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<SEC-DOCUMENT>0000950123-05-006393.txt : 20050516
<SEC-HEADER>0000950123-05-006393.hdr.sgml : 20050516
<ACCEPTANCE-DATETIME>20050516171653
ACCESSION NUMBER:		0000950123-05-006393
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20050331
FILED AS OF DATE:		20050516
DATE AS OF CHANGE:		20050516

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PHIBRO ANIMAL HEALTH CORP
		CENTRAL INDEX KEY:			0001069899
		STANDARD INDUSTRIAL CLASSIFICATION:	GRAIN MILL PRODUCTS [2040]
		IRS NUMBER:				131840497
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	333-64641
		FILM NUMBER:		05835974

	BUSINESS ADDRESS:	
		STREET 1:		ONE PARKER PLZ
		CITY:			FORT LEE
		STATE:			NJ
		ZIP:			07024
		BUSINESS PHONE:		2019446020

	MAIL ADDRESS:	
		STREET 1:		ONE PARKET PLZ
		CITY:			FORT LEE
		STATE:			NJ
		ZIP:			07024

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PHILIPP BROTHERS CHEMICALS INC
		DATE OF NAME CHANGE:	19980908
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>y09095e10vq.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

(MARK ONE)

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

                  For the quarterly period ended March 31, 2005

                                       OR

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

             For the transition period from _________ to _________.

                        Commission File Number 333-64641

                        PHIBRO ANIMAL HEALTH CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                          <C>
             New York                                             13-1840497
   (STATE OR OTHER JURISDICTION                                (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)
</TABLE>

              65 Challenger Road, Ridgefield Park, New Jersey 07660
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (201) 329-7300
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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 whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                           Yes [ ]   No [X]

Number of shares of each class of common stock outstanding as of March 31, 2005:

                 Class A Common Stock, $.10 par value: 12,600.00
                 Class B Common Stock, $.10 par value: 11,888.50

================================================================================
<PAGE>
                        PHIBRO ANIMAL HEALTH CORPORATION

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>       <C>                                                               <C>
PART I    FINANCIAL INFORMATION (Unaudited)
          Item 1. Condensed Consolidated Financial Statements............     3
                  Condensed Consolidated Balance Sheets..................     4
                  Condensed Consolidated Statements of Operations
                     and Comprehensive Income (Loss).....................     5
                  Condensed Consolidated Statements of Changes in
                     Stockholders' Deficit...............................     6
                  Condensed Consolidated Statements of Cash Flows........     7
                  Notes to Condensed Consolidated Financial Statements...     8
          Item 2. Management's Discussion and Analysis of Financial
                     Condition and Results of Operations.................    30
          Item 3. Quantitative and Qualitative Disclosures About
                     Market Risk.........................................    44
          Item 4. Controls and Procedures................................    45

PART II   OTHER INFORMATION
          Item 5. Other Information......................................    46
          Item 6. Exhibits and Reports on Form 8-K.......................    46

SIGNATURES ..............................................................    47
</TABLE>


                                        2
<PAGE>
This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference are discussed in the
Company's Annual Report on Form 10-K for its fiscal year ended June 30, 2004
and/or throughout this Form 10-Q and in particular in Item 2 of Part I of this
Form 10-Q under the caption "Certain Factors Affecting Future Operating
Results." Unless the context otherwise requires, references in this report to
the "Company" or to "we" or "our" refers to Phibro Animal Health Corporation
and/or one or more of its subsidiaries, as applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements


                                        3
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                MARCH 31,   JUNE 30,
                                                                  2005        2004
                                                                ---------   --------
<S>                                                             <C>         <C>
                            ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                    $  7,405    $  5,568
   Trade receivables, less allowance for doubtful accounts
      of $1,223 at March 31, 2005 and $1,358 at June 30, 2004     53,204      57,217
   Other receivables                                               4,326       2,766
   Inventories                                                    99,059      78,562
   Prepaid expenses and other current assets                       6,641       8,591
   Current assets from discontinued operations                     2,150       1,886
                                                                --------    --------
         TOTAL CURRENT ASSETS                                    172,785     154,590
PROPERTY, PLANT AND EQUIPMENT, net                                52,520      55,381
INTANGIBLES                                                       10,674      11,695
OTHER ASSETS                                                      16,863      16,298
OTHER ASSETS FROM DISCONTINUED OPERATIONS                          3,329       3,405
                                                                --------    --------
                                                                $256,171    $241,369
                                                                ========    ========

            LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
   Cash overdraft                                               $  2,821    $    891
   Loans payable to banks                                          3,947      10,996
   Current portion of long-term debt                               2,250       1,351
   Accounts payable                                               33,954      46,764
   Accrued expenses and other current liabilities                 55,796      39,380
   Current liabilities from discontinued operations                  998         838
                                                                --------    --------
         TOTAL CURRENT LIABILITIES                                99,766     100,220
LONG-TERM DEBT                                                   176,645     158,018
OTHER LIABILITIES                                                 19,840      22,286
                                                                --------    --------
         TOTAL LIABILITIES                                       296,251     280,524
                                                                --------    --------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SECURITIES:
   Series C preferred stock                                           --      24,678
                                                                --------    --------
STOCKHOLDERS' DEFICIT:
   Series A preferred stock                                          521         521
   Common stock                                                        2           2
   Paid-in capital                                                27,260         860
   Accumulated deficit                                           (68,010)    (57,964)
   Accumulated other comprehensive income (loss):
      Gain on derivative instruments                                 304           9
      Cumulative currency translation adjustment                    (157)     (7,261)
                                                                --------    --------
         TOTAL STOCKHOLDERS' DEFICIT                             (40,080)    (63,833)
                                                                --------    --------
                                                                $256,171    $241,369
                                                                ========    ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                        4
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED    NINE MONTHS ENDED
                                                                     MARCH 31,            MARCH 31,
                                                                ------------------   -------------------
                                                                  2005      2004       2005       2004
                                                                -------   -------    --------   --------
<S>                                                             <C>       <C>        <C>        <C>
NET SALES                                                       $90,255   $85,976    $269,169   $261,582

COST OF GOODS SOLD (includes Belgium Plant Transactions costs
   of $4,372 and $13,908 for the three months and nine months
   ended March 31, 2005, respectively)                           71,504    63,246     214,682    195,663
                                                                -------   -------    --------   --------
   GROSS PROFIT                                                  18,751    22,730      54,487     65,919

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                     17,885    16,004      51,901     48,292
                                                                -------   -------    --------   --------
   OPERATING INCOME                                                 866     6,726       2,586     17,627

OTHER:
   Interest expense                                               5,891     4,918      16,526     13,400
   Interest (income)                                                (19)      (43)        (77)      (117)
   Other (income) expense, net                                       77      (134)       (691)      (594)
   Net (gain) on extinguishment of debt                              --        --          --    (23,226)
                                                                -------   -------    --------   --------
   INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
      INCOME TAXES                                               (5,083)    1,985     (13,172)    28,164

PROVISION FOR INCOME TAXES                                          773     2,126         699      5,745
                                                                -------   -------    --------   --------
   INCOME (LOSS) FROM CONTINUING OPERATIONS                      (5,856)     (141)    (13,871)    22,419

DISCONTINUED OPERATIONS:
   Income (loss) from discontinued operations
      (net of income taxes)                                         272      (254)        575       (504)
   Gain on disposal of discontinued operations
      (net of income taxes)                                          --        --          --        231
                                                                -------   -------    --------   --------
   NET INCOME (LOSS)                                             (5,584)     (395)    (13,296)    22,146

OTHER COMPREHENSIVE INCOME:
   Change in derivative instruments, net of tax                     (27)     (383)        295         36
   Change in currency translation adjustment                     (1,207)      (92)      7,104      2,080
                                                                -------   -------    --------   --------
   COMPREHENSIVE INCOME (LOSS)                                  $(6,818)  $  (870)   $ (5,897)  $ 24,262
                                                                =======   =======    ========   ========
   NET INCOME (LOSS)                                             (5,584)     (395)    (13,296)    22,146

Excess of the reduction of Series B and C preferred stock
   over total assets divested and costs and liabilities
   incurred on the Prince Transactions                            4,000        --       4,973     20,138
Dividends and equity value accreted on Series B and C
   preferred stock                                               (3,582)   (4,223)     (1,723)    (8,074)
                                                                -------   -------    --------   --------
   NET INCOME AVAILABLE (LOSS ATTRIBUTABLE)
      TO COMMON SHAREHOLDERS                                    $(5,166)  $(4,618)   $(10,046)  $ 34,210
                                                                =======   =======    ========   ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                        5
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                   (UNAUDITED)
            FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2005
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              COMMON                                 ACCUMULATED
                                            PREFERRED         STOCK                                     OTHER
                                              STOCK     -----------------   PAID-IN   ACCUMULATED   COMPREHENSIVE
                                             SERIES A   CLASS A   CLASS B   CAPITAL     DEFICIT     INCOME (LOSS)     TOTAL
                                            ---------   -------   -------   -------   -----------   -------------   --------
<S>                                         <C>         <C>       <C>       <C>       <C>           <C>             <C>
Balance, June 30, 2004                         $521        $1        $1     $   860    $(57,964)       $(7,252)     $(63,833)
   Dividends on Series C
      preferred stock                                                                      (668)                        (668)
   Equity value accreted on
      Series C preferred stock                                                              (14)                         (14)
   Change in derivative
      instruments, net of tax                                                                               75            75
   Foreign currency translation
      adjustment                                                                                         3,007         3,007
   Net (loss)                                                                              (141)                        (141)
                                               ----       ---       ---     -------    --------        -------      --------
Balance, September 30, 2004                    $521        $1        $1     $   860    $(58,787)       $(4,170)     $(61,574)
                                               ====       ===       ===     =======    ========        =======      ========
   Excess of the reduction in Series C
      preferred stock over total assets
      divested and costs and liabilities
      incurred on the Prince Transactions                                                   973                          973
   Dividends on Series C
      preferred stock                                                                      (667)                        (667)
   Equity value accreted on
      Series C preferred stock                                                            3,208                        3,208
   Change in derivative
      instruments, net of tax                                                                              247           247
   Foreign currency translation
      adjustment                                                                                         5,304         5,304
   Net (loss)                                                                            (7,571)                      (7,571)
                                               ----       ---       ---     -------    --------        -------      --------
Balance, December 31, 2004                     $521        $1        $1     $   860    $(62,844)       $ 1,381      $(60,080)
                                               ====       ===       ===     =======    ========        =======      ========
   Capital contribution from
      PAHC Holdings Corporation                                              26,400                                   26,400
   Excess of the reduction in Series C
      preferred stock over total assets
      divested and costs and liabilities
      incurred on the Prince Transactions                                                 4,000                        4,000
   Dividends on Series C
      preferred stock                                                                      (478)                        (478)
   Equity value accreted on
      Series C preferred stock                                                           (3,104)                      (3,104)
   Change in derivative
      instruments, net of tax                                                                              (27)          (27)
   Foreign currency translation
      adjustment                                                                                        (1,207)       (1,207)
   Net (loss)                                                                            (5,584)                      (5,584)
                                               ----       ---       ---     -------    --------        -------      --------
Balance, March 31, 2005                        $521        $1        $1     $27,260    $(68,010)       $   147      $(40,080)
                                               ====       ===       ===     =======    ========        =======      ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                        6
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            NINE MONTHS ENDED
                                                                                               MARCH 31,
                                                                                          -------------------
                                                                                            2005       2004
                                                                                          --------   --------
<S>                                                                                       <C>        <C>
OPERATING ACTIVITIES:
   Net income (loss)                                                                      $(13,296)  $ 22,146
   Adjustment for discontinued operations                                                     (575)       273
                                                                                          --------   --------
   Income (loss) from continuing operations                                                (13,871)    22,419
   Adjustments to reconcile income (loss) from continuing operations to net cash
      (used) by operating activities:
      Depreciation and amortization (includes accelerated depreciation from the
         Belgium Plant Transactions of $3,628 for the nine months ended March 31, 2005)     13,716      9,483
      Deferred income taxes                                                                   (202)       263
      Net gain on extinguishment of debt                                                        --    (23,226)
      Effects of changes in foreign currency                                                  (760)      (168)
      Other                                                                                   (359)      (290)
      Changes in operating assets and liabilities:
         Accounts receivable                                                                 4,460     (3,014)
         Inventories                                                                       (16,378)    (1,579)
         Prepaid expenses and other current assets                                           1,647       (979)
         Other assets                                                                         (618)       977
         Accounts payable                                                                  (11,378)   (13,497)
         Accrued expenses and other liabilities                                              9,120      8,794
         Accrued costs of non-completed transaction                                         (3,970)        --
         Accrued costs of the Belgium Plant Transactions                                    10,280         --
   Cash provided (used) by discontinued operations                                             808       (598)
                                                                                          --------   --------
         NET CASH (USED) BY OPERATING ACTIVITIES                                            (7,505)    (1,415)
                                                                                          --------   --------
INVESTING ACTIVITIES:
   Capital expenditures                                                                     (5,098)    (3,986)
   Proceeds from sale of assets                                                              1,353      1,079
   Other investing                                                                            (119)        (1)
   Discontinued operations                                                                     (93)    14,807
                                                                                          --------   --------
         NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                   (3,957)    11,899
                                                                                          --------   --------
FINANCING ACTIVITIES:
   Net increase in cash overdraft                                                            1,930      2,354
   Net decrease in short-term debt                                                          (7,049)   (30,023)
   Proceeds from long-term debt                                                             24,292    109,622
   Proceeds from capital contribution by PAHC Holdings Corporation                          26,400         --
   Payments of long-term debt                                                               (3,913)   (34,612)
   Redemption of Series C preferred stock                                                  (26,400)        --
   Payment of Pfizer obligations                                                                --    (28,300)
   Payments relating to the Prince Transactions and transaction costs                           --    (21,023)
   Debt refinancing costs                                                                   (2,027)   (14,945)
   Discontinued operations                                                                      --      1,135
                                                                                          --------   --------
         NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                   13,233    (15,792)
                                                                                          --------   --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                         66        319
                                                                                          --------   --------
         NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                1,837     (4,989)

CASH AND CASH EQUIVALENTS at beginning of period                                             5,568     11,179
                                                                                          --------   --------
CASH AND CASH EQUIVALENTS at end of period                                                $  7,405   $  6,190
                                                                                          ========   ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                        7
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

1. GENERAL

     PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:

     In the opinion of Phibro Animal Health Corporation (the "Company" or
"PAHC"), the accompanying unaudited condensed consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly its financial position as of March 31, 2005 and its
results of operations and cash flows for the three months and nine months ended
March 31, 2005 and 2004.

     The condensed consolidated balance sheet as of June 30, 2004 was derived
from audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States. Additionally
it should be noted the accompanying condensed consolidated financial statements
and notes thereto have been prepared in accordance with accounting standards
appropriate for interim financial statements. While the Company believes the
disclosures presented are adequate to make the information contained herein not
misleading, these financial statements should be read in conjunction with the
Company's audited consolidated financial statements as found in the Company's
annual report filed on Form 10-K for the year ended June 30, 2004.

     The Company's Mineral Resource Technologies, Inc. ("MRT"), La Cornubia S.A.
(France) ("La Cornubia") and Wychem Limited (U.K.) ("Wychem") businesses have
been classified as discontinued operations as discussed in these notes to
condensed consolidated financial statements. The Company's condensed
consolidated financial statements have been reclassified to report separately
the financial position, operating results and cash flows of the discontinued
operations. These footnotes present information only for continuing operations,
unless otherwise noted.

     The results of operations for all interim periods presented may not be
indicative of results for the full year.

     NEW ACCOUNTING PRONOUNCEMENTS:

     The Company will adopt the following new accounting pronouncements during
2005:

     Statement of Financial Accounting Standards No. 151, "Inventory Costs, an
amendment to Accounting Research Bulletin No. 43, Chapter 4" ("SFAS No. 151").
SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing"
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB No.
43, Chapter 4, previously stated "...under some circumstances, items such as
idle facility expense, excessive spoilage, double freight, and rehandling costs
may be so abnormal as to require treatment as current period charges....". SFAS
No. 151 requires that those items be recognized as current period charges
regardless of whether they meet the criterion of "so abnormal". In addition,
SFAS No. 151 requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS
No. 151 is effective for inventory costs incurred during fiscal years beginning
after June 30, 2005 and the provisions of this statement shall be applied
prospectively. The Company is currently assessing the impact of this statement.

