louis,  Missouri and  Glendale  Heights,
Illinois,  the Company's  independent  consultants  have completed a significant
portion of the repair work needed to make such systems year 2000 compliant. They
have also completed a significant  portion of the testing required to verify the
effectiveness  of  such  repairs.  The  key  systems  located  in  Harbor  City,
California  will be  addressed  primarily  through an  upgrade  of the  existing
software to a year 2000-compliant  version.  Such upgrade has been evaluated and
initial planning by independent  consultants  retained to evaluate and implement
the upgrade has been completed. The final implementation of the upgrade has been
delayed,  pending the  completion  of the Merger  Agreement  and  evaluation  of
information system needs of the merged  organization.  The cost of upgrading the
systems in Harbor City has been included in the Company's  capital  expenditures
plan,   based  on  the  final  bid  received  from  the  Company's   independent
consultants. The costs of repairs and upgrades to date have not been material to
the Company's  financial position or results of operations.  Non-key systems and
non-information  technology  systems,  including  embedded  technology  such  as
microcontrollers, at all locations are in the process of being assessed. Subject
to the evaluation and resolution of the information  system needs  subsequent to
the merger of Virbac and the Company, it is anticipated that all key systems and
non-information technology systems will be year 2000 compliant by June of 1999.

     The Company is diligently  quantifying  issues and  developing  contingency
sources to mitigate the risks associated with  interruptions in its supply chain
due to year 2000 problems. The Company plans

                                                        19

<PAGE>



to  develop a  contingency  plan by July 1999 in the  event its  systems  or its
mission-critical vendors do not achieve year 2000 compliance.

         The Company believes that, with  appropriate  modifications to existing
computer  systems/components,  updates  by vendors  and  trading  partners,  and
conversion to new software and hardware in the ordinary course of business,  the
year 2000 issues will not pose significant operational problems for the Company.
However,  there  can be no  assurance  that  the  Company  will  not  experience
unanticipated  costs and/or business  interruptions due to year 2000 problems in
its  internal  systems,  its supply  chain or from  customer  product  migration
issues, or that such costs and/or interruptions will not have a material adverse
effect on the Company's consolidated results of operations. These statements are
"Year 2000  Disclosures"  within the  meaning of the Year 2000  Information  and
Readiness Disclosure Act.

Euro Conversion Issues

         On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") adopted a common  currency,  the "Euro." For a three-year
transition period,  both the Euro and individual  participants'  currencies will
remain in  circulation;  after January 1, 2002,  the Euro will be the sole legal
tender  for EMU  countries.  The  adoption  of the  Euro  will  affect  numerous
financial systems and business applications.

         While the  Company's  United  States  operations,  which  comprise  the
majority  of  its   business,   has  contracts   with  European   suppliers  and
distributors,  almost all of these contracts are U.S. dollar-denominated.  Thus,
while the Company is  reviewing  the impact of the  introduction  of the Euro on
various  aspects  of  its  business  (including  information  systems,  currency
exchange rate risk, taxation, contracts, competitive position and pricing), such
introduction  is not  expected  to have a material  impact on the  Company.  The
Company's  United  Kingdom  operations  does the majority of its business in the
United Kingdom,  however to accommodate its customers  throughout Europe, it has
upgraded its information  systems,  contracts and certain procedures to meet the
Euro requirements. The costs incurred to date related to the introduction of the
Euro have not been material and the impact of such  introduction is not expected
to materially affect the Company's financial position,  cash flows or results of
operations.

Forward-Looking Information

         This  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations ("MD&A") contains "forward-looking  statements" within the
meaning of Section 27A of the  Securities  Act and  Section 21E of the  Exchange
Act. All  statements  other than  statements of historical  fact included in the
MD&A, including  statements  regarding the Company's operating strategy,  plans,
objectives and beliefs of management for future  operations are  forward-looking
statements. Although the Company believes the expectations and beliefs reflected
in such forward-looking statements are reasonable, it can give no assurance that
they will prove to have been correct.

Item 8.  Financial Statements.

     The  Consolidated  Financial  Statements of the Company,  together with the
report thereon of  PricewaterhouseCoopers  LLP dated January 15, 1999 are listed
in Item  14(a)(1)  and are  included  at the end of this  Report  on Form  10-K,
beginning on page F-1, and are incorporated herein by reference.



                                                        20

<PAGE>



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

         None.



                                                        21

<PAGE>



                                Part III

Item 10.  Directors and Executive Officers of the Registrant.

         The information required by Item 10 is contained in the Company's Proxy
Statement  for the 1999  Annual  Meeting  of  Stockholders  under  the  captions
"Directors  and Nominees" and  "Compliance  with Section 16(a) of the Securities
Exchange  Act of  1934,"  and in Item 4A of this  Report  on Form  10-K,  and is
incorporated herein by reference.

Item 11.  Executive Compensation.

         The information required by Item 11 is contained in the Company's Proxy
Statement  for the  1999  Annual  Meeting  of  Stockholders  under  the  caption
"Executive Compensation," and is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         The information required by Item 12 is contained in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders  under the caption "Common
Stock  Ownership  of  Certain   Beneficial   Owners  and   Management,"  and  is
incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions.

         The information required by Item 13 is contained in the Company's Proxy
Statement  for the  1999  Annual  Meeting  of  Stockholders  under  the  caption
"Compensation   Committee  Interlocks  and  Insider  Participation  and  Certain
Transactions," and is incorporated herein by reference.

                                                        22

<PAGE>



                                Part IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.

         (a) (1) List of Financial  Statements.  The  following is a list of the
financial  statements  included at pages F-1 through F-24 in this Report on Form
10-K:

         Report of Independent Accountants
         Consolidated Balance Sheet as of October 31, 1997 and 1998
         Consolidated  Statement of  Operations  for the Years Ended October 31,
            1996, 1997 and 1998 
         Consolidated  Statement of Cash Flows for the Years Ended  October  31,
            1996,  1997 and  1998 
         Consolidated  Statement of Shareholders' Equity for Years Ended October
            31, 1996, 1997 and 1998
         Notes to Consolidated Financial Statements

              (2) List of Financial Statement Schedules. Schedule II - Valuation
of Qualifying Accounts and Reserves is furnished.  All other schedules have been
omitted because they are either not applicable or not required,  or the required
information is provided in the financial statements or notes thereto.

         (b) Reports on Form 8-K. The  following  reports on Form 8-K were filed
during the fiscal quarter ended October 31, 1998:

         None

         (c) List of Exhibits.  The  following is a list of exhibits  furnished.
Copies of exhibits will be furnished upon written  request of any stockholder at
a charge of $.25 per page plus postage.

2.4(a)        Warehousing and Distribution Agreement between Purina Mills, Inc. 
              and PM Resources, Inc. dated September 9, 1993

2.5(a)        Indemnity Agreement between Purina Mills, Inc. and PM Resources, 
              Inc. dated September 9, 1993

2.8(h)        Agreement and Plan of Merger among Agri-Nutrition Group Limited, 
              Mardel Acquisition Corporation, and Mardel Laboratories, Inc.
              dated September 25, 1997

2.9(h)        Indemnity Agreement between Agri-Nutrition Group Limited, Mardel 
              Laboratories, Inc., and the stockholders of Mardel Laboratories, 
              Inc. dated September 25, 1997

2.10(h)       Share Transfer and Registration Rights Agreement between Agri-
              Nutrition Group Limited, the Stockholders of Mardel Laboratories, 
              Inc. dated September 25, 1997

2.11(n)       Agreement and Plan of Merger, dated October 16, 1998, by and among
              Agri-Nutrition Group Limited, Virbac, S.A. and Virbac, Inc.

3.1(b)        Restated Certificate of Incorporation

3.2(b)        Amended and Restated By-laws

                                                        23

<PAGE>



4(a)          Specimen stock certificate

10.2(g)       Fourth Restated Employment Agreement between Agri-Nutrition Group
              Limited and Bruce G. Baker dated as of November 1, 1996

10.3(g)       Agreement between Agri-Nutrition Group Limited and George W.
              Daignault dated as of August 23, 1996

10.4(g)       Amended and Restated Stock Option Agreement between Agri-Nutrition
              Group Limited and George W. Daignault dated as of August 23, 1996

10.9(c)       Revolving Credit Agreement between St. JON Laboratories, Inc. and
              First Bank, along with accompanying Guaranty by Agri-Nutrition 
              Group Limited in favor of First Bank both dated as of January 19,
              1996

10.10(a)      Form of Indemnification Agreement

10.11(a)      1994 Incentive Stock Plan

10.13(d)      Reload Option and Exchange Exercise Plan

10.14(e)      1995 Incentive Stock Plan

10.15(f)      1996 Incentive Stock Plan

10.16(b)      Consulting Agreement between Agri-Nutrition Group Limited and 
              Brakke and Associates, Inc. dated October 11, 1995

10.19(i)      Second   amendment  to  amended  and  restated   revolving  credit
              agreement by and between PM Resources,  Inc., Zema Corporation and
              First Bank dated March 6, 1997

10.20(i)      Second amendment to revolving credit agreement by and between St.
              JON Laboratories, Inc. and First Bank dated March 6, 1997

10.21(j)      Amended and Restated Revolving Credit Agreement between St. JON 
              Laboratories, Inc. and First Bank dated June 18, 1997

10.22(j)      Second Amended and Restated Revolving Credit Agreement between PM
              Resources, Inc., Zema Corporation and First Bank dated June 18,
              1997

10.23(k)      Amendment to Second Amended and Restated Revolving Credit 
              Agreement between PM Resources, Inc., Zema Corporation, Mardel 
              Acquisition Corporation and First Bank dated September 25, 1997

10.24(l)      Credit Agreement by and between Agri-Nutrition Group Limited, PM 
              Resources, Inc., St. Jon Laboratories, Inc., and First Bank, dated
              May 14, 1998


                                                        24

<PAGE>



10.25(m)      Amended Credit Agreement by and between Agri-Nutrition Group 
              Limited, PM Resources, Inc., St. JON Laboratories, Inc. and First
              Bank dated August 6, 1998

10.26+        Second Amendment to Credit Agreement by and between Agri-Nutrition
              Group Limited, PM Resources,  Inc., and St. JON Laboratories, Inc.
              and First Bank dated October 2, 1998.