     Statement of Financial Accounting Standards No. 153, "Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29" ("SFAS No. 153"). SFAS
No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The provisions of this statement shall be applied
prospectively. The Company is currently assessing the impact of this statement.


                                        8
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

     Statement of Financial Accounting Standards No. 123, "Share-Based Payment
(revised 2004)" ("SFAS No. 123"). This Statement is a revision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" and supercedes Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and its related implementation
guidance. This Statement establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the
entity's equity instruments or may be settled by the issuance of those equity
instruments. This Statement focuses primarily on accounting for transactions in
which an entity obtains employee services in share-based payment transactions.
This Statement does not change the accounting guidance for share-based payment
transactions with parties other than employees provided in SFAS No. 123 as
originally issued, and it does not address the accounting for employee share
ownership plans. This Statement applies to all awards granted after the
effective date and to awards modified, repurchased, or cancelled after that
date. The cumulative effect of initially applying this Statement, if any, is
recognized as of the required effective date. SFAS No. 123, as revised, is
effective as of the beginning of the first annual reporting period that begins
after December 31, 2005. The Company is currently assessing the impact of this
statement.

     FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement
Obligations" ("FIN No. 47"). FIN No. 47 clarifies that the term "conditional
asset retirement obligation" as used in FASB Statement No. 143, "Accounting for
Asset Retirement Obligations ("ARO")" refers to a legal obligation to perform an
asset retirement activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of the
entity. The obligation to perform the asset retirement activity is unconditional
even though uncertainty exists about the timing and/or method of settlement.
Thus, the timing and/or method of settlement may be conditional on a future
event. Accordingly, an entity is required to recognize a liability for the fair
value of a conditional ARO if the fair value of the liability can be reasonably
estimated. The fair value of a liability for the conditional ARO should be
recognized when incurred; generally upon acquisition, construction, or
development and/or through the normal operation of the asset. Uncertainty about
the timing and/or method of settlement of a conditional ARO should be factored
into the measurement of the liability when sufficient information exists. FIN
No. 47 also clarifies when an entity would have sufficient information to
reasonably estimate the fair value of an ARO. FIN No. 47 is effective no later
than the end of fiscal years ending after December 15, 2005. The Company
anticipates that the adoption of FIN No. 47 will not result in a material impact
on the Company's financial statements.

2. RISKS, UNCERTAINTIES, AND LIQUIDITY

     The Company's ability to fund its operating plan depends upon the continued
availability of borrowing under its domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under
the domestic senior credit facility based on its forecasted operating plan. In
the event of adverse operating results and/or violation of covenants under this
facility, there can be no assurance that the Company would be able to obtain
waivers or amendments on favorable terms, if at all. The Company expects
adequate liquidity throughout 2005, with periods of reduced availability around
the dates of the semi-annual interest payments due June 1 and December 1 related
to its Senior Secured Notes and Senior Subordinated Notes. The Company is
pursuing additional cost reduction activities, working capital improvement
plans, and sales of non-strategic assets to ensure additional liquidity. The
Company also has availability under foreign credit lines that likely would be
available. There can be no assurance the Company will be successful in any of
the above-noted actions.

     The use of antibiotics in medicated feed additives is a subject of
legislative and regulatory interest. The issue of potential for increased
bacterial resistance to certain antibiotics used in certain food-producing
animals is the subject of discussions on a worldwide basis and, in certain
instances, has led to government restrictions on the use of antibiotics in
food-producing animals. The sale of feed additives containing antibiotics is a
material portion of the Company's business. Should regulatory or other
developments result in further restrictions on the sale of such products, it
could have a material adverse impact on the Company's financial position,
results of operations and cash flows.

     The testing, manufacturing, and marketing of certain of the Company's
products are subject to extensive regulation by numerous government authorities
in the United States and other countries.


                                        9
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

     The Company has significant assets located outside of the United States,
and a significant portion of the Company's sales and earnings are attributable
to operations conducted abroad.

     The Company has assets located in Israel and a portion of its sales and
earnings are attributable to operations conducted in Israel. The Company is
affected by social, political and economic conditions affecting Israel, and any
major hostilities involving Israel as well as the Middle East or curtailment of
trade between Israel and its current trading partners, either as a result of
hostilities or otherwise, could have a material adverse effect on the Company.

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,
generation, treatment, emission, release, discharge and disposal of certain
materials and wastes, the remediation of contaminated soil and groundwater, the
manufacture, sale and use of pesticides and the health and safety of employees.
As such, the nature of the Company's current and former operations and those of
its subsidiaries exposes the Company and its subsidiaries to the risk of claims
with respect to such matters.

3. REFINANCING

     ISSUANCE OF ADDITIONAL 13% SENIOR SECURED NOTES:

     On December 21, 2004, the Company completed a private placement pursuant to
which the Company (the "Parent Issuer") and Philipp Brothers Netherlands III
B.V., an indirect wholly-owned subsidiary of the Company (the "Dutch Issuer" and
together with the Company, the "Issuers") issued and sold 22,491 additional
units consisting of $18,207 13% Senior Secured Notes due 2007 of the Parent
Issuer (the "U.S. Notes") and $4,284 13% Senior Secured Notes due 2007 of the
Dutch Issuer (the "Dutch Notes" and together with the U.S. Notes, the
"Additional Notes"), from which they received gross proceeds of $23,391. The
proceeds were used to refinance indebtedness outstanding under the Company's
domestic senior credit facility. The Company incurred financing costs of $2,275
in connection with the issuance of the Additional Notes. The Additional Notes
were issued under the Indenture dated October 21, 2003, as amended and
supplemented (the "Indenture") under which the Issuers previously issued 105,000
units consisting of $85,000 aggregate principal amount of U.S. Notes and $20,000
aggregate principal amount of Dutch Notes.

     On March 9, 2005, the Company completed the exchange of its privately
placed 127,491 units of 13% Senior Secured Notes due 2007 with new units of 13%
Senior Secured Notes due 2007 that have been registered with the Securities and
Exchange Commission (the "SEC").

     AMENDMENT TO THE DOMESTIC SENIOR CREDIT FACILITY:

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended its domestic senior credit facility to:
(i) amend the EBITDA definition to exclude charges and expenses related to the
sale of the Belgium Plant in an aggregate amount not to exceed $26,800 for
purposes of calculating a certain financial covenant; (ii) amend the indenture
reserve definition to include scheduled payments of interest due on the
Additional Notes; (iii) amend the maximum aggregate amount of borrowing
available under the working capital facility to permit a temporary increase to
$22,500 and for its reduction to $17,500 on such borrowings being refinanced by
the proceeds of the Additional Notes; (iv) amend the Permitted Investments
definition to include investments in connection with the sale of the Belgium
Plant and transfer of certain equipment, together with other assets and rights
related to the production of virginiamycin, to Phibro Saude International Ltda.
("PAH Brazil") or in connection with alternative production arrangements; and
(v) provide for the issuance of the Additional Notes and the sale of the Belgium
Plant and related transactions.


                                       10
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

4. BELGIUM PLANT TRANSACTIONS

     On December 16, 2004, Phibro Animal Health SA, ("PAH Belgium") entered into
an agreement with GlaxoSmithKline Biologicals ("GSK") to sell to GSK
substantially all of PAH Belgium's facilities in Rixensart, Belgium (the
"Belgium Plant"). Such sale, when completed (the "Belgium Plant Transactions"),
will include the following elements (U.S. dollar amounts at the March 31, 2005
exchange rate): (i) the transfer of substantially all of the land and buildings
and certain equipment of PAH Belgium at the Belgium Plant, as well as the
industrial activities and intellectual property relating to certain solvent
technology of PAH Belgium for a purchase price of EUR 6,200 ($8,025), payable at
closing; (ii) the transfer to GSK of a majority of the employees of the Belgium
Plant and the corresponding responsibility for statutory severance obligations;
(iii) GSK agreeing to be responsible for cleaning-up, by demolition or
otherwise, certain buildings not to be used by it, but for PAH Belgium to
reimburse GSK up to a maximum of EUR 700 ($906) for such cleaning-up costs; (iv)
in recognition of the benefits to PAHC from the proposed transaction, PAH
Belgium agreeing to pay to GSK EUR 1,500 ($1,942) within six months from the
closing date, EUR 1,500 ($1,942) within eighteen months from the closing date,
EUR 1,500 ($1,942) within thirty months from the closing date, and EUR 500
($647) within forty-two months from the closing date; (v) PAH Belgium retaining
certain excess land (valued at approximately EUR 400 ($518)) and being able to
sell such land for its own account; (vi) PAH Belgium being responsible for
certain plant closure costs and legally required severance indemnities in
connection with workforce reductions, estimated in total to be EUR 10,200
($13,203), of which an amount estimated to be approximately EUR 4,200 ($5,436)
would be payable at or around the closing and an aggregate amount so estimated
to be approximately EUR 6,000 ($7,766) would be payable over periods up to
thirteen years; and (vii) PAH Belgium retaining any or all equipment at the
Belgium Plant, and being able to sell such equipment for the account of PAH
Belgium or transfer such equipment, together with other assets and rights
related to the production of virginiamycin, to PAH Brazil which owns a facility
in Guarulhos, Brazil or in connection with alternative production arrangements.

     The foregoing transactions and agreements are subject to a closing that is
expected to occur on November 30, 2005, but in no event earlier than July 1,
2005 or later than June 30, 2006.

     The Dutch Notes and related guarantees are collateralized by a mortgage on
the Belgium Plant which will be released in connection with the closing of the
sale of the Belgium Plant to GSK.

     As a result of the above agreement, the Company will depreciate the Belgium
plant to its estimated salvage value of EUR 2,470 ($3,197) as of the projected
closing date of November 30, 2005. The Company recorded incremental depreciation
expense of EUR 2,755 ($3,628) during the three months ended March 31, 2005 and
will record an additional EUR 6,301 ($8,156) of incremental depreciation expense
ratably through November 2005. The Company recorded severance expense of EUR
6,650 ($9,003) in December 2004 for the estimated minimum severance amounts
indicated by law, contract, and/or past practice. The Company recorded
additional expense of EUR 976 ($1,277) during the three months ended March 31,
2005 and estimates it will record additional expense of EUR 2,574 ($3,332)
ratably through November 2005 for severance, retention agreements and other
costs. The incremental depreciation expense of $3,628 and severance expense of
$10,280 recorded through March 2005 are included in cost of goods sold on the
Company's condensed consolidated statements of operations and comprehensive
income (loss).

     The Company has determined that the carrying amount of the Belgium Plant at
March 31, 2005 is recoverable based on the estimated future cash flows arising
from the use of the assets.

     In anticipation of transferring production of virginiamycin from the
Belgium plant to an alternative production location, the Company has been
increasing inventory levels of virginiamycin to ensure adequate supplies during
the transfer period. At March 31, 2005 virginiamycin inventories were
approximately $43,000 and are expected to continue to increase through November
2005, based on current production rates.


                                       11
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

5. HOLDING COMPANY AND HOLDCO NOTES

     During February 2005, PAHC Holdings Corporation ("Holdings") was formed to
hold the capital stock of the Company, except for its Series C Preferred Stock.
On February 10, 2005, Holdings issued $29,000 aggregate principal amount of its
15% Senior Secured Notes due 2010 (the "HoldCo Notes") in a private placement.
Interest is payable at the option of Holdings in cash or pay-in-kind HoldCo
Notes in its sole discretion. The Company is not obligated for the HoldCo Notes.
The Company's ability to make payments to Holdings is subject to the terms of
the Company's Senior Secured Notes, its Senior Subordinated Notes, and its
domestic senior credit facility, and to applicable law.

     The proceeds from the sale of the HoldCo Notes were used by Holdings to
make a capital contribution to the Company to contemporaneously finance the
redemption of the Company's Series C Preferred Stock in the amount of $26,400 on
February 28, 2005.

     On May 16, 2005, Holdings completed the exchange of its privately placed
HoldCo Notes with new HoldCo Notes that have been registered with the SEC.

     Holdings was formed by the holders of all of the Company's capital stock,
other than the holders of the Company's Series C Preferred Stock. In particular,
Jack Bendheim, Marvin Sussman and trusts for the benefit of Mr. Bendheim and his
family exchanged all of their shares of Series A Preferred Stock and Class B
Common Stock and Mr. Bendheim exchanged all of his shares of Class A Common
Stock, for the same number and class of shares of Holdings, having the same
designations, relative rights, privileges and limitations as the Company's
shares of such class (except to the extent that Holdings is a Delaware
corporation and the Company is a New York corporation). Holdings owns all the
outstanding capital stock of all classes of the Company, and Mr. Bendheim, Mr.
Sussman and trusts for the benefit of Mr. Bendheim's family own the same number
and class of shares of Holdings as they previously owned of the Company, and
having the same designations, relative rights, privileges and limitations as the
Company's shares of such class.

     The HoldCo Notes are collateralized by all of Holdings' assets (now
consisting substantially of all the outstanding capital stock of the Company).
The HoldCo Notes and such security interest are effectively subordinated to all
liabilities, including the Company's and its subsidiaries' trade payables, as
well as the Company's indenture indebtedness.

6. REDEMPTION OF SERIES C PREFERRED STOCK

     In connection with the redemption of the Company's Series C Preferred
Stock, the Company, Palladium Equity Partners II, LP ("Palladium"), PAHC
Holdings and the principal stockholders of PAHC Holdings entered into an
agreement with respect to (i) the redemption price (consisting of $19,600 of
liquidation preference and $6,800 of equity value), (ii) amending the terms of
the post-redemption redemption price adjustment set forth in the certificate of
incorporation of the Company (a) from an amount payable upon occurrence of
certain capital stock transactions determined with respect to the value of the
Company upon the occurrence of such capital stock transaction, to a liquidated
amount of $4,000, payable only after the occurrence of certain capital stock
transactions and the receipt by the current stockholders of the Company, on a
cumulative basis, of an aggregate of $24,000 of dividends and distributions in
respect of such capital stock transactions, and (b) to remove the one year time
period for such adjustment of the redemption price, and (iii) eliminating the
backstop indemnification obligation of up to $4,000 of the Company to Palladium
incurred in connection with the sale by the Company to Palladium in December
2003 of The Prince Manufacturing Company ("PMC"). The excess of the redemption
price over the carrying value of the Series C Preferred Stock and the
elimination of the backstop indemnification obligation have been reflected as
adjustments to stockholder's deficit on the condensed consolidated balance sheet
at March 31, 2005. The Company has determined the fair value of the liability
for the post-redemption redemption price adjustment to be insignificant to the
consolidated financial statements, due to the uncertainty of the ultimate timing
of such payment, if any. Future changes in the fair value of the liability for
the post-redemption redemption price adjustment will be recorded through
earnings in the period in which such change occurs.


                                       12
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

7. PRINCE TRANSACTIONS

     Effective December 26, 2003, the Company completed the divestiture of
substantially all of the business and assets of Prince Quincy, Inc. (f/k/a The
Prince Manufacturing Company ("PMC")), to a company ("Buyer") formed by
Palladium Equity Partners II, LP and certain of its affiliates (the "Palladium
Investors"), and the related reduction of the Company's preferred stock held by
the Palladium Investors (collectively, the "Prince Transactions").

     The divestiture of PMC has not been reflected as a discontinued operation
due to the existence of continuing supply and service agreements.

     On December 29, 2004, the Company and the Buyer reached agreement regarding
the post-closing working capital adjustment, which resulted in a final $227
payment to the Company from the Buyer. The Company reassessed the accruals
relating to the Prince Transactions and adjusted the accruals accordingly. The
adjustments resulted in a net gain of $973 which was recorded as a decrease to
accumulated deficit.

     PMC is included in the Company's Industrial Chemicals segment. The results
of operations of PMC were:

<TABLE>
<CAPTION>
                                NINE MONTHS ENDED
                                  MARCH 31, 2004
                                -----------------
<S>                             <C>
Net sales                            $11,118
Operating income                       2,278
Depreciation and amortization            487
</TABLE>

8. INVENTORIES

     Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) and average methods. Obsolete
and unsaleable inventories are reflected at estimated net realizable value.
Inventory costs include materials, direct labor and manufacturing overhead.
Inventories are comprised of:

<TABLE>
<CAPTION>
                               AS OF
                  -------------------------------
                   MARCH 31, 2005   JUNE 30, 2004
                  ---------------   -------------
<S>               <C>               <C>
Raw materials         $24,207          $16,038
Work-in-process           605            1,468
Finished goods         74,247           61,056
                      -------          -------
Total inventory       $99,059          $78,562
                      =======          =======
</TABLE>

9. INTANGIBLES

     Product intangible cost arising from the acquisition of the medicated feed
additive business of Pfizer, Inc. and the acquisition of the rights to sell
amprolium was $14,931 and $14,925 at March 31, 2005 and June 30, 2004,
respectively, with related accumulated amortization of $4,257 and $3,230 at
March 31, 2005 and June 30, 2004, respectively. Amortization expense was $375
and $313 for the three months ended March 31, 2005 and 2004, respectively, and
$1,121 and $921 for the nine months ended March 31, 2005 and 2004, respectively.


                                       13
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

10. DISCONTINUED OPERATIONS

     WYCHEM:

     On April 29, 2005, the Company sold the shares of Wychem, an indirect
wholly-owned subsidiary, for cash proceeds of $4,750, to an investor group that
included the former head of the Company's Specialty Chemicals Group, who retired
in August 2004, and the Managing Director of Wychem. The Company owned Wychem
through its subsidiaries: Koffolk (1949), Ltd. (Israel) which owned 75% and
Ferro Metal and Chemical Corporation Limited (U.K.) which owned 25%. The Company
anticipates that it will record a gain on the sale of Wychem of approximately
$1,500 in the quarter ending June 30, 2005. Wychem was included in the Company's
All Other segment.

     Operating results and balance sheet items of Wychem were:

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                 NINE MONTHS ENDED
                                      --------------------------------   -------------------------------
                                       MARCH 31, 2005   MARCH 31, 2004   MARCH 31, 2005   MARCH 31, 2004
                                      ---------------   --------------   --------------   --------------
<S>                                   <C>               <C>              <C>              <C>
OPERATING RESULTS:
Net sales                                  $1,487           $1,061           $3,908           $2,945
Cost of goods sold                            924              597            2,590            1,961
Selling, general and administrative
   expenses                                   174              161              511              482
Other expense                                   5                3                6                5
                                           ------           ------           ------           ------
Income before income taxes                    384              300              801              497
Provision for income taxes                    112               83              226              127
                                           ------           ------           ------           ------
Income from operations                     $  272           $  217           $  575           $  370
                                           ======           ======           ======           ======

Depreciation and amortization              $  105           $  105           $  309           $  318
                                           ======           ======           ======           ======
</TABLE>

<TABLE>
<CAPTION>
                                                                AS OF
                                                   ------------------------------
                                                   MARCH 31, 2005   JUNE 30, 2004
                                                   --------------   -------------
<S>                                                <C>              <C>
BALANCE SHEET:
Trade receivables                                      $  704           $  441
Inventories                                             1,271            1,348
Prepaid expenses and other current assets                 175               97
                                                       ------           ------
Current assets from discontinued operations            $2,150           $1,886
                                                       ======           ======
Property, plant & equipment - net                      $3,329           $3,405
                                                       ------           ------
Other assets from discontinued operations              $3,329           $3,405
                                                       ======           ======
Accounts payable                                       $  252           $  208
Accrued expenses and other current liabilities            746              630
                                                       ------           ------
Current liabilities from discontinued operations       $  998           $  838
                                                       ======           ======
</TABLE>


                                       14
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

      MRT AND LA CORNUBIA:

     The Company divested MRT and shutdown La Cornubia during fiscal 2004. These
businesses have been classified as discontinued operations.

      Operating results and gain on sale of MRT were:

<TABLE>
<CAPTION>
                                                     NINE MONTHS ENDED
                                                       MARCH 31, 2004
                                                     -----------------
<S>                                                  <C>
OPERATING RESULTS:
Net sales                                                 $  3,327
Cost of goods sold                                           3,135
Selling, general and administrative expenses                   316
                                                          --------
(Loss) before income taxes                                    (124)
Provision for income taxes                                      --
                                                          --------
(Loss) from operations                                    $   (124)
                                                          ========

GAIN ON SALE:
Current assets                                            $ (5,813)
Property, plant & equipment - net and other assets         (10,703)
Current liabilities                                          2,911
Net proceeds of sale                                        13,836
                                                          --------
Gain on sale                                              $    231
                                                          ========
</TABLE>

     Operating results of La Cornubia were:

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED   NINE MONTHS ENDED
                                                 MARCH 31, 2004      MARCH 31, 2004
                                               ------------------   -----------------
<S>                                            <C>                  <C>
OPERATING RESULTS:
Net sales                                            $4,161               $9,884
Cost of goods sold                                    4,050                9,465
Selling, general and administrative expenses            474                1,262
Other (income) expense                                   68                 (175)
Interest expense                                         22                   64
                                                     ------               ------
(Loss) before income taxes                             (453)                (732)
Provision for income taxes                               18                   18
                                                     ------               ------
(Loss) from operations                               $ (471)              $ (750)
                                                     ======               ======
Depreciation and amortization                        $  101               $  302
                                                     ======               ======
</TABLE>

11. DEBT

     LOANS PAYABLE TO BANKS

     At March 31, 2005, loans payable to banks included $3,913 under the
domestic senior credit facility with Wells Fargo Foothill, Inc. The weighted
average interest rate at March 31, 2005 was 5.77%. At March 31, 2005, the
Company had $13,587 of borrowings available under the working capital facility
that is provided under the domestic senior credit facility. The Company's
Koffolk (Israel) subsidiary also had $34 included in loans payable to banks at
March 31, 2005.


                                       15
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

     As of September 24, 2004, the Company amended its domestic senior credit
facility to: (i) increase the aggregate amount of borrowings available under
such working capital and letter of credit facilities from $27,500 to $32,500;
the amount of aggregate borrowings available under the working capital facility
remained unchanged at $17,500; (ii) amend the EBITDA definition to exclude
charges and expenses related to unsuccessful acquisitions and related financings
in an aggregate amount not to exceed $5,300 for the period beginning January 1,
2004 and ending June 30, 2004; (iii) amend the definition of Additional
Indebtedness to exclude advances under the working capital facility; (iv) amend
the definition of Permitted Investments to allow other investments made during
the period from January 1, 2004 through June 30, 2004 in an aggregate amount not
to exceed $336; and (v) establish EBITDA covenant levels for the periods after
June 30, 2004. The amendment was effective June 30, 2004 for items (i), (ii) and
(iii); effective January 1, 2004 for item (iv); and effective September 24, 2004
for item (v).

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended its domestic senior credit facility to:
(i) amend the EBITDA definition to exclude charges and expenses related to the
sale of the Belgium Plant in an aggregate amount not to exceed $26,800 for
purposes of calculating a certain financial covenant; (ii) amend the Indenture
reserve definition to include scheduled payments of interest due on the
Additional Notes; (iii) amend the maximum aggregate amount of borrowing
available under the working capital facility to permit a temporary increase to
$22,500 and for its reduction to $17,500 on such borrowings being refinanced by
the proceeds of the Additional Notes; (iv) amend the Permitted Investments
definition to include investments in connection with the sale of the Belgium
Plant and transfer of certain equipment, together with other assets and rights
related to the production of virginiamycin, to Phibro Saude Animal International
Ltda, ("PAH Brazil") or in connection with alternative production arrangements;
and (v) provide for the issuance of the Additional Notes and the sale of the
Belgium Plant and related transactions.

     As of March 31, 2005, the Company was in compliance with the financial
covenants of its domestic senior credit facility. The domestic senior credit
facility requires, among other things, the maintenance of certain levels of
trailing consolidated and domestic EBITDA (earnings before interest, taxes,
depreciation and amortization) calculated on a monthly basis, and an
acceleration clause should an event of default (as defined in the agreement)
occur. In addition, there are certain restrictions on additional borrowings,
additional liens on the Company's assets, guarantees, dividend payments,
redemption or purchase of the Company's stock, sale of subsidiaries' stock,
disposition of assets, investments, and mergers and acquisitions.

     The domestic senior credit facility contains a lock-box requirement and a
material adverse change clause should an event of default (as defined in the
agreement) occur. Accordingly, the amounts outstanding have been classified as
short-term and are included in loans payable to banks in the consolidated
balance sheet.

     LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                          AS OF
                                             ------------------------------
                                             MARCH 31, 2005   JUNE 30, 2004
                                             --------------   -------------
<S>                                          <C>              <C>
Senior secured notes due December 1, 2007       $127,491         $105,000
Senior subordinated notes due June 1, 2008        48,029           48,029
Foreign bank loans                                 3,375            6,237
Capitalized lease obligations and other               --              103
                                                --------         --------
                                                 178,895          159,369
Less: current maturities                           2,250            1,351
                                                --------         --------
                                                $176,645         $158,018
                                                ========         ========
</TABLE>

     The Company's Koffolk (Israel) subsidiary has aggregate credit lines of
$10,500. At March 31, 2005, Koffolk (Israel) had $7,091 of borrowings available
under these credit lines.


                                       16
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

12. EMPLOYEE BENEFIT PLANS

     The Company and its domestic subsidiaries maintain noncontributory defined
benefit pension plans for all eligible domestic nonunion employees who meet
certain requirements of age, length of service and hours worked per year. The
Company's Belgium subsidiary maintains a defined contribution and defined
benefit plan for eligible employees.

     Components of net periodic pension expense were:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                NINE MONTHS ENDED
                                                 -------------------------------   -------------------------------
                                                 MARCH 31, 2005   MARCH 31, 2004   MARCH 31, 2005   MARCH 31, 2004
                                                 --------------   --------------   --------------   --------------
<S>                                              <C>              <C>              <C>              <C>
DOMESTIC PENSION EXPENSE
Service cost - benefits earned during the year       $ 291            $ 288            $ 915            $ 971
Interest cost on benefit obligation                    228              217              707              673
Expected return on plan assets                        (218)            (213)            (676)            (633)
Amortization of initial unrecognized
   net transition (asset)                               (1)              --               (3)              (2)
Amortization of prior service costs                    (35)             (35)            (107)            (117)
Amortization of net actuarial loss (gain)               --                2               --               23
Curtailment benefit                                     --               --               --              (64)
                                                     -----            -----            -----            -----
NET PERIODIC PENSION COST - DOMESTIC                 $ 265            $ 259            $ 836            $ 851
                                                     =====            =====            =====            =====
</TABLE>

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                NINE MONTHS ENDED
                                                 -------------------------------   -------------------------------
                                                 MARCH 31, 2005   MARCH 31, 2004   MARCH 31, 2005   MARCH 31, 2004
                                                 --------------   --------------   --------------   --------------
<S>                                              <C>              <C>              <C>              <C>
INTERNATIONAL PENSION EXPENSE
Service cost - benefits earned during the year        $131             $123            $ 367            $ 350
Interest cost on benefit obligation                    105               98              314              280
Expected return on plan assets                         (84)             (79)            (263)            (225)
Amortization of net actuarial loss (gain)                6                6                7               17
                                                      ----             ----            -----            -----
NET PERIODIC PENSION COST - INTERNATIONAL             $158             $148            $ 425            $ 422
                                                      ====             ====            =====            =====
</TABLE>

     The Company has contributed $720 to its domestic pension plans during
fiscal 2005 for its 2004 pension plan year. Beginning in fiscal 2006, the
Company will be required by ERISA regulations to accelerate the funding of its
domestic pension plans. Accordingly, contributions are expected to aggregate
$1,411 during fiscal 2006 for the Company's 2005 and 2006 domestic pension plan
years.

13. CONTINGENCIES

     LITIGATION:

     On or about April 17, 1997, CP Chemicals, Inc., a subsidiary ("CP"), and
the Company were served with a complaint filed by Chevron U.S.A. Inc.
("Chevron") in the United States District Court for the District of New Jersey,
alleging that the operations of CP at its Sewaren plant affected adjoining
property owned by Chevron and alleging that the Company, as the parent of CP, is
also responsible to Chevron. In July 2002, a phased settlement agreement was
reached and a Consent Order entered by the Court. The Consent Order provided for
a period of due diligence investigation of the property owned by Chevron and
upon completion of the review of the results of the investigation, a decision
was to be made whether to opt out of the settlement or proceed. Negotiations
with Chevron regarding its allocation of responsibility and associated costs
under the Consent Order reached an impasse and it became necessary for the
Company and another defendant, Vulcan Materials Company, to opt out of the
settlement on April 21, 2005. It is expected that the litigation will resume.
While the costs and liabilities cannot be estimated with any degree of certainty
at this time, the Company believes that insurance recoveries will be available
to offset most of those costs.


                                       17
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

     The Company's subsidiary, Phibro-Tech, Inc. ("Phibro-Tech"), was named in
1993 as a potentially responsible party ("PRP") in connection with an action
commenced under the Federal Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA") by the United States Environmental Protection
Agency (the "EPA"), involving a former third-party fertilizer manufacturing site
in Jericho, South Carolina. An agreement has been reached under which such
subsidiary agreed to contribute up to $900 of which $635 has been paid as of
March 31, 2005. Some recovery from insurance and other sources is expected but
has not been recorded. The Company also has accrued its best estimate of any
future costs.

     Phibro-Tech has resolved certain alleged technical permit violations with
the California Department of Toxic Substances Control ("DTSC") and has reached
an agreement to pay $425 over a six year period ending October 2008. The annual
payments required under this agreement are not expected to have any material
adverse impact on the Company.

     Phibro-Tech and the DTSC are currently negotiating the settlement of
certain alleged technical permit violations from 2003. A preliminary assessment
of penalties in the amount of $49 has been made. Phibro-Tech, Inc. believes this
amount will be reduced.

     In February 2000, the EPA notified numerous parties of potential liability
for waste disposal at a licensed Casmalia, California disposal site, including a
business, assets of which were originally acquired by a subsidiary in 1984. A
settlement has been reached in this matter and the Company has paid $171 in full
settlement.

     On or about April 5, 2002, the Company was served, as a potentially
responsible party, with an information request from the EPA relating to a
third-party superfund site in Rhode Island. The Company has investigated the
matter, which relates to events in the 1950's and 1960's, and management does
not believe that the Company has any liability in this matter.

     On or about August 13, 2004 the Company was served with a Request for
Information pursuant to Section 104 of CERCLA and Section 3007 of the Resource
Conservation and Recovery Act relating to possible discharges into Turkey Creek
in Sumter, South Carolina. The Company has submitted its response to the Request
for Information and believes that, because its Sumter, South Carolina facility
is distant from Turkey Creek and does not discharge into Turkey Creek, the
likelihood of liability associated with this matter is remote.

     By letter dated February 22, 2005, Phibro-Tech has been advised by the
adjoining property owner of Phibro-Tech's Powder Springs, Georgia property, of a
potential claim for property damage as a result of certain alleged environmental
conditions on Phibro-Tech's Powder Springs property. No specific claim was made
nor was any specific amount alleged. The Company is presently investigating this
matter but does not, at this time, believe there will be any material liability
resulting therefrom.

     The Company and its subsidiaries are party to a number of claims and
lawsuits arising out of the normal course of business including product
liabilities and governmental regulation. Certain of these actions seek damages
in various amounts. In most cases, such claims are covered by insurance. The
Company believes that none of the claims or pending lawsuits, either
individually or in the aggregate, will have a material adverse effect on its
financial position or results of operations.


                                       18
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

     ENVIRONMENTAL REMEDIATION:

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,
generation, treatment, emission, release, discharge and disposal of certain
materials and wastes, the remediation of contaminated soil and groundwater, the
manufacture, sale and use of pesticides and the health and safety of employees.
As such, the nature of the Company's current and former operations and those of
its subsidiaries exposes the Company and its subsidiaries to the risk of claims
with respect to such matters. Under certain circumstances, the Company or any of
its subsidiaries might be required to curtail operations until a particular
problem is remedied. Known costs and expenses under environmental laws
incidental to ongoing operations are generally included within operating
results. Potential costs and expenses may also be incurred in connection with
the repair or upgrade of facilities to meet existing or new requirements under
environmental laws or to investigate or remediate potential or actual
contamination and from time to time the Company establishes reserves for such
contemplated investigation and remediation costs. In many instances, the
ultimate costs under environmental laws and the time period during which such
costs are likely to be incurred are difficult to predict.

     The Company's subsidiaries have, from time to time, implemented procedures
at their facilities designed to respond to obligations to comply with
environmental laws. The Company believes that its operations are currently in
material compliance with such environmental laws, although at various sites its
subsidiaries are engaged in continuing investigation, remediation and/or
monitoring efforts to address contamination associated with their historic
operations.