21+           List of subsidiaries

23+           Consents of PricewaterhouseCoopers LLP

27+           Financial data schedule

99(o)         Press Release of the Company dated October 19, 1998.

+             Filed herewith.
(a)           Filed as exhibit of same number to the  Registrant's  Registration
              Statement on Form S-1, File No. 33-78646,  and incorporated herein
              by reference.
(b)           Filed as exhibit of same number to the Registrant's  Form 10-Q for
              the  Quarterly  Period ended  January 31, 1996,  and  incorporated
              herein by reference.
(c)           Filed as exhibit of same number to the Registrant's  Form 10-K for
              the Fiscal Year ended October 31, 1995, and incorporated herein by
              reference.
(d)           Filed as exhibit 4.2 to the Registrant's Registration Statement on
              Form  S-8,  File  No.  33-  86892,  and  incorporated   herein  by
              reference.
(e)           Filed as Exhibit 4.1 to the Registrant's Registration Statement on
              Form  S-8,  File  No.  33-  93340,  and  incorporated   herein  by
              reference.
(f)           Filed  as  exhibit  of  the  same   number  to  the   Registrant's
              Registration   Statement  on  Form  S-8,  File  No.  33-3192,  and
              incorporated herein by reference.
(g)           Filed as exhibit of same number to the Registrant's  Form 10-K for
              the Fiscal Year ended October 31, 1996, and incorporated herein by
              reference.
(h)           Filed as exhibit of same number to the Registrant's Current Report
              on Form 8-K,  filed October 8, 1997,  and  incorporated  herein by
              reference.
(i)           Filed as exhibit of same number to the Registrant's  Form 10-Q for
              the  Quarterly  Period ended  January 31, 1997,  and  incorporated
              herein by reference.
(j)           Filed as exhibit of same number to the Registrant's  Form 10-Q for
              the Quarterly Period ended July 31, 1997, and incorporated  herein
              by reference.
(k)           Filed as exhibit of same number to the Registrant's  Form 10-K for
              the Fiscal year ended October 31, 1997, and incorporated herein by
              reference.
(l)           Filed as exhibit of same number to the Registrant's  Form 10-Q for
              the Quarterly Period ended April 30, 1998, and incorporated herein
              by reference.
(m)           Filed as exhibit of same number to the Registrant's  Form 10-Q for
              the Quarterly Period ended July 31, 1998, and incorporated  herein
              by reference.
(n)           Filed as exhibit 2.1 to the  Registrant's  Current  Report on Form
              8-K,  filed  November  17,  1998,  and   incorporated   herein  by
              reference.
(o)           Filed as exhibit of same number to the Registrant's Current Report
              on Form 8-K, filed November 17, 1998, and  incorporated  herein by
              reference.

                                                        25

<PAGE>



                                    SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                     AGRI-NUTRITION GROUP LIMITED


                                     By: /s/ BRUCE G. BAKER
                                                    Bruce G. Baker
                                         President and Chief Executive Officer


        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this report has been signed by the following  persons in the  capacities  and on
the dates indicated.

<TABLE>
<CAPTION>

Signature                                                 Title                                  Date
<S>                                            <C>                                        <C>
/s/ BRUCE G. BAKER                              President, Chief Executive                  January 29, 1999
Bruce G. Baker                                  Officer, and Director

/s/ ROBERT J. ELFANBAUM                         Vice President and Chief                    January 29, 1999
Robert J. Elfanbaum                             Financial Officer
                                                (Principal Accounting Officer)

                                                Chairman of the Board                       January    , 1999
Alec L. Poitevint, II

/s/ ROBERT E. HORMANN                           Vice Chairman of the Board                  January 29, 1999
Robert E. Hormann

/s/ W.M. JONES, JR.                             Director                                    January 29, 1999
W.M. Jones, Jr.

/s/ ROBERT W. SCHLUTZ                           Director                                    January 29, 1999
Robert W. Schlutz
</TABLE>




                                                          26

<PAGE>




                             INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

Agri-Nutrition Group Limited                                                                                      Page 
<S>                                                                                                             <C> 
    Report of Independent Accountants........................................................................      F-2
    Consolidated Balance Sheet as of October 31, 1997 and 1998 ..............................................      F-3
    Consolidated Statement of Operations for the Three Years Ended October 31, 1998 .........................      F-4
    Consolidated Statement of Cash Flows for the Three Years Ended October 31, 1998..........................      F-5
    Consolidated Statement of Shareholders' Equity for the Three Years Ended
              October 31, 1998...............................................................................      F-7
    Notes to Consolidated Financial Statements...............................................................      F-8
</TABLE>



                                                          F-1

<PAGE>



                      REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and
Stockholders of Agri-Nutrition Group Limited


In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, of cash flows and of stockholders' equity
present fairly, in all material respects, the consolidated financial position of
Agri-Nutrition  and its  subsidiaries  at  October  31,  1997 and 1998,  and the
results of their  operations and their cash flows for each of the three years in
the period  ended  October 31,  1998,  in  conformity  with  generally  accepted
accounting principles.  These financial statements are the responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.



PRICEWATERHOUSECOOPERS LLP
St. Louis, Missouri
January 15, 1999


                                                        F-2

<PAGE>



                        Agri-Nutrition Group Limited
                         Consolidated Balance Sheet
<TABLE>
<CAPTION>

                                                                                           October 31,        
                                                                                      1997            1998    
                                                                                  -------------  -------------
<S>                                                                              <C>             <C>
Assets
Current assets:
  Cash and cash equivalents...................................................   $      145,505  $       97,971
  Accounts receivable, net....................................................        3,817,417       4,812,842
  Inventories (Note 6)........................................................        6,355,310       7,150,042
  Prepaid expenses and other current assets...................................        1,016,098         586,292
  Deferred income taxes (Note 10).............................................          244,574         659,517
                                                                                 --------------  --------------
                                                                                     11,578,904      13,306,664
Property, plant and equipment, net (Note 7)...................................        5,788,688       5,520,798
Goodwill......................................................................        8,095,049       7,930,705
Other assets..................................................................        1,133,509       1,284,421
                                                                                 --------------  --------------
                                                                                 $   26,596,150  $   28,042,588
                                                                                 ==============  ==============

Liabilities and Stockholders' Equity Current liabilities:
  Current portion of long-term debt and notes payable (Note 8)................   $      201,636  $    1,160,912
  Current portion of acquisition notes payable (Note 8).......................          719,716          49,000
  Accounts payable............................................................        1,417,286       1,562,652
  Accrued expenses............................................................        1,467,948       1,270,985
                                                                                 --------------  --------------
                                                                                      3,806,586       4,043,549
Long-term debt and notes payable (Note 8).....................................        5,665,955       8,963,226
Acquisition notes payable (Note 8)............................................        1,570,249         151,000

Commitments and contingencies (Notes 2, 3, 7 and 15)

Stockholders' equity (Notes 4, 11 and 12):
  Common stock ($.01 par value; 20,000,000 shares
    authorized; 9,304,280 and 9,387,279 shares
    issued and outstanding, respectively).....................................           93,043          93,873
  Additional paid-in-capital..................................................       15,935,700      16,025,620
  Accumulated deficit.........................................................         (395,841)     (1,058,673)
                                                                                 --------------  --------------
                                                                                     15,632,902      15,060,820
  Cost of common stock held in treasury
  (46,850 and 129,961 shares in 1997 and 1998, respectively)..................          (79,542)       (176,007)
                                                                                 --------------  --------------
                                                                                     15,553,360      14,884,813
                                                                                 --------------  --------------
                                                                                 $   26,596,150  $   28,042,588
                                                                                 ==============  ==============
</TABLE>





      The accompanying  notes are an integral part of these consolidated
                               financial statements.