     The nature of the Company's and its subsidiaries' current and former
operations exposes the Company and its subsidiaries to the risk of claims with
respect to environmental matters and the Company cannot assure it will not incur
material costs and liabilities in connection with such claims. Based upon its
experience to date, the Company believes that the future cost of compliance with
existing environmental laws, and liability for known environmental claims
pursuant to such environmental laws, will not have a material adverse effect on
the Company's financial position.

     Based upon information available, the Company estimates the cost of
litigation proceedings described above and the cost of further investigation and
remediation of identified soil and groundwater problems at operating sites,
closed sites and third-party sites, and closure costs for closed sites to be
approximately $2,756, which is included in current and long-term liabilities in
the March 31, 2005 condensed consolidated balance sheet (approximately $2,933 at
June 30, 2004).

14. GUARANTEES

     As part of the Prince Transactions (as discussed in these notes to
condensed consolidated financial statements), as is normal for such
transactions, the Company has agreed to indemnify the Palladium Investors for
losses arising out of breach of representations, warranties and covenants. The
Company's maximum liability under such indemnification is limited to $15,000.

     The Company established a $1,000 letter of credit escrow through December
2005 to collateralize certain indemnification obligations relating to the Prince
Transactions.


                                       19
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

15. BUSINESS SEGMENTS

     The Company's reportable segments are Animal Health and Nutrition,
Industrial Chemicals, Distribution and All Other. Reportable segments have been
determined primarily on the basis of the nature of products and services and
certain similar operating units have been aggregated. The Company's Animal
Health and Nutrition segment manufactures and markets more than 500 formulations
and concentrations of medicated feed additives and nutritional feed additives
including antibiotics, antibacterials, anticoccidials, anthelmintics, trace
minerals, vitamins, vitamin premixes and other animal health and nutrition
products. The Industrial Chemicals segment manufactures and markets a number of
chemicals for use in the pressure-treated wood, chemical catalyst,
semiconductor, automotive, and aerospace industries. The Distribution segment
markets and distributes a variety of industrial, specialty and fine organic
chemicals and intermediates produced primarily by third parties. The All Other
segment manufactures and markets a variety of specialty custom chemicals and
copper-based fungicides. Intersegment sales and transfers were not significant.
The following segment data includes information only for continuing operations.

<TABLE>
<CAPTION>
                                      ANIMAL
                                    HEALTH &    INDUSTRIAL                    ALL    CORPORATE &
                                    NUTRITION    CHEMICALS   DISTRIBUTION    OTHER      OTHER       TOTAL
                                    ---------   ----------   ------------   ------   -----------   -------
<S>                                 <C>         <C>          <C>            <C>      <C>           <C>
THREE MONTHS ENDED MARCH 31, 2005
Net sales                            $69,005      $8,871        $7,838      $4,541     $    --     $90,255
Operating income (loss)                3,420         957           895         414      (4,820)        866
Depreciation and amortization          5,303         374             6          --         929       6,612
</TABLE>

     The Animal Health and Nutrition segment includes Belgium Plant Transaction
costs of $1,277 of severance expense and $3,095 of depreciation expense

<TABLE>
<CAPTION>
                                      ANIMAL
                                    HEALTH &    INDUSTRIAL                    ALL    CORPORATE &
                                    NUTRITION    CHEMICALS   DISTRIBUTION    OTHER      OTHER       TOTAL
                                    ---------   ----------   ------------   ------   -----------   -------
<S>                                 <C>         <C>          <C>            <C>      <C>           <C>
THREE MONTHS ENDED MARCH 31, 2004
Net sales                            $64,819      $10,000       $7,916      $3,241     $    --     $85,976
Operating income (loss)                8,370        1,136          789         254      (3,823)      6,726
Depreciation and amortization          2,086          403            3          --         660       3,152
</TABLE>

<TABLE>
<CAPTION>
                                      ANIMAL
                                    HEALTH &    INDUSTRIAL                    ALL     CORPORATE &
                                    NUTRITION    CHEMICALS   DISTRIBUTION    OTHER       OTHER        TOTAL
                                    ---------   ----------   ------------   -------   -----------   --------
<S>                                 <C>         <C>          <C>            <C>       <C>           <C>
NINE MONTHS ENDED MARCH 31, 2005
Net sales                            $205,519     $24,950       $23,603     $15,097    $     --     $269,169
Operating income/(loss)                 9,715       2,385         2,555       1,156     (13,225)       2,586
Depreciation and amortization          10,203       1,190            14          --       2,309       13,716
</TABLE>

     The Animal Health and Nutrition segment includes Belgium Plant Transaction
costs of $10,280 of severance expense and $3,628 of depreciation expense

<TABLE>
<CAPTION>
                                      ANIMAL
                                    HEALTH &    INDUSTRIAL                    ALL     CORPORATE &
                                    NUTRITION    CHEMICALS   DISTRIBUTION    OTHER       OTHER        TOTAL
                                    ---------   ----------   ------------   -------   -----------   --------
<S>                                 <C>         <C>          <C>            <C>       <C>           <C>
NINE MONTHS ENDED MARCH 31, 2004
Net sales                            $193,347     $33,661       $23,511     $11,063    $     --     $261,582
Operating income/(loss)                22,925       2,736         2,322       1,381     (11,737)      17,627
Depreciation and amortization           6,174       1,691            10          --       1,608        9,483
</TABLE>

<TABLE>
<CAPTION>
                                      ANIMAL
                                    HEALTH &    INDUSTRIAL                    ALL    CORPORATE &
                                    NUTRITION    CHEMICALS   DISTRIBUTION    OTHER      OTHER        TOTAL
                                    ---------   ----------   ------------   ------   -----------   --------
<S>                                 <C>         <C>          <C>            <C>      <C>           <C>
IDENTIFIABLE ASSETS OF CONTINUING
   OPERATIONS
At March 31, 2005                    $198,962     $24,940       $7,356       $730      $18,704     $250,692
At June 30, 2004                      185,601      26,146        7,715        405       16,211      236,078
</TABLE>


                                       20
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

16.  CONSOLIDATING FINANCIAL STATEMENTS

     The units of Senior Secured Notes due 2007, consisting of U.S. Notes issued
by the Parent Issuer and Dutch Notes issued by the Dutch Issuer, are guaranteed
by certain subsidiaries. The Parent Issuer and its U.S. subsidiaries ("U.S.
Guarantor Subsidiaries"), excluding PMC, Prince MFG, LLC and MRT (the
"Unrestricted Subsidiaries", as defined in the Indenture), fully and
unconditionally guarantee all of the Senior Secured Notes on a joint and several
basis. In addition, the Dutch Issuer's subsidiaries, presently consisting of
Phibro Animal Health SA (the "Belgium Guarantor"), fully and unconditionally
guarantee the Dutch Notes. The Dutch Issuer and the Belgium Guarantor do not
guarantee the U.S. Notes. Other foreign subsidiaries ("Non-Guarantor
Subsidiaries") do not presently guarantee the Senior Secured Notes. The U.S.
Guarantor Subsidiaries include all domestic subsidiaries of the Parent Issuer
other than the Unrestricted Subsidiaries and include: CP Chemicals, Inc.;
Phibro-Tech, Inc.; Prince Agriproducts, Inc.; Phibrochem, Inc.; Phibro
Chemicals, Inc.; Western Magnesium Corp.; Phibro Animal Health Holdings, Inc.;
and Phibro Animal Health U.S., Inc.

     The Senior Subordinated Notes due 2008, issued by the Parent Issuer, are
guaranteed by certain subsidiaries. The Parent Issuer's U.S. subsidiaries,
including the U.S. Guarantor Subsidiaries and the Unrestricted Subsidiaries,
fully and unconditionally guarantee the Senior Subordinated Notes on a joint and
several basis. The Dutch Issuer, Belgium Guarantor and Non-Guarantor
Subsidiaries do not presently guarantee the Senior Subordinated Notes. The U.S.
Guarantor Subsidiaries and Unrestricted Subsidiaries include all domestic
subsidiaries of the Parent Issuer including: CP Chemicals, Inc.; Phibro-Tech,
Inc.; Prince Agriproducts, Inc.; PMC; Prince MFG, LLC; MRT (until divested);
Phibrochem, Inc.; Phibro Chemicals, Inc.; Western Magnesium Corp.; Phibro Animal
Health Holdings, Inc.; and Phibro Animal Health U.S., Inc.

     The following consolidating financial data summarizes the assets,
liabilities and results of operations and cash flows of the Parent Issuer,
Unrestricted Subsidiaries, U.S. Guarantor Subsidiaries, Dutch Issuer, Belgium
Guarantor and Non-Guarantor Subsidiaries. The Unrestricted Subsidiaries, U.S.
Guarantor Subsidiaries, Dutch Issuer, Belgium Guarantor and Non-Guarantor
Subsidiaries are directly or indirectly wholly owned as to voting stock by the
Company.

     Investments in subsidiaries are accounted for by the Parent Issuer using
the equity method. Income tax expense (benefit) is allocated among the
consolidating entities based upon taxable income (loss) by jurisdiction within
each group. The principal consolidation adjustments are to eliminate investments
in subsidiaries and intercompany balances and transactions.


                                       21
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

                      CONDENSED CONSOLIDATING BALANCE SHEET
                              AS OF MARCH 31, 2005

<TABLE>
<CAPTION>
                                                  Parent    Unrestricted   U.S. Guarantor    Dutch
                                                  Issuer    Subsidiaries    Subsidiaries     Issuer
                                                 --------   ------------   --------------   --------
<S>                                              <C>        <C>            <C>              <C>
                    ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                     $     67        $--          $    985      $     16
   Trade receivables                                3,054         --            25,115            --
   Other receivables                                  628         --             1,190            --
   Inventory                                        2,422         --            35,485            --
   Prepaid expenses and other                       1,281         --               575            --
   Current assets from discontinued operations         --         --                --            --
                                                 --------        ---          --------      --------
      TOTAL CURRENT ASSETS                          7,452         --            63,350            16
                                                 --------        ---          --------      --------

Property, plant & equipment, net                      920         --            13,191            --

Intangibles                                            --         --             3,933            --
Investment in subsidiaries                        103,603         --                --        (8,355)
Intercompany                                       12,163         --            92,602        30,308
Other assets                                       14,683         --             1,108            --
Other assets from discontinued operations              --         --                --            --
                                                 --------        ---          --------      --------
                                                 $138,821        $--          $174,184      $ 21,969
                                                 ========        ===          ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Cash overdraft                                $     --        $--          $  2,821      $     --
   Loan payable to banks                            3,913         --                --            --
   Current portion of long-term debt                   --         --                --            --
   Accounts payable                                 1,324         --            19,881            --
   Accrued expenses and other                      12,903         --             9,192           866
   Current liabilities from
      discontinued operations                          --         --                --            --
                                                 --------        ---          --------      --------
      TOTAL CURRENT LIABILITIES                    18,140         --            31,894           866
                                                 --------        ---          --------      --------

Long-term debt                                    151,236         --                --        24,284
Intercompany debt                                      --         --            27,191         5,044
Other liabilities                                   9,525         --             5,415            --
                                                 --------        ---          --------      --------
      TOTAL LIABILITIES                           178,901         --            64,500        30,194
                                                 --------        ---          --------      --------

STOCKHOLDERS' EQUITY (DEFICIT):
   Series A preferred stock                           521         --                --            --
   Common stock                                         2         --                33            --
   Paid-in capital                                 27,260         --           108,383            21
   Retained earnings (accumulated deficit)        (68,010)        --             1,259       (14,274)
   Accumulated other comprehensive
      income (loss):
      Gain on derivative instruments                  304         --               304            --
      Cumulative currency translation
         adjustment                                  (157)        --              (295)        6,028
                                                 --------        ---          --------      --------
      TOTAL STOCKHOLDERS' EQUITY (DEFICIT)        (40,080)        --           109,684        (8,225)
                                                 --------        ---          --------      --------
                                                 $138,821        $--          $174,184      $ 21,969
                                                 ========        ===          ========      ========

<CAPTION>
                                                  Belgium    Non-Guarantor   Consolidation   Consolidated
                                                 Guarantor   Subsidiaries     Adjustments       Balance
                                                 ---------   -------------   -------------   ------------
<S>                                              <C>         <C>             <C>             <C>
                    ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                     $    393      $  5,944        $      --       $  7,405
   Trade receivables                                3,344        21,691               --         53,204
   Other receivables                                1,321         1,187               --          4,326
   Inventory                                       34,663        26,489                          99,059
   Prepaid expenses and other                       1,115         3,670               --          6,641
   Current assets from discontinued operations         --         2,150                           2,150
                                                 --------      --------        ---------       --------
      TOTAL CURRENT ASSETS                         40,836        61,131               --        172,785
                                                 --------      --------        ---------       --------

Property, plant & equipment, net                   13,461        24,948               --         52,520

Intangibles                                         1,496         5,245               --         10,674
Investment in subsidiaries                             --            --          (95,248)            --
Intercompany                                       (3,773)      (15,363)        (115,937)            --
Other assets                                           --         1,072               --         16,863
Other assets from discontinued operations              --         3,329                           3,329
                                                 --------      --------        ---------       --------
                                                 $ 52,020      $ 80,362        $(211,185)      $256,171
                                                 ========      ========        =========       ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Cash overdraft                                $     --      $     --        $      --       $  2,821
   Loan payable to banks                               --            34               --          3,947
   Current portion of long-term debt                   --         2,250               --          2,250
   Accounts payable                                 2,252        10,497               --         33,954
   Accrued expenses and other                      22,154        10,681                          55,796
   Current liabilities from
      discontinued operations                          --           998                             998
                                                 --------      --------        ---------       --------
      TOTAL CURRENT LIABILITIES                    24,406        24,460               --         99,766
                                                 --------      --------        ---------       --------

Long-term debt                                         --         1,125               --        176,645
Intercompany debt                                  34,916        48,786         (115,937)            --
Other liabilities                                   1,053         3,847               --         19,840
                                                 --------      --------        ---------       --------
      TOTAL LIABILITIES                            60,375        78,218         (115,937)       296,251
                                                 --------      --------        ---------       --------

STOCKHOLDERS' EQUITY (DEFICIT):
   Series A preferred stock                            --            --               --            521
   Common stock                                        --            --              (33)             2
   Paid-in capital                                     52         1,537         (109,993)        27,260
   Retained earnings (accumulated deficit)        (14,435)        6,496           20,954        (68,010)
   Accumulated other comprehensive
      income (loss):
      Gain on derivative instruments                   --            --             (304)           304
      Cumulative currency translation
         adjustment                                 6,028        (5,889)          (5,872)          (157)
                                                 --------      --------        ---------       --------
      TOTAL STOCKHOLDERS' EQUITY (DEFICIT)         (8,355)        2,144          (95,248)       (40,080)
                                                 --------      --------        ---------       --------
                                                 $ 52,020      $ 80,362        $(211,185)      $256,171
                                                 ========      ========        =========       ========
</TABLE>


                                       22
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2005

<TABLE>
<CAPTION>
                                                  Parent    Unrestricted   U.S. Guarantor    Dutch
                                                  Issuer    Subsidiaries    Subsidiaries     Issuer
                                                 --------   ------------   --------------   --------
<S>                                              <C>        <C>            <C>              <C>
NET SALES                                        $ 6,169         $--           $55,191       $    --

NET SALES - INTERCOMPANY                              44          --                --            --

COST OF GOODS SOLD (includes Belgium Plant
   Transactions costs of $4,372)                   4,724          --            40,903            --
                                                 -------         ---           -------       -------
   GROSS PROFIT                                    1,489          --            14,288            --

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES       5,610          --             7,705             8
                                                 -------         ---           -------       -------
   OPERATING INCOME (LOSS)                        (4,121)         --             6,583            (8)

OTHER:
   Interest expense                                4,913          --                --           652
   Interest (income)                                  (3)         --                --            --
   Other (income) expense, net                        --          --               587            --
   Intercompany interest and other                (6,847)         --             5,176          (797)
   (Profit) loss relating to subsidiaries          3,492          --                --         3,505
                                                 -------         ---           -------       -------
   INCOME (LOSS) FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                         (5,676)         --               820        (3,368)

PROVISION (BENEFIT) FOR INCOME TAXES                 180          --               171            --
                                                 -------         ---           -------       -------
   INCOME (LOSS) FROM CONTINUING OPERATIONS       (5,856)         --               649        (3,368)

DISCONTINUED OPERATIONS:
   Income relating to discontinued operations        272          --                --            --
   Income from discontinued operations (net of
      income taxes)                                   --          --                --            --
                                                 -------         ---           -------       -------
      NET INCOME (LOSS)                          $(5,584)        $--           $   649       $(3,368)
                                                 =======         ===           =======       =======