                                F-3

<PAGE>



                          Agri-Nutrition Group Limited
                       Consolidated Statement of Operations
<TABLE>
<CAPTION>

                                                                       For the Year Ended October 31,         
                                                                    1996             1997             1998    
                                                              --------------    --------------  --------------
<S>                                                          <C>               <C>              <C>
Net sales  (including  sales to Purina of $5.4  million, 
  $4.3  million and $3.1 million for the years ended
  October 31, 1996, 1997 and 1998, respectively)............  $   28,661,307    $   31,051,537  $   32,944,020
Cost of sales...............................................      20,783,847        22,850,923      24,008,395
                                                              --------------    --------------  --------------
Gross profit................................................       7,877,460         8,200,614       8,935,625
Selling, general and administrative expenses................       7,447,301         7,129,860       8,812,136
Research and development....................................         142,760            92,273         166,383
Corporate severance costs (Note 16).........................         240,000                                  
                                                              --------------    --------------  --------------
Operating income (loss).....................................          47,399           978,481         (42,894)

Interest expense............................................        (596,086)         (638,599)       (787,727)
Interest income and other...................................         158,904          (146,883)       (247,154)
                                                              --------------    --------------  --------------
Income (loss) before income tax benefit (expense)...........        (389,783)          192,999      (1,077,775)
Income tax benefit (expense)................................         148,463           (74,328)        414,943
                                                              --------------    --------------  --------------
Income (loss) from continuing operations....................        (241,320)          118,671        (662,832)
Income from discontinued operations, net....................         113,900            14,659                
                                                              --------------    --------------  --------------
Net income (loss) ..........................................  $     (127,420)   $      133,330  $     (662,832)
                                                              ==============    ==============  ==============

Basic earnings (loss) per share (Note 5):
Income (loss) from continuing operations....................  $         (.03)   $          .01  $         (.07)
Income from discontinued operations.........................             .01                                  
                                                              --------------    --------------  --------------
Net income (loss)...........................................  $         (.02)   $          .01  $         (.07)
                                                              ==============    ==============  ==============

Diluted earnings (loss) per share (Note 5):
Income (loss) from continuing operations....................  $         (.03)   $          .01  $         (.07)
Income from discontinued operations.........................             .01                                  
                                                              --------------    --------------  --------------
Income (loss)...............................................  $         (.02)   $          .01  $         (.07)
                                                              ==============    ==============  ==============

Basic shares outstanding (Note 5)...........................       8,397,686         8,483,897       9,309,184
                                                              ==============    ==============  ==============

Diluted shares outstanding (Note 5).........................       8,397,686         8,699,914       9,309,184
                                                              ==============    ==============  ==============
</TABLE>











     The accompanying  notes are an integral part of these consolidated
                          financial statements.


                               F-4
<PAGE>



                       Agri-Nutrition Group Limited
                    Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>

                                                                       For the Year Ended October 31,         
                                                                    1996             1997             1998    
                                                              --------------    --------------  --------------
<S>                                                           <C>               <C>             <C>
Operating activities:
Net income (loss) from continuing operations................  $     (241,320)   $      118,671  $     (662,832)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
   Depreciation and amortization............................         847,723           966,022       1,180,382
   Income from discontinued operations, net of
     taxes..................................................         113,900            14,659
   Change in net assets from discontinued
     operations.............................................      (1,007,633)        1,347,539
   Changes in operating assets and liabilities,
   excluding the effects of acquisitions (Note 2):
     Increase in accounts receivable........................        (528,806)         (410,942)       (995,425)
     (Increase) decrease in inventories.....................      (1,677,051)          692,492        (794,732)
     (Increase) decrease in prepaids and other..............        (281,520)           48,984         131,510
     Increase (decrease) in accounts payable................       1,419,731          (785,558)        145,366
     Increase (decrease) in accounts payable to
      Purina................................................        (930,954)
     Increase (decrease) in accrued expenses................          63,356          (267,295)       (196,963)
     (Increase) decrease in deferred income taxes...........         (66,611)           58,491        (414,943)
                                                              --------------    --------------  --------------
Net cash provided (used) by operating activities............      (2,289,185)        1,783,063      (1,607,637)
                                                              --------------    --------------  --------------

Investing activities:
Acquisitions (Note 2), net of cash
   acquired.................................................        (520,189)         (970,537)       (100,000)
Purchase of property, plant and equipment...................        (592,678)         (996,683)       (500,764)
Purchase of Bromethalin Assets (Note 3).....................      (1,056,097)
Sale of short-term investments..............................       1,191,379                                  
                                                              --------------    --------------  --------------
Net cash used by investing activities.......................        (977,585)       (1,967,220)       (600,764)
                                                              --------------    --------------  --------------

Financing activities:
Proceeds from (repayment of) long-term debt
   and notes payable, net*..................................       3,090,125        (1,154,911)      4,256,547
Repayment of acquisition notes payable......................                          (700,000)     (2,038,965)
Proceeds from sale of common stock..........................          52,823            27,252          39,750
Payments of loans from employees............................          30,000
Purchase of Treasury Stock..................................         (49,986)          (29,556)        (96,465)
                                                              --------------    --------------  --------------
Net cash provided (used) by financing activities............       3,122,962        (1,857,215)      2,160,867
                                                              --------------    --------------  --------------

Decrease in cash and cash equivalents.......................        (143,808)       (2,041,372)        (47,534)

Cash and cash equivalents, beginning of period..............       2,330,685         2,186,877         145,505
                                                              --------------    --------------  --------------

Cash and cash equivalents, end of period....................  $    2,186,877    $      145,505  $       97,971
                                                              ==============    ==============  ==============
</TABLE>

        The accompanying  notes are an integral part of these consolidated
                               financial statements.

*Debt  proceeds  (repayments)  are  presented on a net basis given the volume of
daily transactions  under the Company's  revolving credit facilities for lockbox
receipts and disbursements.

                                  F-5
<PAGE>



                      Agri-Nutrition Group Limited
             Consolidated Statement of Cash Flows (continued)
<TABLE>
<CAPTION>

                                                                         For the Year Ended October 31,         
                                                                      1996             1997             1998    
                                                                --------------    --------------  --------------
<S>                                                             <C>               <C>             <C>
Supplemental disclosure of cash flow information:
   Cash paid for interest.....................................  $      363,422    $      667,922  $      844,840
   Cash paid for taxes........................................          47,189            25,873           5,023
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:
During  the  year  ended  October  31,  1997,   the  Company   acquired   Mardel
Laboratories,  Inc.  for cash of  approximately  $1,100,000  (Note 2) and  stock
valued  at  approximately   $1,100,000.  As  additional  consideration  for  the
acquisition of Mardel, the Company also issued a note payable of $300,000 to the
former owners of the acquired company to be paid in cash and stock over a period
of three  years.  Fair  value  assigned  to assets  acquired  was  approximately
$2,600,000,  fair value  assigned to goodwill was  approximately  $2,100,000 and
liabilities assumed were approximately $2,200,000.

During the year ended October 31, 1998,  the Company  issued common stock with a
fair value of $51,000 to the former owners of Mardel in conjunction with certain
payments due under the $300,000 notes payable discussed above.























     The accompanying  notes are an integral part of these consolidated
                          financial statements.



                                   F-6
<PAGE>



                            Agri-Nutrition Group Limited
                   Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>

                                                                 AGNU Common Stock
                                  AGNU Common Stock            in Treasury, at Cost        
                           Number                Additional     Number
                             of          Par       Paid in        of                    Accumulated
                           Shares       Value      Capital      Shares     Amount         Deficit        Total
<S>                      <C>          <C>        <C>           <C>        <C>         <C>            <C> 
Balance, November 1,
  1995................     8,401,344  $  84,013  $14,734,656                             $(401,751)  $14,416,918

Repayment of employee
  stock purchase loans                                30,000                                             30,000
Issuance of stock to
  directors and officers      29,605        296       52,527                                             52,823
Treasury stock
  purchased...........                                           (25,650) $  (49,986)                   (49,986)
Net loss..............                                                                    (127,420)    (127,420)
                         -----------  ---------  -----------  ----------  ----------  ------------  -----------

Balance, October 31,
  1996................     8,430,949     84,309   14,817,183     (25,650)    (49,986)     (529,171)  14,322,335

Issuance of stock to
  directors and officers      20,556        206       27,045                                             27,251
Issuance of stock for
  acquisition.........       852,775      8,528    1,091,472                                          1,100,000
Treasury stock
  purchased...........                                           (21,200)    (29,556)                   (29,556)
Net income............                                                                     133,330      133,330
                         -----------  ---------  -----------  ----------  ----------  ------------  -----------

Balance, October 31,
  1997................     9,304,280     93,043   15,935,700     (46,850)    (79,542)     (395,841)  15,553,360

Issuance of stock to
  directors and officers      29,300        293       39,457                                             39,750
Issuance of stock for
  acquisition notes 
  payable.............        53,699        537       50,463                                             51,000
Treasury stock
  purchased...........                                           (83,111)    (96,465)                   (96,465)
Net loss..............                                                                    (662,832)    (662,832)
                         -----------  ---------  -----------  ----------  ----------  ------------  -----------

Balance, October 31,
  1998................     9,387,279  $  93,873  $16,025,620    (129,961) $(176,007)  $(1,058,673)  $14,884,813
                         ===========  =========  ===========  ==========  ==========  ===========   ===========
</TABLE>















       The accompanying  notes are an integral part of these consolidated
                          financial statements.


                                 F-7
<PAGE>



                         Agri-Nutrition Group Limited
                        Notes to Financial Statements

1.       Organization

Agri-Nutrition (the Company), a Delaware corporation,  was organized on July 20,
1993, to acquire and operate businesses in the domestic and international  food,
agriculture  and pet  industries.  In September  1993,  through its wholly owned
subsidiary, PM Resources, Inc. (Resources),  the Company acquired certain assets
and assumed certain liabilities of the Health Industries Business (the Business)
of Purina Mills, Inc.  (Purina).  See Notes 13 and 16 for further  discussion of
related matters involving Purina. Resources commenced operations on September 9,
1993,  the  effective  date  of  the  acquisition  of  the  Business.  Resources
formulates,  manufactures and distributes feed additives,  medicated treatments,
anthelmetics,  nutritional supplements, cleaners and disinfectants, pest control
products, home, lawn and garden products, and specialty compounds.

Effective  March 31, 1995, the Company  purchased  substantially  all of the net
assets and  business of Zema  Corporation  (Zema).  The Company  also  purchased
substantially all of the net assets and business of St. JON  Laboratories,  Inc.
(St. JON) effective  August 31, 1995. In September  1997,  the Company  acquired
Mardel Laboratories, Inc. (Mardel). Zema, St. JON and Mardel formulate, package,
market  and  distribute  pet  health  care,  veterinary  and  grooming  products
domestically   and  abroad.   See  Note  2  for  further   discussion  of  these
acquisitions.

2.       Acquisitions - Zema and St. JON

Through the Company's wholly owned  subsidiary,  Zema  Acquisition  Corporation,
substantially  all of the net assets of Zema were acquired  effective  March 31,
1995.  The sales price  included a base price of $3,000,000 in cash and $300,000
in the form of a note payable to the former owner of Zema.  The note payable and
related interest are due on or before April 28, 1998 and were conditioned on the
continued  employment  of Zema's  president  (see Note 8). In  conjunction  with
renegotiation  of the  employment  contract of Zema's  president in fiscal 1997,
such employment requirement of the note was waived. Additional purchase price is
required  to be paid by the  Company  to the  former  owner of Zema based upon a
percentage of Zema's cumulative  earnings before taxes and interest in excess of
$3,345,000 for the five years ending  October 31, 1999. In November 1998,  based
on Zema's  results to date,  the Company and the former  owner of Zema  mutually
agreed that no additional  purchase  price would be due and that the Company has
no additional  obligations  to the former owner of Zema.  The Company  primarily
used proceeds from its initial public offering of common stock (IPO) to fund the
$3,000,000  initial payment and related  acquisition  expenses of  approximately
$200,000.

The  acquisition  of Zema was accounted  for pursuant to the purchase  method of
accounting.  The purchase  price paid for Zema has been  allocated to net assets
acquired based on their  estimated fair values at the date of  acquisition.  The
excess of the  purchase  price  over the fair value of net  assets  acquired  of
approximately  $1,700,000  was recorded as goodwill and is being  amortized on a
straight-line  basis over 40 years.  The  amounts assigned  to other  intangible
assets acquired were not material. The results of Zema's operations are included
in  the  Company's  consolidated  financial  statements  from  the  date  of the
acquisition.

Substantially  all of the net  assets  of St.  JON  were  acquired  through  the
Company's wholly owned subsidiary,  St. JON Acquisition  Corporation,  effective
August 31, 1995.  The purchase price included a base price of $3,500,410 in cash
and additional purchase price of $2,000,000 in the form of a




                                F-8

<PAGE>


                       Agri-Nutrition Group Limited
                Notes to Financial Statements -- continued


promissory  note. The remaining  balance of the note payable to the former owner
of St.  JON was paid in full  during  fiscal  1998  (see  Note 8).  The  Company
primarily used proceeds from its IPO to fund the $3,500,410  initial payment and
the related acquisition expenses of approximately  $200,000.  The acquisition of
St. JON was accounted  for pursuant to the purchase  method of  accounting.  The
purchase price paid for St. JON has been allocated to net assets  acquired based
on their  estimated  fair values at the date of  acquisition.  The excess of the
purchase  price  over  fair  value  of  net  assets  acquired  of  approximately
$4,800,000,  was recorded as goodwill and is being  amortized on a straight-line
basis over 30 years.  The amounts assigned to other  intangible  assets acquired
were not  material.  The results of St.  JON's  operations  are  included in the
Company's consolidated financial statements from the date of the acquisition.

Through the Company's wholly owned subsidiary,  Mardel Acquisition  Corporation,
substantially all of the net assets of Mardel were acquired effective  September
1997.  Mardel's  expertise extends to fresh water and marine fish, birds,  dogs,
cats,  small  animals and pond  accessories.  The  purchase  price  consisted of
approximately  $1,100,000  in cash,  $1,100,000 in common stock and a promissory
note of  $300,000  payable in three  annual  installments,  each  consisting  of
$49,000 of cash plus  interest  at prime,  and $51,000 of the  Company's  common
stock, beginning September 1998. At October 31, 1998, $200,000 was due under the
promissory note. The Company primarily used the remaining  proceeds from its IPO
to fund the $1,000,000 initial payment.

The  acquisition of Mardel was accounted for pursuant to the purchase  method of
accounting.  The purchase price paid for Mardel has been allocated to net assets
acquired based on their  estimated fair values at the date of  acquisition.  The
excess of the  purchase  price  over the fair value of net  assets  acquired  of
approximately  $2,100,000  was recorded as goodwill and is being  amortized on a
straight-line  basis over 30 years.  The  amounts assigned  to other  intangible
assets  acquired  were not  material.  The  results of Mardel's  operations  are
included in the Company's consolidated financial statements from the date of the
acquisition.

3.       Acquisition of Certain Bromethalin Assets

Effective May 1996, Resources acquired from Purina the worldwide patents, active
ingredient  inventory,  registrations and rights to Bromethalin (the Bromethalin
Assets), a highly effective and proprietary rodenticide serving agricultural and
Pest Control Operator (PCO) markets.  The purchase price and related acquisition
costs was  approximately  $1 million,  plus  additional  consideration  based on
subsequent  shipments  of  Bromethalin  to Purina over a five-year  period.  The
Company  primarily  used  proceeds  from  its IPO to fund the  initial  payment.
Approximately   $871,000  of  the  purchase   price  was  assigned  to  patents,
registration  rights and other intangible  assets which are being amortized over
three to 10 years.  In December 1998,  the Company  entered into an agreement to
purchase  certain  assets  of  Purina's  animal  health  products  business.  In
conjunction  with this  agreement,  Purina agreed to forego any future  payments
under the May 1996 Bromethalin agreement. See Note 16 for further discussion.




                                    F-9
<PAGE>


                        Agri-Nutrition Group Limited
                 Notes to Financial Statements -- continued


4.       Initial public offering

In July 1994,  the Company  completed the initial  public  offering of 2,435,000
shares of its  common  stock at $6.00 per share  resulting  in net  proceeds  of
approximately $12,100,000 to be used to finance acquisitions, strategic business
alliances  and joint  ventures,  including  the  payment  of  certain  executive
salaries and other administrative expenses incurred in the implementation of the
Company's  acquisition  strategy.  In  September  1997,  the  Company  used  its
remaining  IPO  proceeds  in  conjunction  with the  acquisition  of Mardel,  as
discussed in Note 4. As of October 31, 1997, all proceeds had been expended.

5.       Summary of significant accounting policies

Principles of consolidation

The consolidated  financial  statements  include the accounts of the Company and
its   subsidiaries.   All  significant   intercompany   transactions  have  been
eliminated.

Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets,  liabilities,  revenues and expenses and
the disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.

Revenue recognition

Revenue is generally  recognized  upon  shipment of orders.  Revenue  related to
certain  contract  manufacturing   customers,  for  whom  the  Company  provides
warehousing and/or distribution  services, is contractually  recognized upon the
completion of the manufacturing  process. For certain private label and contract
manufacturing   customers,  the  Company  provides  various  services,  such  as
laboratory  services,  regulatory  consulting,  etc. Such services are generally
performed  prior to shipment,  included in the cost of the related  products and
billed  at the  time the  related  products  are  shipped.  Accounts  receivable
consists of the amounts  estimated to be collectible on sales,  after  provision
for uncollectible amounts, based on historical experience.  At October 31, 1996,
1997, and 1998 the provision for  uncollectible  amounts was $53,029,  $133,705,
and $142,354, respectively.

Cash and cash equivalents

For purposes of the consolidated  statement of cash flows, the Company considers
all highly liquid  investments with an original maturity of three months or less
to be cash equivalents.

Concentration of credit risk

Financial  instruments  which  potentially  subject the  Company to  significant
concentrations  of credit risk as defined by Statement  of Financial  Accounting
Standards No. 105,  "Disclosure of Information about Financial  Instruments with
Off-Balance-Sheet  Risk and Financial  Instruments with Concentrations of Credit
Risk," consist of cash investments and accounts receivable.