<CAPTION>
                                                  Belgium    Non-Guarantor   Consolidation   Consolidated
                                                 Guarantor   Subsidiaries     Adjustments       Balance
                                                 ---------   -------------   -------------   ------------
<S>                                              <C>         <C>             <C>             <C>
NET SALES                                         $ 3,328       $25,567        $     --        $90,255

NET SALES - INTERCOMPANY                            9,787         2,115         (11,946)            --

COST OF GOODS SOLD (includes Belgium Plant
   Transactions costs of $4,372)                   14,492        23,331         (11,946)        71,504
                                                  -------       -------        --------        -------
   GROSS PROFIT                                    (1,377)        4,351              --         18,751

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          736         3,826              --         17,885
                                                  -------       -------        --------        -------
   OPERATING INCOME (LOSS)                         (2,113)          525              --            866

OTHER:
   Interest expense                                    15           311              --          5,891
   Interest (income)                                   --           (16)             --            (19)
   Other (income) expense, net                        301          (811)             --             77
   Intercompany interest and other                  1,095         1,373              --             --
   (Profit) loss relating to subsidiaries              --            --          (6,997)            --
                                                  -------       -------        --------        -------
   INCOME (LOSS) FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                          (3,524)         (332)          6,997         (5,083)

PROVISION (BENEFIT) FOR INCOME TAXES                  (19)          441              --            773
                                                  -------       -------        --------        -------
   INCOME (LOSS) FROM CONTINUING OPERATIONS        (3,505)         (773)          6,997         (5,856)

DISCONTINUED OPERATIONS:
   Income relating to discontinued operations          --            --            (272)            --
   Income from discontinued operations (net of
      income taxes)                                    --           272              --            272
                                                  -------       -------        --------        -------
      NET INCOME (LOSS)                           $(3,505)      $  (501)       $  6,725        $(5,584)
                                                  =======       =======        ========        =======
</TABLE>


                                       23
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (IN THOUSANDS)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2005

<TABLE>
<CAPTION>
                                                           U.S.
                                Parent   Unrestricted    Guarantor     Dutch    Belgium   Non-Guarantor  Consolidation  Consolidated
                                Issuer   Subsidiaries  Subsidiaries   Issuer   Guarantor   Subsidiaries   Adjustments      Balance
                               --------  ------------  ------------  --------  ---------  -------------  -------------  ------------
<S>                            <C>       <C>           <C>           <C>       <C>        <C>            <C>            <C>
NET SALES                      $ 18,345      $--         $169,657    $     --   $  7,556    $ 73,611       $     --       $269,169
NET SALES - INTERCOMPANY            137       --              131          --     20,447       5,532        (26,247)            --
COST OF GOODS SOLD (includes
   Belgium Plant Transactions
   costs of $13,908)             14,378       --          125,895          --     35,276      65,380        (26,247)       214,682
                               --------      ---         --------    --------   --------    --------       --------       --------
   GROSS PROFIT                   4,104       --           43,893          --     (7,273)     13,763             --         54,487

SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES       15,828       --           22,054          14      2,102      11,903             --         51,901
                               --------      ---         --------    --------   --------    --------       --------       --------
   OPERATING INCOME (LOSS)      (11,724)      --           21,839         (14)    (9,375)      1,860             --          2,586

OTHER:
   Interest expense              13,850       --               --       1,951         38         687             --         16,526
   Interest (income)                 (5)      --               (4)         --         --         (68)            --            (77)
   Other (income) expense,
   net                                4       --              213          --         90        (998)            --           (691)
   Intercompany interest and
      other                     (20,781)      --           15,562      (2,113)     2,976       4,356             --             --
   (Profit) loss relating to
      subsidiaries                8,385       --               --      11,009         --          --        (19,394)            --
                               --------      ---         --------    --------   --------    --------       --------       --------

   INCOME (LOSS) FROM
      CONTINUING OPERATIONS
      BEFORE INCOME TAXES       (13,177)      --            6,068     (10,861)   (12,479)     (2,117)        19,394        (13,172)

PROVISION (BENEFIT) FOR
   INCOME TAXES                     694       --              470          --     (1,470)      1,005             --            699
                               --------      ---         --------    --------   --------    --------       --------       --------

   INCOME (LOSS) FROM
      CONTINUING OPERATIONS     (13,871)      --            5,598     (10,861)   (11,009)     (3,122)        19,394        (13,871)

DISCONTINUED OPERATIONS:
   Income relating to
      discontinued operations       575       --               --          --         --          --           (575)            --
   Income from discontinued
      operations (net of
      income taxes)                  --       --               --          --         --         575             --            575
                               --------      ---         --------    --------   --------    --------       --------       --------
      NET INCOME (LOSS)        $(13,296)     $--         $  5,598    $(10,861)  $(11,009)   $ (2,547)      $ 18,819       $(13,296)
                               ========      ===         ========    ========   ========    ========       ========       ========
</TABLE>


                                       24
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (IN THOUSANDS)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2005

<TABLE>
<CAPTION>
                                                           U.S.
                                Parent   Unrestricted    Guarantor     Dutch    Belgium   Non-Guarantor  Consolidation  Consolidated
                                Issuer   Subsidiaries  Subsidiaries   Issuer   Guarantor   Subsidiaries   Adjustments      Balance
                               --------  ------------  ------------  --------  ---------  -------------  -------------  ------------
<S>                            <C>       <C>           <C>           <C>       <C>        <C>            <C>            <C>
OPERATING ACTIVITIES:
   Net income (loss)           $(13,296)     $ --        $ 5,598     $(10,861)  $(11,009)    $(2,547)      $ 18,819       $(13,296)
   Adjustment for
      discontinued operations      (575)       --             --           --         --        (575)           575           (575)
                               --------      ----        -------     --------   --------     -------       --------       --------
   Income (loss) from
      continuing operations     (13,871)       --          5,598      (10,861)   (11,009)     (3,122)        19,394        (13,871)

   Adjustments to reconcile
      income (loss) from
      continuing operations
      to net cash provided
      (used) by operating
      activities:
   Depreciation and
      amortization (includes
      accelerated
      depreciation from the
      Belgium Plant
      Transactions of $3,628)     2,309        --          2,113           --      5,880       3,414             --         13,716
   Deferred income taxes             --        --             --           --         --        (202)            --           (202)
   Net gain from sales of
      assets                         --        --           (777)          --         --         (12)            --           (789)
   Effects of changes in
      foreign currency               --        --           (554)          --        (87)       (119)            --           (760)
   Other                            289        --             37           --         --         104             --            430
   Changes in operating
      assets and liabilities:
      Accounts receivable          (392)       --          2,066           --       (575)      3,361             --          4,460
      Inventory                    (428)       --          2,772           --     (9,857)     (8,865)            --        (16,378)
      Prepaid expenses and
         other                    1,656        --            631           --     (1,277)        637             --          1,647
      Other assets                   (2)       --           (241)          --         --        (375)            --           (618)
      Intercompany                2,274         5         (5,707)       5,926      7,605       9,291        (19,394)            --
      Accounts payable           (1,610)        6         (8,579)          --       (152)     (1,043)            --        (11,378)
      Accrued expenses and
         other                    4,707        (1)         1,286          650        237       2,241             --          9,120
      Accrued costs of non-
         completed
         transaction             (3,970)       --             --           --         --          --             --         (3,970)
      Accrued costs of the
         Belgium Plant
         Transactions                --        --             --           --     10,280          --             --         10,280
   Cash provided by
      discontinued operations        --        --             --           --         --         808             --            808
                               --------      ----        -------     --------   --------     -------       --------       --------
      NET CASH PROVIDED
         (USED) BY OPERATING
         ACTIVITIES              (9,038)       10         (1,355)      (4,285)     1,045       6,118             --         (7,505)
                               --------      ----        -------     --------   --------     -------       --------       --------

INVESTING ACTIVITIES:
   Capital expenditures            (909)       --         (1,626)          --       (726)     (1,837)            --         (5,098)
   Proceeds from sale of
      assets                         --        --          1,320           --         --          33             --          1,353
   Other investing                 (119)       --             --           --       (154)        154             --           (119)
   Discontinued operations           --        --             --           --         --         (93)            --            (93)
                               --------      ----        -------     --------   --------     -------       --------       --------
      NET CASH (USED) BY
      INVESTING ACTIVITIES       (1,028)       --           (306)          --       (880)     (1,743)            --         (3,957)
                               --------      ----        -------     --------   --------     -------       --------       --------

FINANCING ACTIVITIES:
   Net increase (decrease) in
      cash overdraft                 --       (10)         1,940           --         --          --             --          1,930
   Net increase (decrease) in
      short-term debt            (7,083)       --             --           --         --          34             --         (7,049)
   Proceeds from long-term
      debt                       19,107        --             --        4,284         --         901             --         24,292
   Proceeds from capital
      contribution from
      PAHC Holdings
      Corporation                26,400        --             --           --         --          --             --         26,400
   Redemption of Series C
      preferred stock           (26,400)       --             --           --         --          --             --        (26,400)
   Payments of long-term debt        --        --           (103)          --         --      (3,810)            --         (3,913)
   Debt refinancing costs        (2,027)       --             --           --         --          --             --         (2,027)
                               --------      ----        -------     --------   --------     -------       --------       --------
      NET CASH PROVIDED
         (USED) BY FINANCING
         ACTIVITIES               9,997       (10)         1,837        4,284         --      (2,875)            --         13,233
                               --------      ----        -------     --------   --------     -------       --------       --------
EFFECT OF EXCHANGE RATE
   CHANGES ON CASH                   --        --              8           --         16          42                            66
                               --------      ----        -------     --------   --------     -------       --------       --------
NET INCREASE (DECREASE) IN
   CASH AND CASH EQUIVALENTS        (69)       --            184           (1)       181       1,542             --          1,837

CASH AND CASH EQUIVALENTS
   at beginning of period           136        --            801           17        212       4,402                         5,568
                               --------      ----        -------     --------   --------     -------       --------       --------
CASH AND CASH EQUIVALENTS
   at end of period            $     67      $ --        $   985     $     16   $    393     $ 5,944       $     --       $  7,405
                               ========      ====        =======     ========   ========     =======       ========       ========
</TABLE>


                                       25
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

                      CONDENSED CONSOLIDATING BALANCE SHEET
                               AS OF JUNE 30, 2004

<TABLE>
<CAPTION>
                                                             U.S.                               Non-
                                  Parent   Unrestricted    Guarantor    Dutch    Belgium     Guarantor   Consolidation  Consolidated
                                  Issuer   Subsidiaries  Subsidiaries  Issuer   Guarantor  Subsidiaries   Adjustments      Balance
                                 --------  ------------  ------------  ------   ---------  ------------  -------------  ------------
<S>                              <C>       <C>           <C>           <C>      <C>        <C>           <C>            <C>
                                                               ASSETS
CURRENT ASSETS:
   Cash and cash equivalents     $    136     $    --      $    801    $    17    $   212    $  4,402      $      --      $  5,568
   Trade receivables                2,670          --        26,996         --      2,592      24,959             --        57,217
   Other receivables                  317         414         1,195         --         72         768             --         2,766
   Inventory                        1,994          --        37,890         --     23,159      15,519                       78,562
   Prepaid expenses and other       3,195         110           565         --      1,018       3,703             --         8,591
   Current assets from
      discontinued operations          --          --            --         --         --       1,886             --         1,886
                                 --------     -------      --------    -------    -------    --------      ---------      --------
         TOTAL CURRENT ASSETS       8,312         524        67,447         17     27,053      51,237             --       154,590
                                 --------     -------      --------    -------    -------    --------      ---------      --------
Property, plant & equipment,
   net                                105          --        13,730         --     17,321      24,225             --        55,381
Intangibles                            --          --         4,252         --      1,569       5,874             --        11,695
Investment in subsidiaries        125,355          --            --      1,604         --          --       (126,959)           --
Intercompany                      (14,995)     20,995        60,030     20,181      1,630     (12,497)       (75,344)           --
Other assets                       14,506          --         1,056         --         --         736             --        16,298
Other assets from discontinued
   operations                          --          --            --         --         --       3,405             --         3,405
                                 --------     -------      --------    -------    -------    --------      ---------      --------
                                 $133,283     $21,519      $146,515    $21,802    $47,573    $ 72,980      $(202,303)     $241,369
                                 ========     =======      ========    =======    =======    ========      =========      ========

                                           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Cash overdraft                $     --     $    10      $    881    $    --    $    --    $     --      $      --      $    891
   Loan payable to banks           10,996          --            --         --         --          --             --        10,996
   Current portion of long-term
      debt                             --          --           101         --         --       1,250             --         1,351
   Accounts payable                 4,734           9        28,434         --      2,258      11,329             --        46,764
   Accrued expenses and other      11,857         159         8,306        216     12,022       6,820                       39,380
   Current liabilities from
      discontinued operations          --          --            --         --         --         838             --           838
                                 --------     -------      --------    -------    -------    --------      ---------      --------
         TOTAL CURRENT
            LIABILITIES            27,587         178        37,722        216     14,280      20,237             --       100,220
                                 --------     -------      --------    -------    -------    --------      ---------      --------
Long-term debt                    133,029          --             2     20,000         --       4,987             --       158,018
Intercompany debt                      --          --            --         --     30,553      44,791        (75,344)           --
Other liabilities                  11,822          --         4,897         --      1,136       4,431             --        22,286
                                 --------     -------      --------    -------    -------    --------      ---------      --------
         TOTAL LIABILITIES        172,438         178        42,621     20,216     45,969      74,446        (75,344)      280,524
                                 --------     -------      --------    -------    -------    --------      ---------      --------
REDEEMABLE SECURITIES:
   Series C preferred stock        24,678          --            --         --         --          --             --        24,678
                                 --------     -------      --------    -------    -------    --------      ---------      --------

STOCKHOLDERS' EQUITY (DEFICIT):
   Series A preferred stock           521          --            --         --         --          --             --           521
   Common stock                         2           1            33         --         --          --            (34)            2
   Paid-in capital                    860          --       108,383         21         52       1,537       (109,993)          860
   Retained earnings
      (accumulated deficit)       (57,964)     21,340        (4,339)    (2,744)    (2,757)      8,374        (19,874)      (57,964)
   Accumulated other
      comprehensive income
      (loss):                                                                                                                   --
      Gain on derivative
         instruments                    9          --             9         --         --          --             (9)            9
      Cumulative currency
         translation adjustment    (7,261)         --          (192)     4,309      4,309     (11,377)         2,951        (7,261)
                                 --------     -------      --------    -------    -------    --------      ---------      --------
         TOTAL STOCKHOLDERS'
            EQUITY (DEFICIT)      (63,833)     21,341       103,894      1,586      1,604      (1,466)      (126,959)      (63,833)
                                 --------     -------      --------    -------    -------    --------      ---------      --------
                                 $133,283     $21,519      $146,515    $21,802    $47,573    $ 72,980      $(202,303)     $241,369
                                 ========     =======      ========    =======    =======    ========      =========      ========
</TABLE>