                                F-10
<PAGE>


                       Agri-Nutrition Group Limited
                  Notes to Financial Statements -- continued


The Company  sells its products to customers in the animal  health and specialty
chemical  businesses  throughout the United States and abroad. The three largest
customers accounted for 31%, 25% and 24% of sales from continuing  operations in
the years ended October 31, 1996, 1997 and 1998,  respectively,  and 22% and 21%
of accounts receivable at October 31, 1997 and 1998,  respectively.  The Company
generally does not require collateral from its customers.

Relationship with suppliers

The Company purchases certain chemical  materials from multiple  suppliers,  for
which  alternative  suppliers  also  exist and are  adequate.  However,  certain
chemical  materials are  proprietary  in nature,  and the  Company's  ability to
procure such chemical  materials is limited to those suppliers with  proprietary
rights. The Company considers its relationships with its primary suppliers to be
strong.

Fair value of financial instruments

For purposes of financial  reporting,  the Company has determined  that the fair
value of the Company's debt and investments  approximates  book value at October
31,  1997 and  1998,  based on  terms  currently  available  to the  Company  in
financial markets.

Inventories

Inventories  are valued at the lower of cost,  determined  on the  average  cost
method  which   approximates  the  first-in,   first-out   method,   or  market.
Inventoriable costs include materials,  direct labor and manufacturing overhead.
Inventories  are  stated net of a reserve  for  estimated  excess  and  obsolete
inventory.

Property and equipment

Property and equipment are recorded at cost.  Expenditures  for  maintenance and
repairs are charged to operations as incurred; acquisitions, major renewals, and
betterments are capitalized.  When property is retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the accounts, and
any profit or loss on disposition is credited or charged to income.

The Company provides for depreciation by charging amounts sufficient to amortize
the cost of the properties over their estimated useful lives. The  straight-line
method of depreciation is utilized for substantially all asset categories.



                               F-11
<PAGE>


                              Agri-Nutrition Group Limited
                        Notes to Financial Statements -- continued


A summary of estimated useful lives used in computing depreciation for financial
statement reporting purposes follows:
                                                                    Estimated
                                                                   useful life 
Building and leasehold improvements                                5-30 years
Machinery and equipment                                               8-12
Furniture and fixtures                                                 5-7
Vehicles                                                                5

Goodwill

The excess of  purchase  price over the fair  value of net  assets  acquired  in
business combinations is capitalized and amortized on a straight-line basis over
the  estimated  period  benefited  which  ranges  from 30 to 40 years.  Goodwill
amortization  charged to income for the years ended  October 31, 1996,  1997 and
1998, was $195,000, $209,000 and $264,000, respectively.

The carrying  value of goodwill is assessed  for  recoverability  by  management
based  on an  analysis  of  future  expected  cash  flows  from  the  underlying
operations of the Company.  To the extent expected future  discounted cash flows
are less than the  carrying  value of  goodwill,  a writedown of goodwill to the
extent of such shortfall may be recognized.  Management  believes that there has
been no impairment at October 31, 1998.

Other assets

Other assets, which is comprised of deferred compensation,  patents,  tradenames
and other  intangible  assets,  including  those acquired in connection with the
acquisition  of the  Bromethalin  Assets  as  discussed  in  Note 3,  are  being
amortized on a straight-line  basis over the lives of the related assets,  which
range from one to fifteen years.  Amortization  expense  related to other assets
for the years ended October 31, 1996, 1997 and 1998, was approximately $142,000,
$87,000 and $147,000, respectively.

Income taxes

The Company uses the liability method of accounting for income taxes as mandated
by Statement of Financial  Accounting  Standards  No. 109.  Under the  liability
method,  deferred  taxes are  recognized  for the  estimated  future tax effects
attributable to temporary  differences  between the book and tax bases of assets
and  liabilities as well as carryforward  items.  These tax effects are measured
based on provisions of enacted tax laws. The  classification of net deferred tax
assets and/or liabilities,  i.e., current or non-current,  is based primarily on
the classification of the related assets and liabilities.

Earnings (loss) per share

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128 (SFAS 128), "Earnings Per Share," which
changed the method of  computation  of earnings per share.  SFAS 128,  which was
adopted by the Company in fiscal 1998, requires the computation of Basic EPS and
Diluted EPS.  Basic EPS is based on the weighted  average  number of outstanding
common shares during the period,  but does not consider dilution for potentially
dilutive




                                  F-12
<PAGE>


                         Agri-Nutrition Group Limited
                  Notes to Financial Statements -- continued


securities.  Diluted EPS reflects  dilutive  potential  common shares.  Dilutive
potential common shares arising from the effect of outstanding stock options are
computed  using the treasury stock method,  if dilutive.  Earnings per share for
fiscal 1997, 1996 and 1995 have been restated in accordance with SFAS 128.

Preferred stock

The Company's Board of Directors may,  without  further action by  stockholders,
from time-to-time direct the issuance of shares of preferred stock in series and
may, at time of issuance,  determine the rights,  preferences and limitations of
each  series.  No shares of  preferred  stock have been issued as of October 31,
1998.

Environmental policy

Environmental  expenditures  that relate to current  operations  are expensed or
capitalized as appropriate.  Expenditures  that relate to an existing  condition
caused by past  operations,  and which do not  contribute  to  current or future
revenue  generation,  are expensed.  Liabilities are recorded when environmental
assessments  and/or  remedial  efforts  are  probable,  and  the  costs  can  be
reasonably estimated.

Purina,  and the former owners of Zema and St. JON, have indemnified the Company
from environmental  claims resulting from any liabilities or obligations arising
from  events  occurring  prior to the  acquisitions  which the  Company  did not
expressly  assume in these three respective  acquisitions.  The Company has been
notified by certain  state  agencies of  non-compliance  with certain  state and
federal  environmental  regulations.   However,  management  believes  that  the
resolution  of these  issues  will  have no  material  effect  on the  Company's
financial position, cash flows or results of operations.

Impairment of long-lived assets

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate that the carrying amount may not be recoverable.  If the
assets  subject  to the test for  recoverability  were  acquired  in a  purchase
business combination, goodwill is allocated pro rata to such acquired long-lived
assets  primarily  based on the  relative  fair  values  of those  assets at the
acquisition  date. If the sum of the expected future  undiscounted cash flows is
less  than the  carrying  amount  of the  asset,  a loss is  recognized  for the
difference  between  the  fair  value  and  the  carrying  value  of the  asset.
Management believes that there has been no impairment at October 31, 1998.

Employee stock-based compensation

In October 1995, the FASB issued Statement of Financial  Accounting Standard No.
123, "Accounting for Stock-Based Compensation" (FAS 123), which defines the fair
value based method of accounting for  stock-based  compensation  plans.  FAS 123
allows  companies  to use the fair value method  defined in the  statement or to
continue  use the  intrinsic  value  method as  outlined  in APB Opinion No. 25,
"Accounting for Stock Issued to Employees," (APB 25). FAS 123 was adopted during
the Company's fiscal 1997 and the Company will continue to use the provisions of
APB 25 in  determining  net income.  See Note 11 for the pro forma impact on the
net income (loss) and earnings  (loss) per share for the years ended October 31,
1996, 1997 and 1998.



                               F-13
<PAGE>


                           Agri-Nutrition Group Limited
                     Notes to Financial Statements -- continued


6.       Inventories

Inventories consist of the following:
<TABLE>
<CAPTION>

                                                                                         October 31,          
                                                                                   1997              1998     
                                                                             ----------------  ---------------
<S>                                                                          <C>               <C>
Raw materials..............................................................  $      4,049,028  $     4,679,508
Work-in-process............................................................           501,801          301,354
Finished goods.............................................................         2,081,771        2,562,608
                                                                             ----------------  ---------------
                                                                                    6,632,600        7,543,470
Less reserve for excess and obsolete inventories...........................          (277,290)        (393,428)
                                                                             ----------------  ---------------
                                                                             $      6,355,310  $     7,150,042
                                                                             ================  ===============
</TABLE>

7.       Property, plant and equipment

Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>

                                                                                         October 31,          
                                                                                   1997              1998     
                                                                             ----------------  ---------------
<S>                                                                          <C>               <C>
Land.......................................................................  $        638,794  $       638,794
Buildings..................................................................         1,895,779        1,942,628
Machinery and equipment....................................................         4,583,080        4,816,728
Leasehold improvements.....................................................           374,203          388,196
Furniture and fixtures.....................................................           229,243          378,796
Vehicles...................................................................            34,944           34,307
                                                                             ----------------  ---------------
                                                                                    7,756,043        8,199,449
Less accumulated depreciation..............................................        (1,968,282)      (2,717,949)
                                                                             ----------------  ---------------
                                                                                    5,787,761        5,481,500
Construction in progress...................................................               927           39,298
                                                                             ----------------  ---------------
                                                                             $      5,788,688  $     5,520,798
                                                                             ================  ===============
</TABLE>

The  Company  leases  certain  equipment  and  facilities  under   noncancelable
operating  leases.  The  primary  operating  facilities  of Zema and St. JON are
leased from related parties (see Note 12).  Minimum lease payments for operating
leases,  including  leases  with  related  parties,  at October  31, 1998 are as
follows:

   1999.................................................  $       512,914
   2000.................................................          178,403
   2001.................................................           20,708
                                                          ---------------
   Total minimum lease payments.........................  $       712,025
                                                          ===============

Rental expense under all operating leases  approximated  $548,000,  $406,000 and
$442,000 for the years ended October 31, 1996, 1997 and 1998, respectively.


                                  F-14
<PAGE>


                         Agri-Nutrition Group Limited
                  Notes to Financial Statements -- continued


8.       Financing

Revolving credit agreement

The Company has revolving credit  facilities which aggregated  $8.025 million at
October 31, 1997.  In May 1998,  the Company  consolidated  its existing  credit
agreements increasing the facility to $9.2 million with a maturity date of March
31, 2001.  The new bank  agreement also  increased  borrowing  availability  for
working  capital  demand  and  modified  the bank  covenants.  The new  facility
consists of $4.5 million in revolving  credit lines,  the available amount being
based upon specified percentages of qualified accounts receivable and inventory,
and a $4.7 million  revolving  credit line with available  amounts being reduced
$150,000  per quarter with the first such  reduction  on November  30, 1998.  On
August 6, 1998 and October 2, 1998,  the  Company  again  amended  its  existing
credit  facilities,  increasing the latter revolving credit line to $5.2 million
from $4.7  million  to meet  temporary  working  capital  requirements.  The $.5
million  increase  in the line will  continue  through  January  31,  1999.  The
interest rate will range from prime minus 0.25% to prime plus 0.5%, depending on
the Company's  ratio of debt to net worth,  as defined in the new agreement.  At
October 31, 1998, the interest rate charged on borrowings  outstanding under the
new agreement,  as amended, was 8.50% which is the bank's prime rate plus 0.50%.
At October 31, 1998,  excluding  outstanding checks,  approximately $1.2 million
was available under this agreement.

In  order to  avoid  being  in  non-compliance  with  certain  of the  financial
covenants  under its amended  credit  agreement in future  periods due to legal,
accounting  and other  transaction  costs  related to the  proposed  Merger with
Virbac,  the Company's bank agreed to exclude such costs from the calculation of
its covenants.  No other instances of  non-compliance  with financial  covenants
were present at October 31, 1998.

Acquisition notes payable

In connection with the  acquisitions  completed during fiscal 1995 (see Note 2),
the Company entered into notes payable agreements with the former owners of Zema
and St.  JON.  During  fiscal  1998,  the  Company  repaid  its note  payable of
$300,000,  plus accrued interest (interest rate of 8.5%), to the former owner of
Zema,  of which 55% of that  company's  common stock was owned by an employee of
the Company (see Note 12).

At October 31,  1997,  the Company had a  $1,300,000  note  payable  outstanding
(interest  rate of 7.6%) that had been  assigned to the former  owner of St. JON
who is the president of the Company's St. JON  subsidiary.  In fiscal 1998,  the
Company  repaid the note, in full, in  conjunction  with the  refinancing of its
debt and legal merger of the  operating  companies  that comprise the Pet Health
Care Division.

In connection  with the  acquisition  of Mardel during fiscal 1997,  the Company
entered into a notes payable  agreement with the former  owners.  At October 31,
1998 the Company had a remaining note balance of $200,000  payable in two annual
installments  of  $49,000 of cash plus  interest  at prime,  and  $51,000 of the
Company's common stock, beginning September 1999.



                                F-15

<PAGE>


                           Agri-Nutrition Group Limited
                    Notes to Financial Statements -- continued


Financing agreements

The  Company  entered  into  agreements  to  finance  certain  of its  insurance
premiums.  The financing  agreements  provide for monthly principal and interest
payments of approximately $30,000 and $28,832, covering periods from August 1996
to August 1997 and August 1997 to August 1998,  respectively,  and an additional
$6,882 monthly  principle and interest  covering  periods from July 1997 to July
2000. The aggregate  amount  financed under these  agreements are  approximately
$292,000 and $372,000,  respectively.  Of these amounts,  approximately $243,000
and $121,000 remain outstanding at October 31, 1997 and 1998, respectively,  and
are  included in current  portion of long-term  debt and notes  payable at those
dates. Additionally,  $45,334 represents premiums for fiscal years ended October
31, 2000, and are recorded in long-term debt.

Also in conjunction  with the acquisition of Mardel,  the Company assumed a note
payable  with the  former  owner  of  Mardel  for  $489,957  due in five  annual
installments of $97,991, plus interest accrued at the prime rate. At October 31,
1998, the balance due under the note was approximately $300,000.

9.       Common stock transactions

During the year ended October 31, 1996, the Company  purchased  25,650 shares of
its common stock at an aggregate cost of $49,986. These purchases were the first
under the stock repurchase plan authorized by the Board of Directors in December
1995.  During the year ended  October 31,  1997,  the Company  purchased  21,200
shares of its  common  stock at an  aggregate  cost of  $29,556  under the stock
repurchase plan.

During the year ended October 31, 1998, the Company  purchased  83,111 shares of
its common  stock at an  aggregate  cost of $96,465  under the stock  repurchase
plan. At October 31, 1998, the number of shares  available to acquire its common
stock as  authorized  by the  1995  stock  repurchase  plan  was  370,039.  As a
condition  of the Merger  Agreement  with Virbac (see Note 16),  the Company has
suspended its stock repurchase program.

10.      Income taxes

The components of the net income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>

                                                                      For the Year Ended October 31,          
                                                                 1996              1997              1998     
                                                            ---------------  ----------------  ---------------
<S>                                                         <C>              <C>               <C>
Current:
   Federal................................................  $       (71,156) $             --  $            --
   State..................................................          (10,696)           15,837                 
                                                            ---------------  ----------------  ---------------
                                                                    (81,852)           15,837               --
                                                            ---------------  ----------------  ---------------
Deferred:
   Federal................................................          (62,567)           73,854         (345,047)
   State..................................................           (4,044)          (15,363)         (69,896)
                                                            ---------------  ----------------  ---------------
                                                                    (66,611)           58,491         (414,943)
                                                            ---------------  ----------------  ---------------
                                                            $      (148,463) $         74,328  $      (414,943)
                                                            ===============  ================  ===============
</TABLE>

Total tax expense (benefit) above excludes tax provision of $71,000,  $9,000 and
$0,  related to  discontinued  operations  for the years ended October 31, 1996,
1997 and 1998, respectively.

The net  benefit  for  income  taxes  differs  from the  amount  of  income  tax
determined by applying the statutory U.S. federal income tax rate to pretax loss
as a result of the following:



                                F-16
<PAGE>


                        Agri-Nutrition Group Limited
                 Notes to Financial Statements -- continued

<TABLE>
<CAPTION>

                                                                      For the Year Ended October 31,          
                                                                 1996              1997              1998     
                                                            ---------------  ----------------  ---------------
<S>                                                         <C>              <C>               <C>
Income tax benefit at statutory rate......................  $      (132,526) $         65,620  $      (366,444)
State income taxes, net of federal benefit................           (9,728)              313          (46,131)
Other, net................................................           (6,209)            8,395           (2,368)
                                                            ---------------  ----------------  ---------------
                                                            $      (148,463) $         74,328  $      (414,943)
                                                            ===============  ================  ===============
</TABLE>

Deferred tax (assets) liabilities are comprised of the following at October 31:
<TABLE>
<CAPTION>

                                                                      For the Year Ended October 31,          
                                                                 1996              1997              1998     
                                                            ---------------  ----------------  ---------------
<S>                                                         <C>              <C>               <C>
Purchase accounting basis differences.....................  $       180,307  $        272,162  $       396,221
Fixed assets..............................................           50,302           359,182          375,163
Other.....................................................            4,074            29,367           60,729
                                                            ---------------  ----------------  ---------------
  Gross deferred tax liabilities..........................          234,683           660,711          832,113
                                                            ---------------  ----------------  ---------------
Inventories...............................................         (192,329)         (273,503)        (456,973)
Accruals..................................................         (101,943)         (270,146)        (151,865)
Net operating loss carryforward...........................         (271,863)         (441,670)        (961,443)
Other.....................................................          (21,463)          (43,810)         (45,193)
                                                            ---------------  ----------------  ---------------
  Gross deferred tax assets...............................         (587,598)       (1,029,129)      (1,615,474)
                                                            ---------------  ----------------  ---------------
Deferred tax assets valuation allowance...................           98,850           123,844          123,844
                                                            ---------------  ----------------  ---------------
Net deferred tax assets...................................  $      (254,065) $       (244,574) $      (659,517)
                                                            ===============  ================  ===============
</TABLE>

At October 31, 1998, the Company has  approximately  $2,285,000 of net operating
loss  carryforwards  which are available to offset future taxable income.  These
carryforwards  begin  to  expire  in 2010.  This  valuation  allowance  reflects
management's  view of the  portion of  deferred  tax assets for which it is more
likely than not that tax  benefits  will not be  realized.  The  primary  factor
affecting  management's  view  in this  regard  are the  Company's  losses  from
operations in certain prior years.