                                       26
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2004

<TABLE>
<CAPTION>
                                                             U.S.                              Non-
                                  Parent   Unrestricted    Guarantor    Dutch   Belgium     Guarantor   Consolidation  Consolidated
                                  Issuer   Subsidiaries  Subsidiaries  Issuer  Guarantor  Subsidiaries   Adjustments      Balance
                                 --------  ------------  ------------  ------  ---------  ------------  -------------  ------------
<S>                              <C>       <C>           <C>           <C>     <C>        <C>           <C>            <C>
NET SALES                        $ 5,331        $--        $55,374     $  --    $1,162      $24,109        $    --       $85,976
NET SALES - INTERCOMPANY              16         --             32        --     7,534          418         (8,000)           --
COST OF GOODS SOLD                 4,176         --         40,301        --     6,461       20,308         (8,000)       63,246
                                 -------        ---        -------     -----    ------      -------        -------       -------
   GROSS PROFIT                    1,171         --         15,105        --     2,235        4,219             --        22,730
SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES         4,868         --          6,476         2       776        3,882             --        16,004
                                 -------        ---        -------     -----    ------      -------        -------       -------
   OPERATING INCOME (LOSS)        (3,697)        --          8,629        (2)    1,459          337             --         6,726
OTHER:
   Interest expense                4,179         --             --       650        60           29             --         4,918
   Interest (income)                  (1)        --             --        --        --          (42)            --           (43)
   Other (income) expense, net       112         --           (350)       --       118          (14)            --          (134)
   Net (gain) on extinguishment
      of debt                         --         --             --        --        --           --             --            --
   Intercompany interest and
      other                       (4,407)        --          2,345      (657)      943        1,776             --            --
   (Profit) loss relating to
      subsidiaries                (3,439)        --             --         2        --           --          3,437            --
                                 -------        ---        -------     -----    ------      -------        -------       -------
   INCOME (LOSS) FROM
      CONTINUING OPERATIONS
      BEFORE INCOME TAXES           (141)        --          6,634         3       338       (1,412)        (3,437)        1,985
PROVISION FOR
   INCOME TAXES                       --         --            211        --       340        1,575             --         2,126
                                 -------        ---        -------     -----    ------      -------        -------       -------
   INCOME (LOSS) FROM
      CONTINUING OPERATIONS         (141)        --          6,423         3        (2)      (2,987)        (3,437)         (141)
DISCONTINUED OPERATIONS:
   (Loss) relating to
      discontinued operations       (254)        --             --        --        --           --            254            --
   (Loss) from discontinued
      operations (net of income
      taxes)                          --                        --        --        --         (254)            --          (254)
                                 -------        ---        -------     -----    ------      -------        -------       -------
      NET INCOME (LOSS)          $  (395)       $--        $ 6,423     $   3    $   (2)     $(3,241)       $(3,183)      $  (395)
                                 =======        ===        =======     =====    ======      =======        =======       =======
</TABLE>


                                       27
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2004

<TABLE>
<CAPTION>
                                                         U.S.
                              Parent   Unrestricted    Guarantor    Dutch    Belgium   Non-Guarantors  Consolidation  Consolidated
                              Issuer   Subsidiaries  Subsidiaries   Issuer  Guarantor   Subsidiaries    Adjustments      Balance
                             --------  ------------  ------------  -------  ---------  --------------  -------------  ------------
<S>                          <C>       <C>           <C>           <C>      <C>        <C>             <C>            <C>
NET SALES                    $ 16,453    $11,118       $158,070    $    --   $ 3,402      $72,539        $     --       $261,582
NET SALES - INTERCOMPANY          113      2,598            425         --    20,530        2,593         (26,259)            --
COST OF GOODS SOLD             12,995     10,139        117,520         --    20,432       60,836         (26,259)       195,663
                             --------    -------       --------    -------   -------      -------        --------       --------
   GROSS PROFIT                 3,571      3,577         40,975         --     3,500       14,296              --         65,919
SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES     14,936      1,299         18,851          4     1,860       11,342                         48,292
                             --------    -------       --------    -------   -------      -------                       --------
   OPERATING INCOME (LOSS)    (11,365)     2,278         22,124         (4)    1,640        2,954              --         17,627
OTHER:
   Interest expense            11,920         18             --      1,156        79          227                         13,400
   Interest (income)               (4)        --             --         --        --         (113)                          (117)
   Other (income) expense,
      net                         640         --           (626)        --      (294)        (314)                          (594)
   Net (gain) on
      extinguishment
      of debt                 (23,226)        --             --         --        --           --                        (23,226)
   Intercompany interest
      and other               (16,152)     1,892          7,833     (1,167)    2,389        5,205                             --
   (Profit) loss relating
      to subsidiaries          (8,913)        --             --        534        --           --           8,379             --
                             --------    -------       --------    -------   -------      -------        --------       --------
   INCOME (LOSS) FROM
      CONTINUING OPERATIONS
      BEFORE INCOME TAXES      24,370        368         14,917       (527)     (534)      (2,051)         (8,379)        28,164
PROVISION FOR
   INCOME TAXES                 1,951         96            883         --        --        2,815                          5,745
                             --------    -------       --------    -------   -------      -------                       --------
   INCOME (LOSS) FROM
      CONTINUING OPERATIONS    22,419        272         14,034       (527)     (534)      (4,866)         (8,379)        22,419
DISCONTINUED OPERATIONS:
   (Loss) relating to
      discontinued
      operations                 (504)        --             --         --        --           --             504             --
   (Loss) from discontinued
      operations (net of
      income taxes)                --       (124)            --         --        --         (380)                          (504)
   Gain on disposal of
      discontinued
      operations (net of
      income taxes)               231         --             --         --        --           --                            231
                             --------    -------       --------    -------   -------      -------        --------       --------
      NET INCOME (LOSS)      $ 22,146    $   148       $ 14,034    $  (527)  $  (534)     $(5,246)       $ (7,875)      $ 22,146
                             ========    =======       ========    =======   =======      =======        ========       ========
</TABLE>


                                       28
<PAGE>
                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 (IN THOUSANDS)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2004

<TABLE>
<CAPTION>
                                                           U.S.
                                Parent   Unrestricted    Guarantor     Dutch    Belgium   Non-Guarantor  Consolidation  Consolidated
                                Issuer   Subsidiaries  Subsidiaries   Issuer   Guarantor   Subsidiaries   Adjustments      Balance
                               --------  ------------  ------------  --------  ---------  -------------  -------------  ------------
<S>                            <C>       <C>           <C>           <C>       <C>        <C>            <C>            <C>
OPERATING ACTIVITIES:
   Net income (loss)           $ 22,146    $    148      $ 14,034    $   (527)  $  (534)     $(5,246)       $(7,875)      $ 22,146
   Adjustment for
      discontinued operations       273         124            --          --        --          380           (504)           273
                               --------    --------      --------    --------   -------      -------        -------       --------
   Income (loss) from
      continuing operations      22,419         272        14,034        (527)     (534)      (4,866)        (8,379)        22,419
   Adjustments to reconcile
      income (loss) from
      continuing operations
      to net cash provided
      (used) by operating
      activities:
      Depreciation and
         amortization             1,608         487         1,864          --     1,900        3,624                         9,483
      Deferred income taxes          --          --            --          --        --          263                           263
      Net gain from sales
         of assets                   --          --          (689)         --        --           (2)                         (691)
      Net gain on
         extinguishment
         of debt                (23,226)         --            --          --        --           --                       (23,226)
      Effects of changes in
         foreign currency            --          --            63          --    (1,177)         946                          (168)
      Other                         391          --            20          --        --          (10)                          401
      Changes in operating
         assets and
         liabilities:
         Accounts receivable        156         336        (5,405)         --       260        1,639                        (3,014)
         Inventory                  504        (543)        2,052          --    (5,238)       1,646                        (1,579)
         Prepaid expenses
            and other             1,190         188        (1,163)         --       (35)      (1,159)                         (979)
         Other assets             1,020          --            (4)         --        --          (39)                          977
         Intercompany            (2,263)     17,358       (13,553)    (20,610)   13,145       (2,456)         8,379             --
         Accounts payable        (2,613)       (332)       (7,045)         --    (2,751)        (756)                      (13,497)
         Accrued expenses
            and other             5,033        (276)        6,317       1,156     3,849       (7,285)                        8,794
   Cash provided (used)
      by discontinued
      operations                    231        (652)           --          --        --         (177)                         (598)
                               --------    --------      --------    --------   -------      -------        -------       --------
     NET CASH PROVIDED
         (USED) BY
         OPERATING
         ACTIVITIES               4,450      16,838        (3,509)    (19,981)    9,419       (8,632)            --         (1,415)
                               --------    --------      --------    --------   -------      -------        -------       --------
INVESTING ACTIVITIES:
   Capital expenditures             (44)        (62)       (1,334)         --    (1,163)      (1,383)                       (3,986)
   Proceeds from sale of
      assets                         --          --         1,057          --        --           22                         1,079
   Other investing                   --          --            --          --        --           (1)                           (1)
   Discontinued operations       14,351          --            --          --        --          456                        14,807
                               --------    --------      --------    --------   -------      -------        -------       --------
      NET CASH PROVIDED
         (USED) BY INVESTING
         ACTIVITIES              14,307         (62)         (277)         --    (1,163)        (906)            --         11,899
                               --------    --------      --------    --------   -------      -------        -------       --------
FINANCING ACTIVITIES:
   Net increase (decrease)
      in cash overdraft            (350)       (274)        2,987          --        --           (9)                        2,354
   Net increase (decrease)
      in short-term debt        (29,874)         --            --          --        --         (149)                      (30,023)
   Proceeds from long-term
      debt                       85,000          --            --      20,000        --        4,622                       109,622
   Payments of long-term
      debt                      (32,679)        (13)         (960)         --        --         (960)                      (34,612)
   Payment of Pfizer
      obligations               (20,075)         --            --          --    (8,225)          --                       (28,300)
   Payments relating to the
      Prince
      Transactions and
         transaction costs       (4,415)    (16,608)           --          --        --           --                       (21,023)
   Debt refinancing costs       (14,945)         --            --          --        --           --                       (14,945)
   Discontinued operations           --          --            --          --        --        1,135                         1,135
                               --------    --------      --------    --------   -------      -------        -------       --------
      NET CASH PROVIDED
         (USED) BY
         FINANCING
         ACTIVITIES             (17,338)    (16,895)        2,027      20,000    (8,225)       4,639             --        (15,792)
                               --------    --------      --------    --------   -------      -------        -------       --------
EFFECT OF EXCHANGE RATE
   CHANGES ON CASH                   --          --             1          --        13          305                           319
                               --------    --------      --------    --------   -------      -------        -------       --------
NET INCREASE (DECREASE) IN
   CASH AND CASH
   EQUIVALENTS                    1,419        (119)       (1,758)         19        44       (4,594)            --         (4,989)
CASH AND CASH EQUIVALENTS
   at beginning of period            43         119         2,167          --       185        8,665                        11,179
                               --------    --------      --------    --------   -------      -------        -------       --------
CASH AND CASH EQUIVALENTS
   at end of period            $  1,462    $     --      $    409    $     19   $   229      $ 4,071        $    --       $  6,190
                               ========    ========      ========    ========   =======      =======        =======       ========
</TABLE>


                                       29
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     This information should be read in conjunction with the condensed
consolidated financial statements and related notes contained in this Report.
The Company's Wychem, MRT and LaCornubia businesses have been classified as
discontinued operations. This discussion presents information only for
continuing operations, unless otherwise indicated. Phibro Animal Health
Corporation (the "Company" or "PAHC") presents its annual consolidated financial
statements on the basis of its fiscal year ending June 30.

GENERAL

     The Company is a leading diversified global manufacturer and marketer of a
broad range of animal health and nutrition products, specifically medicated feed
additives (MFAs) and nutritional feed additives (NFAs), which are sold
throughout the world predominantly to the poultry, swine and cattle markets.
MFAs are used preventatively and therapeutically in animal feed to produce
healthy livestock. The Company believes it is the third largest manufacturer and
marketer of MFAs in the world, and that certain of its MFA products have leading
positions in the marketplace. The Company is also a specialty chemicals
manufacturer and marketer, serving primarily the United States pressure-treated
wood and chemical industries. The Company has several proprietary products, and
many of the Company's products provide critical performance attributes to
customers' products, while representing a relatively small percentage of total
end-product cost.

Holding Company and HoldCo Notes

     During February 2005, PAHC Holdings Corporation ("Holdings") was formed to
hold the capital stock of the Company, except for its Series C Preferred Stock.
On February 10, 2005, Holdings issued $29.0 million aggregate principal amount
of its 15% Senior Secured Notes due 2010 (the "HoldCo Notes") in a private
placement. Interest is payable at the option of Holdings in cash or pay-in-kind
HoldCo Notes in its sole discretion. The Company is not obligated for the HoldCo
Notes. The Company's ability to make payments to Holdings is subject to the
terms of the Company's Senior Secured Notes, its Senior Subordinated Notes, and
its domestic senior credit facility, and to applicable law.

     The proceeds from the sale of the HoldCo Notes were used to make a capital
contribution to the Company to finance the redemption of the Company's Series C
Preferred Stock in the amount of $26.4 million on February 28, 2005.

     Holdings was formed by the holders of all of the Company's capital stock,
other than the holders of the Company's Series C Preferred Stock. In particular,
Jack Bendheim, Marvin Sussman and trusts for the benefit of Mr. Bendheim and his
family exchanged all of their shares of Series A Preferred Stock and Class B
Common Stock and Mr. Bendheim exchanged all of his shares of Class A Common
Stock, for the same number and class of shares of Holdings, having the same
designations, relative rights, privileges and limitations as the Company's
shares of such class (except to the extent that Holdings is a Delaware
corporation and the Company is a New York corporation). Holdings owns all the
outstanding capital stock of all classes of the Company.

     The HoldCo Notes are collateralized by all of Holdings' assets (now
consisting substantially of all the outstanding capital stock of the Company).
The HoldCo Notes and such security interest are effectively subordinated to all
liabilities, including the Company's and its subsidiaries' trade payables, as
well as the Company's indenture indebtedness.

     On May 16, 2005, Holdings completed the exchange of its privately placed
HoldCo Notes with new HoldCo Notes that have been registered with the Securities
and Exchange Commission (the "SEC").

     In connection with the redemption of the Company's Series C Preferred
Stock, the Company, Palladium Equity Partners II, LP ("Palladium"), PAHC
Holdings and the principal stockholders of PAHC Holdings entered into an
agreement with respect to (i) the redemption price (consisting of $19.6 million
of liquidation preference and $6.8 million of equity value), (ii) amending the
terms of the post-redemption redemption price adjustment set forth in the
certificate of incorporation


                                       30
<PAGE>
of the Company (a) from an amount payable upon occurrence of certain capital
stock transactions determined with respect to the value of the Company upon the
occurrence of such capital stock transaction, to a liquidated amount of $4.0
million, payable only after the occurrence of certain capital stock transactions
and the receipt by the current stockholders of the Company, on a cumulative
basis, of an aggregate of $24.0 million of dividends and distributions in
respect of such capital stock transactions, and (b) to remove the one year time
period for such adjustment of the redemption price, and (iii) eliminating the
backstop indemnification obligation of up to $4.0 million of the Company to
Palladium incurred in connection with the sale by the Company to Palladium in
December 2003 of The Prince Manufacturing Company ("PMC"). The excess of the
redemption price over the carrying value of the Series C Preferred Stock and the
elimination of the backstop indemnification obligation have been reflected as
adjustments to stockholder's deficit on the condensed consolidated balance sheet
at March 31, 2005. The Company has determined the fair value of the liability
for the post-redemption redemption price adjustment to be insignificant to the
consolidated financial statements, due to the uncertainty of the ultimate timing
of such payment, if any. Future changes in the fair value of the liability for
the post-redemption redemption price adjustment will be recorded through
earnings in the period in which such change occurs.

Discontinued Operations - Wychem

     On April 29, 2005, the Company sold the shares of Wychem, an indirect
wholly-owned subsidiary, for cash proceeds of $4.8 million to an investor group
that included the former head of the Company's Specialty Chemicals Group, who
retired in August 2004, and the Managing Director of Wychem. The Company owned
Wychem through its subsidiaries: Koffolk (1949), Ltd. (Israel) which owned 75%
and Ferro Metal and Chemical Corporation Limited (U.K.) which owned 25%. The
Company anticipates that it will record a gain on the sale of Wychem of
approximately $1.5 million in the quarter ending June 30, 2005. Wychem was
included in the Company's All Other segment.

Belgium Plant Transactions

     On December 16, 2004, Phibro Animal Health SA, ("PAH Belgium") entered into
an agreement with GlaxoSmithKline Biologicals ("GSK") to sell to GSK
substantially all of PAH Belgium's facilities in Rixensart, Belgium (the
"Belgium Plant"). Such sale, when completed (the "Belgium Plant Transactions"),
will include the following elements (U.S. dollar amounts at the March 31, 2005
exchange rate): (i) the transfer of substantially all of the land and buildings
and certain equipment of PAH Belgium at the Belgium Plant, as well as the
industrial activities and intellectual property relating to certain solvent
technology of PAH Belgium for a purchase price of EUR 6.2 million ($8.0
million), payable at closing; (ii) the transfer to GSK of a majority of the
employees of the Belgium Plant and the corresponding responsibility for
statutory severance obligations; (iii) GSK agreeing to be responsible for
cleaning-up, by demolition or otherwise, certain buildings not to be used by it,
but for PAH Belgium to reimburse GSK up to a maximum of EUR 0.7 million ($0.9
million) for such cleaning-up costs; (iv) in recognition of the benefits to PAHC
from the proposed transaction, PAH Belgium agreeing to pay to GSK EUR 1.5
million ($1.9 million) within six months from the closing date, EUR 1.5 million
($1.9 million) within eighteen months from the closing date, EUR 1.5 million
($1.9 million) within thirty months from the closing date, and EUR 0.5 million
($0.6 million) within forty-two months from the closing date; (v) PAH Belgium
retaining certain excess land (valued at approximately EUR 0.4 million ($0.5
million) and being able to sell such land for its own account; (vi) PAH Belgium
being responsible for certain plant closure costs and legally required severance
indemnities in connection with workforce reductions, estimated in total to be
EUR 10.2 million ($13.2 million), of which an amount estimated to be
approximately EUR 4.2 million ($5.4 million) would be payable at or around the
closing and an aggregate amount so estimated to be approximately EUR 6.0 million
($7.8 million) would be payable over periods up to thirteen years; and (vii) PAH
Belgium retaining any or all equipment at the Belgium Plant, and being able to
sell such equipment for the account of PAH Belgium or transfer such equipment,
together with other assets and rights related to the production of
virginiamycin, to PAH Brazil which owns a facility in Guarulhos, Brazil or in
connection with alternative production arrangements.