11.      Employee benefit plans

The Company  maintains two 401(k)  savings  plans (the Plans).  Employees of the
Company and non-union  employees of Resources  participate in one 401(k) plan; a
separate 401(k) plan was established for union employees of Resources. Employees
of Zema and St. JON each  participated  in separate plans that were  established
prior to the  acquisitions of Zema and St. JON by the Company (see Note 2) until
November  1,  1996,  at which  time such plans  were  merged  with PM  Resources
non-union  plan  into  the  Agri-Nutrition  401(k)  plan.  Employees  of  Mardel
participated in a separate plan  established  prior to the acquisition of Mardel
by the Company (see Note 2) until August 1998, at which time the Mardel plan was
merged  with the  Agri-Nutrition  401(k)  plan  into a single  plan for  Company
employees.   Contributions   to  the  Plans  result   primarily  from  voluntary
contributions  from  employees  in the  form  of  deferrals  of up to 15% of the
employees' salaries.  The Plans permit various employer matching  contributions.
Employer contributions were $227,600,  $181,418 and $177,741 for the years ended
October 31, 1996, 1997 and 1998, respectively.



                              F-17
<PAGE>


                         Agri-Nutrition Group Limited
                  Notes to Financial Statements -- continued


Effective June 1, 1994, the Company adopted the Incentive Stock Plan (1994 ISP).
An aggregate of 400,000  shares of the  Company's  common stock are reserved for
issuance to eligible  employees under the 1994 ISP.  Options to purchase 121,500
shares of the  Company's  common stock were granted to employees  under the 1994
ISP during the year ended  October 31 1996.  The exercise  prices of the options
granted  in fiscal  1996  ranged  from  $1.56 to $2.63 per  share,  all of which
approximated fair value on the dates of grant.  These options vest ratably up to
three  years from the date of grant and will expire five years after the vesting
date.  Additionally  in fiscal 1997, the Company  repriced  232,500  outstanding
employee  options  previously  issued  under the 1994 ISP at a revised  exercise
range of $1.4375 to $1.5625  per  share,  which  approximated  fair value on the
dates of installment.  All other terms of the options remain  unchanged.  During
the year ended  October 31, 1996,  the Company also issued  28,365 shares of the
Company's Common Stock under the 1994 ISP to executives and outside directors of
the Company. No shares were issued under the 1994 ISP in the years ended October
31, 1997 and 1998.

Effective  March 9, 1995, the Company  adopted the 1995  Incentive  Stock Option
Plan (1995 ISP). An aggregate of 500,000  shares of the  Company's  common stock
are reserved for issuance to eligible employees, consultants and advisors to the
Company under the 1995 ISP.  Options to purchase 100,000 shares of the Company's
common stock were granted to a consultant  under this plan at an exercise  price
of $3.00 per share,  under an amended option agreement,  which approximated fair
value at the amended date of grant. These options were not exercised and expired
in June 1996. No other shares or options have been issued in connection with the
1995 ISP.

In March 1995, the  stockholders  of the Company  approved the Reload Option and
Exchange Exercise Plan (the Reload Plan) which permits employees holding options
to elect, in accordance with terms of the Reload Plan, to pay the exercise price
of such options by surrendering  the shares of the Company's  common stock.  The
shares  surrendered  are  valued at the  reported  closing  market  price of the
Company's  common  stock on the date that the  employee  provides  the notice of
intent to  exercise  the  option  and  surrenders  the  shares in payment of the
exercise  price.  The Reload Plan also provides for the issuance to the employee
of a new option to acquire the number of shares of the  Company's  common  stock
surrendered in the option exercise with an exercise price per share equal to the
per-share  valuation  applicable  to the shares  surrendered.  There are 200,000
shares  reserved  for issuance  under the Reload  Plan;  no options were granted
during the years ended October 31, 1996, 1997 and 1998.

Effective March 7, 1996, the Company's  stockholders approved the 1996 Incentive
Stock Option Plan (1996 ISP). An aggregate of 1,000,000  shares of the Company's
common stock are reserved for issuance to eligible Directors, officers and other
employees,  and  consultants  to the  Company  under  the 1996 ISP.  Options  to
purchase  370,000,  192,000 and 68,000 shares of the Company's common stock were
granted to employees  under the 1996 ISP during the year ended October 31, 1996,
1997 and 1998  respectively.  The exercise  prices of the options  granted range
from $1.37 to $2.63 per  share,  which  approximated  fair value on the dates of
grant.  These  options vest ratably up to three years from the date of grant and
will expire ten years from the grant date.  Also,  during the year ended October
31, 1997, the Company  issued 20,556 shares of the Company's  common stock under
the 1996 ISP to executives and outside directors of the Company.

FAS 123 was  adopted  during the  Company's  fiscal  1997 and the  Company  will
continue to use the  provisions of APB 25 in determining  net income.  See below
for various disclosures related to FAS 123



                                F-18
<PAGE>


                          Agri-Nutrition Group Limited
                   Notes to Financial Statements -- continued


and the pro forma  impact of FAS 123 on the net  income  (loss)  and net  income
(loss) per share for the years ended October 31, 1996, 1997 and 1998.
<TABLE>
<CAPTION>

                                                                Incentive Stock           Weighted Average
                                                                  Option Plan               Exercise Price
<S>                                                             <C>                         <C>
Outstanding at October 31, 1995                                        795,500               $   1.20

Granted ($1.56 to $2.63)                                               989,000                   1.58
                                                                --------------
Outstanding at October 31, 1996                                      1,784,500                   1.41

Granted ($1.19 to $1.56)                                               192,000                   1.46
                                                                --------------
Outstanding at October 31, 1997                                      1,976,500                   1.42

Granted ($1.375)                                                        68,000                   1.38
Forfeited ($1.19 to $1.59)                                             (95,000)                  1.54
                                                                --------------
Outstanding at October 31, 1998                                      1,949,500               $   1.41
                                                                ==============
</TABLE>


During  fiscal  1997 a total of 185,000  options  issued in prior  years had the
exercise  prices  reduced  from a weighted  average  price of $3.27 per share to
$1.56 per share, respectively.

During fiscal 1997, the Company adopted FAS 123, which addresses  accounting for
stock options and warrant plans and selected the "intrinsic  value based method"
for valuing stock options granted to employees. Had compensation cost for all of
the Company's  stock option plans been  determined  based upon the fair value at
the grant dates  consistent  with the  methodology  prescribed  in FAS 123,  the
Company's net income (loss) and net income (loss) per share would have increased
(decreased)  to the pro forma  amounts  listed below using the weighted  average
fair values indicated.



                             F-19
<PAGE>


                         Agri-Nutrition Group Limited
                   Notes to Financial Statements -- continued

<TABLE>
<CAPTION>

                                                                        For the Year Ended October 31,
                                                                 1996                1997                1998    
<S>                                                          <C>                <C>                 <C>
Net income (loss) as reported                                $     (127,420)    $   133,330         $  (662,832)
Pro forma net loss                                                 (232,858)        (75,278)           (802,085)

Basic and diluted earnings (loss) per share as reported                (.02)            .02                (.07)
Pro forma loss per share                                               (.03)           (.01)               (.09)

Weighted average fair value of options granted               $         1.14     $      1.10         $      1.05
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions:  For grants in fiscal 1996, 1997 and 1998 the weighted average risk
free interest rate was 6.24%,  6.08% and 5.79%,  respectively;  weighted average
expected  volatility of 75%, 85% and 89%,  respectively;  no  dividends,  and an
expected  life  of  four to six  years.  FAS 123  does  not  require  pro  forma
disclosure  of the  effect of options  and  warrants  granted in years  prior to
fiscal  1996.  The pro forma effect of  compensation  costs using the fair value
based method are not indicative of future amounts when the new method will apply
to all outstanding option and warrant grants.

The  following  table  summarizes  information  for stock  warrants  and options
outstanding at October 31, 1998:

<TABLE>
<CAPTION>

                                                 Weighted Average                        Exercisable              
    Range of               Number              Remaining        Exercise          Number        Weighted Average
Exercise Price           Outstanding             Life             Price        Outstanding       Exercise Price
<S>                     <C>                   <C>                <C>           <C>               <C>
$    .81                     558,000               .3 years      $    .81        558,000          $    .81
  1.19-2.00                1,326,500             5.8  years          1.55      1,073,837              1.56
    2.62                      15,000             7.3  years          2.62         15,000              2.62
    4.25                      50,000             6.5  years          4.25         50,000              4.25
</TABLE>

12.      Related party transactions

During fiscal 1996, the Company  amended  previously  issued options to purchase
387,500  shares of common stock  increasing the exercise price of $.81 per share
to $1.56 per share, in conjunction with the management  restructuring  discussed
in Note 16.

In April 1995,  in  connection  with the  acquisition  of Zema (see Note 2), the
Company entered into an operating lease agreement with a limited  partnership of
which the  general  partner is an  employee  of the  Company.  The lease,  which
expires in April 2000,  with an option to extend the term for an additional five
years, and relates to the land and building that comprised the primary operating
facility in Raleigh,  North  Carolina.  Rent expense  under this  agreement  was
$95,000 for each of the years  ended  October 31,  1996,  1997 and 1998.  During
fiscal 1998, the Company ceased  operations at this facility and is currently in
the process of subletting the facility for the remaining term of the lease.