                                       31
<PAGE>
     The foregoing transactions and agreements are subject to a closing that is
expected to occur on November 30, 2005, but in no event earlier than July 1,
2005 or later than June 30, 2006.

     The Dutch Notes and related guarantees are collateralized by a mortgage on
the Belgium Plant which will be released in connection with the closing of the
sale of the Belgium Plant to GSK.

     As a result of the above agreement, the Company will depreciate the Belgium
plant to its estimated salvage value of EUR 2.5 million ($3.1 million) as of the
projected closing date of November 30, 2005. The Company recorded incremental
depreciation expense of EUR 2.8 million, ($3.6 million) during the three months
ended March 31, 2005 and will record an additional EUR 6.3 million ($8.2
million) of incremental depreciation expense ratably through November 2005. The
Company recorded severance expense of EUR 6.7 million ($9.0 million) in December
2004 for the estimated minimum severance amounts indicated by law, contract,
and/or past practice. The Company recorded additional expense of EUR 1.0 million
($1.3 million) during the three months ended March 31, 2005 and estimates it
will record additional expense of EUR 2.6 million ($3.3 million) ratably through
November 2005 for severance, retention agreements and other costs. The
incremental depreciation expense of $3.6 million and severance expense of $10.3
million recorded through March 2005 are included in cost of goods sold on the
Company's condensed consolidated statements of operations and comprehensive
income (loss).

     The Company has determined that the carrying amount of the Belgium Plant at
March 31, 2005 is recoverable based on the estimated future cash flows arising
from the use of the assets.

     In anticipation of transferring production of virginiamycin from the
Belgium Plant to an alternative production location, the Company has been
increasing inventory levels of virginiamycin to ensure adequate supplies during
the transfer period. At March 31, 2005 virginiamycin inventories were
approximately $43.0 million and are expected to continue to increase through
November 2005, based on current production rates.

Issuance of Additional 13% Senior Secured Notes

     On December 21, 2004, the Company completed a private placement pursuant to
which the Company and Philipp Brothers Netherlands III B.V., an indirect
wholly-owned subsidiary of the Company (the "Dutch Issuer" and together with the
Company, the "Issuers") issued and sold 22,491 additional units consisting of
$18.2 million 13% Senior Secured Notes due 2007 of the Company (the "U.S.
Notes") and $4.3 million 13% Senior Secured Notes due 2007 of the Dutch Issuer
(the "Dutch Notes" and together with the U.S. Notes, the "Additional Notes"),
from which they received gross proceeds of $23.4 million. The proceeds were used
to refinance indebtedness outstanding under the Company's domestic senior credit
facility. The Company incurred financing costs of $2.3 million in connection
with the issuance of the Additional Notes. The Additional Notes were issued
under the Indenture dated October 21, 2003, as amended and supplemented (the
"Indenture") under which the Issuers previously issued 105,000 units consisting
of $85.0 million aggregate principal amount of U.S. Notes and $20.0 million
aggregate principal amount of Dutch Notes.

     On March 9, 2005, the Company completed the exchange of its privately
placed 127,491 units of its 13% Senior Secured Notes due 2007 with new units of
its 13% Senior Secured Notes due 2007 that have been registered with the SEC.

Amendment to the Domestic Senior Credit Facility

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended its domestic senior credit facility to:
(i) amend the EBITDA definition to exclude charges and expenses related to the
sale of the Belgium Plant in an aggregate amount not to exceed $26.8 million for
purposes of calculating a certain financial covenant; (ii) amend the Indenture
reserve definition to include scheduled payments of interest due on the
Additional Notes; (iii) amend the maximum aggregate amount of borrowing
available under the working capital facility to permit a temporary increase to
$22.5 million and for its reduction to $17.5 million on such borrowings being
refinanced by the proceeds of the Additional Notes; (iv) amend the Permitted
Investments


                                       32
<PAGE>
definition to include investments in connection with the sale of the Belgium
Plant and transfer of certain equipment, together with other assets and rights
related to the production of virginiamycin, to PAH Brazil or in connection with
alternative production arrangements; and (v) provide for the issuance of the
Additional Notes and the sale of the Belgium Plant and related transactions.

OTHER RISKS AND UNCERTAINTIES

     The Company's ability to fund its operating plan depends upon the continued
availability of borrowing under its domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under
the domestic senior credit facility based on its forecasted operating plan. In
the event of adverse operating results and/or violation of covenants under this
facility, there can be no assurance that the Company would be able to obtain
waivers or amendments on favorable terms, if at all. The Company expects
adequate liquidity throughout 2005, with periods of reduced availability around
the dates of the semi-annual interest payments due June 1 and December 1 related
to its Senior Secured Notes and Senior Subordinated Notes. The Company is
pursuing additional cost reduction activities, working capital improvement
plans, and sales of non-strategic assets to ensure additional liquidity. The
Company also has availability under foreign credit lines that likely would be
available. There can be no assurance the Company will be successful in any of
the above-noted actions.

     The use of antibiotics in medicated feed additives is a subject of
legislative and regulatory interest. The issue of potential for increased
bacterial resistance to certain antibiotics used in certain food-producing
animals is the subject of discussions on a worldwide basis and, in certain
instances, has led to government restrictions on the use of antibiotics in
food-producing animals. The sale of feed additives containing antibiotics is a
material portion of the Company's business. Should regulatory or other
developments result in further restrictions on the sale of such products, it
could have a material adverse impact on the Company's financial position,
results of operations and cash flows.

     The testing, manufacturing, and marketing of certain of the Company's
products are subject to extensive regulation by numerous government authorities
in the United States and other countries.

     The Company has significant assets located outside of the United States,
and a significant portion of the Company's sales and earnings are attributable
to operations conducted abroad.

     The Company has assets located in Israel and a portion of its sales and
earnings are attributable to operations conducted in Israel. The Company is
affected by social, political and economic conditions affecting Israel, and any
major hostilities involving Israel as well as the Middle East or curtailment of
trade between Israel and its current trading partners, either as a result of
hostilities or otherwise, could have a material adverse effect on the Company.

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,
generation, treatment, emission, release, discharge and disposal of certain
materials and wastes, the remediation of contaminated soil and groundwater, the
manufacture, sale and use of pesticides and the health and safety of employees.
As such, the nature of the Company's current and former operations and those of
its subsidiaries exposes the Company and its subsidiaries to the risk of claims
with respect to such matters.


                                       33
<PAGE>
SUMMARY CONSOLIDATED RESULTS OF CONTINUING OPERATIONS

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED MARCH 31,   NINE MONTHS ENDED MARCH 31,
                                       ----------------------------   ---------------------------
                                              2005       2004               2005       2004
                                             -------   -------            --------   --------
                                                (THOUSANDS)                   (THOUSANDS)
<S>                                    <C>             <C>            <C>            <C>
Net sales                                    $90,255   $85,976            $269,169   $261,582
Gross profit                                  18,751    22,730              54,487     65,919
Selling, general and administrative           17,885    16,004              51,901     48,292
Operating income                                 866     6,726               2,586     17,627
Interest expense, net                          5,872     4,875              16,449     13,283
Other expense (income), net                       77      (134)               (691)      (594)
Net (gain) on extinguishment of debt              --        --                  --    (23,226)
Provision (benefit) for income taxes             773     2,126                 699      5,745
Income from continuing operations            $(5,856)  $  (141)           $(13,871)  $ 22,419
</TABLE>

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2005 AND 2004

     Net Sales of $90.3 million increased $4.3 million, or 5%. Animal Health and
Nutrition sales of $69.0 million grew $4.2 million, or 7%, due to volume
increases and higher average selling prices. Specialty Chemical Group (comprised
of the Industrial Chemicals, Distribution and All Other segments) sales of $21.3
million increased $0.1 million.

     Gross Profit of $18.8 million decreased $4.0 million, to 20.8% of net
sales. The Belgium Plant Transactions increased costs by $4.4 million for the
current quarter. Excluding this charge, Animal Health and Nutrition gross profit
increased due to higher average selling prices offset in part by higher unit
costs. The Specialty Chemical Group's gross profit increased slightly over the
2004 quarter.

     Selling, General and Administrative Expenses of $17.9 million increased
$1.9 million. Expenses in the operating segments increased over the prior year
due to higher research and development costs associated with registration
trials, unfavorable foreign exchange rates, advertising and promotion
expenditures and severance costs. Corporate expenses increased due to higher
debt amortization costs, professional fees and reduced PMC advisory fee income.
In addition, the Company recognized additional gains of $0.1 million from the
previous sale of its etchant business during the current fiscal quarter.

     Operating Income of $0.9 million decreased $5.9 million from the 2004
quarter. Operating income, excluding the Belgium Plant Transactions, declined by
$0.6 million in Animal Health and Nutrition due to higher selling, general and
administrative expenses offset in part by increased gross profit. Specialty
Chemical Group operating income increased $0.1 million. Corporate expenses
increased by $1.0 million and also contributed to the decline.

     Interest Expense, Net of $5.9 million increased $1.0 million from the 2004
quarter, primarily due to higher average interest rates and also higher
borrowing levels associated with the issuance of the Company's Senior Secured
Notes.

     Other (Income) Expense, Net principally reflects foreign currency
transaction net (gains) losses related to short-term inter-company balances and
foreign currency translation (gains) losses. In addition, the Company recorded a
gain of $0.8 million on the sale of its PhibroTech Wilmington, Illinois
property.

     Income Taxes of $0.8 million were recorded on a consolidated pre-tax loss
of $5.1 million. The tax rate reflects income tax provisions in profitable
foreign jurisdictions and for state income taxes. A provision for U.S. federal
income taxes has not been recorded due to the utilization of net operating loss
carryforwards. The Company has recorded valuation allowances related to
substantially all deferred tax assets. The Company will continue to evaluate the
likelihood of recoverability of these deferred tax assets based upon actual and
expected operating performance.


                                       34
<PAGE>
COMPARISON OF NINE MONTHS ENDED MARCH 31, 2005 AND 2004

     Net Sales of $269.2 million increased $7.6 million, or 3%. Animal Health
and Nutrition sales of $205.5 million grew $12.2 million, or 6%, due to volume
increases and also higher average selling prices. Specialty Chemical Group
(comprised of the Industrial Chemicals, Distribution and All Other segments)
sales of $63.7 million decreased $4.6 million. Excluding PMC, Specialty Chemical
group sales increased by $6.5 million, or 11%, due to volume increases in each
of the segments. The Specialty Chemical Group included PMC sales of $11.1
million for the 2004 period.

     Gross Profit of $54.5 million decreased $11.4 million to 20.2% of net
sales. The Belgium Plant Transactions increased costs by $13.9 million for the
current period. Excluding this charge, Animal Health and Nutrition gross profit
increased due to higher unit volumes and average selling prices offset in part
by higher unit costs. The Specialty Chemical Group also contributed to the
improvement due to expanded sales of the Company's new copper-based wood
treatment product and higher unit volumes in its Distribution segment. The
Specialty Chemical Group included PMC gross profit of $3.6 million for the 2004
period.

     Selling, General and Administrative Expenses of $51.9 million increased
$3.6 million. Expenses in the operating segments, excluding PMC, increased over
the prior year due to higher research and development costs associated with
registration trials, unfavorable foreign exchange rates, advertising and
promotion expenditures and severance costs. Corporate expenses increased due to
higher debt amortization charges, professional fees, costs associated with the
relocation of the Company's corporate office and lower PMC advisory fees income
offset in part by the elimination of the Palladium management fee in fiscal
2004. In addition, the Company recognized additional gains of $0.8 million from
the previous sale of its etchant business during the current fiscal year. PMC
expenses were $1.3 million for the 2004 period.

     Operating Income of $2.6 million decreased $15.0 million. Operating income,
excluding the Belgium Plant Transactions and PMC, improved in both the Animal
Health and Nutrition and Specialty Chemical Group with increased gross profit
offset in part by higher selling, general and administrative expenses. PMC
contributed $2.3 million for the 2004 period offset in part by the elimination
of the $1.1 million Palladium management fee.

     Interest Expense, Net of $16.4 million increased $3.2 million from the 2004
period, primarily due to higher average interest rates and also higher borrowing
levels associated with the issuance of the Company's senior secured notes.

     Other (Income) Expense, Net principally reflects foreign currency
transaction net (gains) losses related to short-term inter-company balances and
foreign currency translation (gains) losses. In addition, the Company recorded a
gain of $0.8 million on the sale of its PhibroTech Wilmington, Illinois
property.

     Income Taxes of $0.7 million were recorded on a consolidated pre-tax loss
of $13.2 million. The tax rate reflects income tax provisions in profitable
foreign jurisdictions and for state income taxes. A provision for U.S. federal
income taxes has not been recorded due to the utilization of net operating loss
carryforwards. The Company has recorded valuation allowances related to
substantially all deferred tax assets. The Company will continue to evaluate the
likelihood of recoverability of these deferred tax assets based upon actual and
expected operating performance.

OPERATING SEGMENTS

     The Animal Health and Nutrition segment manufactures and markets MFAs and
NFAs to the poultry, swine and cattle markets, and includes the operations of
the Phibro Animal Health business unit, Prince AgriProducts, Koffolk (1949) Ltd.
and Planalquimica. The Industrial Chemicals segment manufacturers and markets
specialty chemicals for use in the pressure treated wood and chemical
industries, and includes Phibro-Tech and, until its divestiture, PMC. The
Distribution segment markets a variety of specialty chemicals, and includes
PhibroChem and Ferro operations. The All Other segment includes contract
manufacturing of crop protection chemicals and all other operations. Due to the
divestiture of PMC in December 2003, PMC's results are shown separately for
comparability.


                                       35
<PAGE>
<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED MARCH 31,   NINE MONTHS ENDED MARCH 31,
                                   ----------------------------   ---------------------------
                                           2005      2004               2005       2004
                                         -------   -------            --------   --------
                                            (THOUSANDS)                    (THOUSANDS)
<S>                                <C>             <C>            <C>            <C>
NET SALES
   Animal Health & Nutrition             $69,005   $64,819            $205,519   $193,347
   Industrial Chemicals - ex PMC           8,871    10,000              24,950     22,543
   Industrial Chemicals - PMC                 --        --                  --     11,118
   Distribution                            7,838     7,916              23,603     23,511
   All other                               4,541     3,241              15,097     11,063
                                         -------   -------            --------   --------
                                         $90,255   $85,976            $269,169   $261,582
                                         =======   =======            ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED MARCH 31,   NINE MONTHS ENDED MARCH 31,
                                        ----------------------------   ---------------------------
                                                2005      2004               2005       2004
                                              -------   -------            --------   --------
                                                 (THOUSANDS)                   (THOUSANDS)
<S>                                     <C>             <C>            <C>            <C>
OPERATING INCOME
   Animal Health & Nutrition                 $ 3,420   $ 8,370            $  9,715   $ 22,925
   Industrial Chemicals - ex PMC                 957     1,136               2,385        458
   Industrial Chemicals - PMC                     --        --                  --      2,278
   Distribution                                  895       789               2,555      2,322
   All other                                     414       254               1,156      1,381
   Corporate expenses and adjustments         (4,820)   (3,823)            (13,225)   (11,737)
                                             --------   ------            --------   --------
                                             $    866   $6,726            $  2,586   $ 17,627
                                             ========   ======            ========   ========
</TABLE>

OPERATING SEGMENTS COMPARISON OF THREE MONTHS ENDED MARCH 31, 2005 AND 2004

     ANIMAL HEALTH AND NUTRITION

     NET SALES of $69.0 million increased $4.2 million, or 7%. MFA net sales
increased by $2.7 million. Revenues were higher primarily for antibiotics and
anticoccidials but were offset in part by lower sales of antibacterials. The
increase in MFA revenues was due to higher unit volumes and favorable currency
effect on international sales offset in part by lower average selling prices.
NFA net sales increased by $1.5 million principally due to higher average
selling prices of trace mineral premixes and other feed ingredients.