                                 F-20
<PAGE>


                       Agri-Nutrition Group Limited
                 Notes to Financial Statements -- continued


In August 1995, in connection  with the acquisition of St. JON (see Note 2), the
Company  entered into an operating  lease agreement with the former owner of St.
JON and the president of the Company's Pet Health Care Division.  The lease,  as
amended,  expires  in August  2000,  with an  option  to extend  the term for an
additional  five years,  and relates to the land and buildings that comprise St.
JON's  primary  operating  facility.  Rent  expense  under  this  agreement  was
$167,301,  $231,680 and $167,301 for the years ended October 31, 1996,  1997 and
1998, respectively.

In September  1997, in connection  with the  acquisition of Mardel (see Note 4),
the Company  entered into an operating  lease  agreement  with one of the former
owners of Mardel. The lease, as amended, expires in October 1999, with an option
to extend the term for an  additional  five  years,  and relates to the land and
buildings that comprise the Company's  operating  facility in Glendale  Heights,
IL. Rent expense  under this  agreement was $10,500 for the period from the date
of the Mardel  acquisition  through  October 31, 1997 and  $126,000 for the year
ended October 31, 1998.

During the years ended October 31, 1996, 1997 and 1998 the Company had net sales
of approximately $954,000, $944,000 and $1,012,000,  respectively, to a national
animal health marketing,  warehousing,  and distribution  company that is also a
stockholder of the Company. An officer of such corporation is also a stockholder
of the Company and the Vice  Chairman of the Company's  Board of Directors.  The
Company's  management  considers  sales to said  corporation  to be arms  length
transactions.

As  discussed  in Note 8, the Company  entered  into  acquisition  note  payable
agreements with the former owners of Zema, St. JON and Mardel.

13.      Manufacturing and Supply Agreement

In connection with Resources' acquisition,  Purina agreed to purchase sufficient
volume  and mix of  products  to  generate  income,  net of  ingredient,  direct
manufacturing,  and other  direct  costs of  approximately  $2,900,000  annually
(which  represents a historically  consistent  margin level) through October 31,
1996.

In fiscal 1996,  income,  net of  ingredient,  direct  manufacturing,  and other
direct  costs to date from Purina was  approximately  $1,200,000  less than that
required under the  agreement.  Such amount was billed to Purina and included in
net sales by the Company  during  October  1996.  The  manufacturing  and supply
agreement expired on October 31, 1996.

See Note 16 for related matters.

14.      Discontinued operations

In June 1997,  the Company  discontinued  the  distribution  of  ingredients  to
Purina. Consequently, in July 1997, the Company distributed all of its remaining
ingredients  inventories to Purina and discontinued its operations in this area.
This segment of the Company's business has been accounted for and presented as a
discontinued  operation in accordance with Accounting  Principles  Board Opinion
No. 30, "Reporting the Results of Operations" (APB 30) for all periods reflected
herein.  At October 31, 1997, all of the net assets  relating to the ingredients
segment  have either  been  disposed or have been  deployed  into the  Company's
existing operations.



                                F-21
<PAGE>


                         Agri-Nutrition Group Limited
                   Notes to Financial Statements -- continued


Management  does not  anticipate  that the  ingredients  segment  will  have any
significant operations in the future.  Furthermore,  management does not believe
that  there  are  any  separately  identifiable  fixed  assets  related  to  the
ingredients  segment  and  proceeds  related to  disposition  of such net assets
subsequent  to the June 1997  measurement  date did not result in a material net
gain or loss.

The operating results of the discontinued operations are summarized as follows:
<TABLE>
<CAPTION>

                                                                      For the Year Ended October 31,          
                                                                 1996              1997              1998     
                                                            ---------------  ----------------  ---------------
<S>                                                         <C>              <C>               <C>
Net sales.................................................  $     7,722,255  $      5,531,411  $            --
Income before income tax provision........................          185,204            23,835
Income tax  provision.....................................           71,304             9,176                 
                                                            ---------------  ----------------  ---------------
Net income ...............................................  $       113,900  $         14,659  $            --
                                                            ===============  ================  ===============
</TABLE>

There were no net assets of the  discontinued  operations at either  October 31,
1997 or 1998.

15.      Commitment and contingencies

From time to time, the Company becomes party to various claims and legal actions
arising  during the ordinary  course of business.  Management  believes that the
Company's  costs and any  potential  judgments  resulting  from such  claims and
actions would be covered by the Company's  product liability  insurance,  except
for deductible  limits. The Company intends to defend such claims and actions in
cooperation  with its insurers.  It is management's  opinion that, in any event,
their  outcome  would  not have a  material  effect on the  Company's  financial
position, cash flows or results of operations.

16.      Other matters

Merger Agreement with Virbac, Inc.

In October 1998, the Company entered a definitive  merger agreement with Virbac,
Inc., a U.S.  subsidiary of the French  veterinary  pharmaceutical  manufacturer
Virbac  S.A.,  under  which  Virbac  S.A.  will  hold  approximately  60% of the
outstanding stock of the combined companies.  The transaction,  which is subject
to  approval  by the  Company's  stockholders,  government  approval  and  other
customary  conditions,  is expected to close in March 1999 and will be accounted
for as an  acquisition of the Company by Virbac,  Inc.  pursuant to the purchase
method of accounting.  Interest income and other includes approximately $230,000
of fiscal 1998 expenses  relative to legal,  accounting  and other costs for the
pending transaction with Virbac.

Purchase of Inventories from Purina Mills, Inc.

In January 1999, the Company  acquired  certain assets,  primarily  inventories,
related to Purina Mill's animal health  products  business.  The amount paid for
such inventory  aggregated  $400,000,  less future amounts which would have been
due to Purina  Mills  related  to the  acquisition  of  Bromethalin  assets,  as
discussed in Note 3. Purina's  "additional  consideration" due for the five-year
period  subsequent to the  acquisition of Bromethalin  was waived in conjunction
with this purchase of inventories. Prior thereto,



                                 F-22
<PAGE>


                      Agri-Nutrition Group Limited
               Notes to Financial Statements -- continued


the  Company  manufactured  and  supplied  products  to  Purina  Mills  for this
business.  The  Company  will now supply  animal  health  products  directly  to
Purina's dealers.  Management does not anticipate any material adverse impact on
its financial position,  cash flows or results of operations as a result of this
change in customer relationships.

Termination of Anthony Products Letter of Intent

In March  1997,  the  Company  terminated  its  letter of intent  related to its
proposed  acquisition of Anthony  Products  Company.  In  conjunction  with this
action,  the Company recorded a $202,000 pre-tax charge in the second quarter of
fiscal  1997.  Such  amount is  included  in  interest  income  and other in the
accompanying consolidated statement of operations.

Corporate reorganization

In August 1996, the Company  announced the  resignation  of the Company's  Chief
Executive  Officer and  President,  effective  October 31,  1996,  and its Chief
Financial  Officer,   effective  August  23,  1996.  In  connection  with  these
resignations,  the Company incurred a non-recurring  charge of $240,000 relative
to severance  costs in the fourth quarter of fiscal 1996.  These costs were paid
during fiscal 1997.








                                  F-23


<PAGE>



                    REPORT OF INDEPENDENT ACCOUNTANTS ON
                       FINANCIAL STATEMENT SCHEDULE



To the Board of Directors and
Stockholders of Agri-Nutrition Group Limited




Our audits of the consolidated  financial  statements  referred to in our report
dated January 15, 1999, appearing on page F-2 of this Annual Report on Form 10-K
also included an audit of the Financial  Statement Schedule included on page S-2
of this Annual  Report on Form 10-K.  In our opinion,  the  Financial  Statement
Schedule  presents fairly, in all material  respects,  the information set forth
therein  when  read in  conjunction  with  the  related  consolidated  financial
statements.



PRICEWATERHOUSECOOPERS LLP
St. Louis, Missouri
January 15, 1999














                             S-1
<PAGE>


AGRI-NUTRITION GROUP LIMITED
SCHEDULE II - RULE 12-09
VALUATION OF QUALIFYING ACCOUNTS AND RESERVES
OCTOBER 31, 1998


<TABLE>
<CAPTION>



       COLUMN A                   COLUMN B                            COLUMN C                       COLUMN D             COLUMN E
                                 BALANCE AT                                                                              BALANCE AT
                                 BEGINNING                                                           DEDUCTIONS           END OF
      DESCRIPTION                OF PERIOD                           ADDITIONS                       - DESCRIBE           PERIOD
                                                      ----------------------------------------
                                                       CHARGED TO COSTS      CHARGED TO OTHER
                                                        AND EXPENSES       ACCOUNTS - DESCRIBE

<S>                             <C>                     <C>                  <C>                     <C>             <C>
FAS 109 Valuation
  Allowance                     $  123,844                --                     --                      --            $ 123,844

Inventory Reserve               $  277,290              $ 116,138                --                      --            $ 393,428

Allowance for                      
   Doubtful Accounts            $  133,705              $   8,649                --                      --            $ 142,354
</TABLE>











                               S-2