     OPERATING INCOME of $3.4 million decreased $5.0 million from the 2004
period. Operating income, excluding costs relating to the Belgium Transactions
of $4.4 million, decreased due to higher selling, general and administrative
expenses and manufacturing costs offset in part by higher average selling
prices.

     SPECIALTY CHEMICALS

     INDUSTRIAL CHEMICALS net sales of $8.9 million decreased $1.1 million, or
11%. Sales of copper- related products to the wood treatment markets were below
last year, but were partially offset by higher sales of other specialty copper
products arising from capacity expansion. The new copper based wood treatment
product, introduced in the March 2004 quarter, included unusually strong initial
volumes as customers increased inventory levels. Operating income of $1.0
million declined by $0.2 million from the 2004 quarter due to lower sales unit
volumes and changes in product mix.

     DISTRIBUTION net sales of $7.8 million decreased $0.1 million, or 1%. Lower
sales volumes in Europe were offset in part by higher domestic unit volumes and
slightly higher average selling prices. Distribution operating income of $0.9
million improved by $0.1 million from the 2004 quarter due to increased sales of
higher margin products. As a percentage of sales, operating income was 11% and
10% in 2005 and 2004, respectively.


                                       36
<PAGE>
     ALL OTHER net sales of $4.5 million increased $1.3 million. Revenues for
contract manufacturing increased due to higher average selling prices and
increased volumes. Operating income of $0.4 million increased by $0.2 million
over the prior period.

OPERATING SEGMENTS COMPARISON OF NINE MONTHS ENDED MARCH 31, 2005 AND 2004

     ANIMAL HEALTH AND NUTRITION

     NET SALES of $205.5 million increased $12.2 million, or 6%. MFA net sales
increased by $4.3 million. Revenues were higher primarily for antibiotics but
were offset in part by lower sales of antibacterials and anticoccidials. The
increase in MFA revenues was due to higher unit volumes, higher average selling
prices and favorable currency effect on international sales. NFA net sales
increased by $7.9 million principally due to volume increases and higher average
selling prices in trace mineral premixes and other feed ingredients.

     OPERATING INCOME of $9.7 million decreased $13.2 million from the 2004
period. Operating income, excluding costs relating to the Belgium Transactions
of $13.9 million, improved due to higher average selling prices and sales unit
volumes offset in part by higher selling, general and administrative expenses
and manufacturing costs.

     SPECIALTY CHEMICALS

     INDUSTRIAL CHEMICALS net sales of $25.0 million, excluding PMC, increased
$2.4 million, or 11%. Sales of copper-related products to the wood treatment
markets increased due to the introduction of new copper based wood treatment
products and by higher sales of other specialty copper products arising from
capacity expansion. PMC, divested in December 2003, generated revenues of $11.1
million for the 2004 period. Operating income, excluding PMC, of $2.4 million
improved by $1.9 million from the 2004 period. This improvement was due to new
product introductions and savings from previously implemented headcount
reductions and facility restructurings in Phibro-Tech operations. PMC provided
operating income of $2.3 million for the 2004 period.

     DISTRIBUTION net sales of $23.6 million increased $0.1 million. Higher
domestic unit volumes and slightly higher average selling prices were offset in
part by lower sales volumes in Europe. Distribution operating income of $2.6
million improved by $0.2 million from the 2004 period due to increased sales of
higher margin products. As a percentage of sales, operating income was 11% and
10% in 2005 and 2004, respectively.

     ALL OTHER net sales of $15.1 million increased $4.0 million. Revenues for
contract manufacturing increased due to higher average selling prices and also
increased volumes. Operating income of $1.2 million decreased $0.2 million from
the prior period due to higher manufacturing costs.

DISCONTINUED OPERATIONS

     On April 29, 2005, the Company sold the shares of Wychem, an indirect
wholly-owned subsidiary, for cash proceeds of $4.8 million to an investor group
that included the former head of the Company's Specialty Chemicals Group, who
retired in August 2004, and the Managing Director of Wychem. The Company owned
Wychem through its subsidiaries: Koffolk (1949), Ltd. (Israel) which owned 75%
and Ferro Metal and Chemical Corporation Limited (U.K.) which owned 25%. The
Company anticipates that it will record a gain on the sale of Wychem of
approximately $1.5 million in the quarter ending June 30, 2005. Wychem was
included in the Company's All Other segment.

     In August 2003, the Company divested Mineral Resource Technologies, Inc and
shutdown its operations at La Cornubia. These businesses have been classified as
discontinued operations. The Company's consolidated financial statements have
been reclassified to report separately the operating results and cash flows of
the discontinued operations.


                                       37
<PAGE>
<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED MARCH 31, 2005
                                                  ----------------------------------
                                                  MRT   LACORNUBIA   WYCHEM    TOTAL
                                                  ---   ----------   ------   ------
<S>                                               <C>   <C>          <C>      <C>
Net Sales                                         $--       $--      $1,487   $1,487
                                                  ===       ===      ======   ======

Operating Income                                  $--       $--      $  389   $  389
Other Expense (Income), net                        --        --           5        5
Provision (benefit) for income tax                 --        --         112      112
                                                  ---       ---      ------   ------
Net Income (loss) from discontinued operations    $--       $--      $  272   $  272
                                                  ===       ===      ======   ======

Depreciation and Amortization                     $--       $--      $  105   $  105
                                                  ===       ===      ======   ======
</TABLE>

<TABLE>
<CAPTION>
                                                      THREE MONTHS MARCH 31, 2004
                                                  ----------------------------------
                                                  MRT   LACORNUBIA   WYCHEM    TOTAL
                                                  ---   ----------   ------   ------
<S>                                               <C>   <C>          <C>      <C>
Net Sales                                         $--     $4,161     $1,061   $5,222
                                                  ===     ======     ======   ======

Operating Income (Loss)                           $--     $ (363)    $  303   $  (60)
Interest Expense, net                              --         22         --       22
Other Expense (Income), net                        --         68          3       71
Provision (benefit) for income tax                 --         18         83      101
                                                  ---     ------     ------   ------
Net Income (loss) from discontinued operations    $--     $ (471)    $  217   $ (254)
                                                  ===     ======     ======   ======

Depreciation and Amortization                     $--     $  101     $  105   $  206
                                                  ===     ======     ======   ======
</TABLE>

<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED MARCH 31, 2005
                                                  ----------------------------------
                                                  MRT   LACORNUBIA   WYCHEM    TOTAL
                                                  ---   ----------   ------   ------
<S>                                               <C>   <C>          <C>      <C>
Net Sales                                         $--       $--      $3,908   $3,908
                                                  ===       ===      ======   ======

Operating Income                                  $--       $--      $  807   $  807
Interest Expense, net                              --        --          --       --
Other Expense (Income), net                        --        --           6        6
Provision (benefit) for income tax                 --        --         226      226
                                                  ---       ---      ------   ------
Net Income (loss) from discontinued operations    $--       $--      $  575   $  575
                                                  ===       ===      ======   ======

Depreciation and Amortization                     $--       $--      $  309   $  309
                                                  ===       ===      ======   ======
</TABLE>

<TABLE>
<CAPTION>
                                                     NINE MONTHS ENDED MARCH 31, 2004
                                                  --------------------------------------
                                                    MRT    LACORNUBIA   WYCHEM    TOTAL
                                                  ------   ----------   ------   -------
<S>                                               <C>      <C>          <C>      <C>
Net Sales                                         $3,327     $9,884     $2,945   $16,156
                                                  ======     ======     ======   =======

Operating Income (Loss)                           $ (124)    $ (843)    $  502   $  (465)
Interest Expense, net                                 --         64         --        64
Other Expense (Income), net                           --       (175)         5      (170)
Provision (benefit) for income tax                    --         18        127       145
                                                  ------     ------     ------   -------
Net Income (loss) from discontinued operations    $ (124)    $ (750)    $  370   $  (504)
                                                  ======     ======     ======   =======

Depreciation and Amortization                     $   --     $  302     $  318   $   620
                                                  ======     ======     ======   =======
</TABLE>


                                       38
<PAGE>
     Mineral Resource Technologies, Inc. ("MRT"). In August 2003, the Company
divested MRT for net proceeds, after transaction costs, of approximately $13.8
million. MRT was included in the Company's All Other segment.

     La Cornubia. On June 30, 2004, one of the Company's French subsidiaries, La
Cornubia SA ("La Cornubia"), filed for bankruptcy under the insolvency laws of
France. The Company believes that, as a result of the bankruptcy filing by La
Cornubia, it is possible that LC Holding S.A. ("LC Holding"), La Cornubia's
parent, a holding company with no assets except for its investment in La
Cornubia, may also file for bankruptcy in France. The Company does not believe
that La Cornubia's bankruptcy filing, nor the possible bankruptcy filing by LC
Holding, will have a material adverse effect on its financial condition or
results of operations.

LIQUIDITY AND CAPITAL RESOURCES

     Net Cash (Used) by Operating Activities. Cash (used) by operations for the
nine months ended March 31, 2005 and 2004 was ($7.5) million and ($1.4) million,
respectively. Cash used was due to higher working capital requirements. The
Company is currently increasing inventory levels of virginiamycin to enhance
future supply flexibility and reduce cost as part of the planned exit of the
Belgium Plant. Total inventories increased by $16.4 million in the current
fiscal year. In addition, the Company paid $4.0 million of costs related to a
non-completed transaction that was charged to expense in fiscal 2004.

     Net Cash Provided (Used) by Investing Activities. Net cash provided (used)
by investing activities for the nine months ended March 31, 2005 and 2004 was
($4.0) million and $11.9 million, respectively. Capital expenditures of $5.1
million and $4.0 million for 2005 and 2004, respectively, were for new product
capacity, for maintaining the Company's existing asset base and for
environmental, health and safety projects. Discontinued operations, primarily
from the sale of MRT, provided funds of $14.8 million in 2004.

     Net Cash Provided (Used) by Financing Activities. Net cash provided (used)
by financing activities for the nine months ended March 31, 2005 and 2004 was
$13.2 million and ($15.8) million, respectively. Proceeds from long-term debt
reflect the issuance of additional 13% Senior Secured Notes and borrowings of
Koffolk Israel. The decrease in short-term debt is due to the reduction of the
senior credit facility primarily funded from proceeds of additional long-term
debt. Payments of long-term debt reflect the repayments of Koffolk Israel
borrowings. The Company used $26.4 million of capital contribution from Holdings
Corporation to redeem for $26.4 million, the remaining Series C preferred stock.

     Working Capital and Capital Expenditures. Working capital as of March 31,
2005 was $73.0 million compared to $54.4 million at June 30, 2004, an increase
of $18.6 million. The fiscal 2005 increase in working capital primarily was due
to higher inventory levels and to reduced short-term debt levels related to the
issuance of new long-term debt.

     The Company anticipates spending approximately $8.0 million for capital
expenditures in fiscal 2005, primarily to cover the Company's asset replacement
needs, to improve processes, and for environmental and regulatory compliance,
subject to the availability of funds.

     Liquidity. At March 31, 2005 the amount of credit extended under the
Company's domestic senior credit facility totaled $3.9 million under the working
capital facility and $10.5 million under the letter of credit facility, and the
Company had $13.6 million available under the working capital facility. In
addition, certain of the Company's foreign subsidiaries also had availability
totaling $7.1 million under their respective loan agreements.

     As of September 24, 2004, the Company amended its domestic senior credit
facility to: (i) increase the aggregate amount of borrowings available under
such working capital and letter of credit facilities to $32.5 million; the
amount of aggregate borrowings available under the working capital facility
remained unchanged at $17.5 million; (ii) amend the EBITDA definition to exclude
charges and expenses related to unsuccessful acquisitions and related financings
in an aggregate amount not to exceed $5.3 million for the period beginning
January 1, 2004 and ending June 30, 2004; (iii) amend the definition of
Additional Indebtedness to exclude advances under the working capital facility;
(iv) amend the definition of Permitted Investments to allow other investments
made during the period from


                                       39
<PAGE>
January 1, 2004 through June 30, 2004 in an aggregate amount not to exceed
$336,000; and (v) establish covenant EBITDA levels for the periods ending after
June 30, 2004. The amendment was effective June 30, 2004 for items (i), (ii) and
(iii); effective January 1, 2004 for item (iv); and effective September 24, 2004
for item (v).

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended the domestic senior credit facility to:
(i) amend the EBITDA definition to exclude charges and expenses related to the
sale of the Belgium Plant in an aggregate amount not to exceed $26.8 million for
purposes of calculating a certain financial covenant; (ii) amend the Indenture
reserve definition to include scheduled payments of interest due on the
Additional Notes; (iii) amend the maximum aggregate amount of borrowing
available under the working capital facility to permit a temporary increase to
$22.5 million and for its reduction to $17.5 million on such borrowings being
refinanced by the proceeds of the Additional Notes; (iv) amend the Permitted
Investments definition to include investments in connection with the sale of the
Belgium Plant and transfer of certain equipment, together with other assets and
rights related to the production of virginiamycin, to PAH Brazil or in
connection with alternative production arrangements; and (v) provide for the
issuance of the Additional Notes and the sale of the Belgium Plant and related
transactions.

     The domestic senior credit facility contains a lock-box requirement and a
material adverse change clause should an event of default (as defined in the
agreement) occur. Accordingly, the amounts outstanding have been classified as
short-term and are included in loans payable to banks in the condensed
consolidated balance sheet.

     The Company's ability to fund its operating plan depends upon the continued
availability of borrowing under its domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under
the domestic senior credit facility based on its forecasted operating plan. In
the event of adverse operating results and/or violation of covenants under this
facility, there can be no assurance that the Company would be able to obtain
waivers or amendments on favorable terms, if at all. The Company expects
adequate liquidity throughout 2005, with periods of reduced availability around
the dates of the semi-annual interest payments due June 1 and December 1 related
to its Senior Secured Notes and Senior Subordinated Notes. The Company is
pursuing additional cost reduction activities, working capital improvement
plans, and sales of non-strategic assets to ensure additional liquidity. The
Company also has availability under foreign credit lines that likely would be
available. There can be no assurance the Company will be successful in any of
the above-noted actions.

     THE COMPANY'S CONTRACTUAL OBLIGATIONS (IN MILLIONS) AT MARCH 31, 2005
MATURE AS FOLLOWS:

<TABLE>
<CAPTION>
                                                                 YEARS
                                             ---------------------------------------------
                                             WITHIN 1   OVER 1 TO 3   OVER 3 TO 5   OVER 5    TOTAL
                                             --------   -----------   -----------   ------   ------
<S>                                          <C>        <C>           <C>           <C>      <C>
Loans payable to banks                         $ 3.9       $   --        $  --       $ --    $  3.9
Long-term debt (including current portion)       2.3        128.2         48.4         --     178.9
Interest payments                               22.2         41.6          1.2         --      65.0
Lease commitments                                1.4          2.6          2.0        1.8       7.8
Acquisition of rights                            0.5          0.7          0.2         --       1.4
                                               -----       ------        -----       ----    ------
   Total contractual obligations               $30.3       $173.1        $51.8       $1.8    $257.0
                                               =====       ======        =====       ====    ======
</TABLE>


                                       40
<PAGE>
SUPPLEMENTAL INFORMATION (UNAUDITED)

     The Company sold MRT in August 2003, shutdown La Cornubia in June 2004 and
sold Wychem in April 2005. These businesses have been classified as discontinued
operations. The Company's consolidated financial statements have been
reclassified to report separately the operating results, financial position, and
cash flows of the discontinued operations. In addition, the Company completed
the Prince Transactions in December 2003, including the divestiture of PMC and
the termination of management fees to the Palladium Investors.

     To facilitate quarterly comparisons, the following unaudited statements
present the quarterly operating results of continuing operations, for each
quarter of the Company's current fiscal year and for the year ended June 30,
2004. Amounts are in thousands.

<TABLE>
<CAPTION>
                                                                     QUARTERS ENDED           NINE MONTHS
                                                            -------------------------------      ENDED
                                                            SEPT 30,    DEC 31,   MARCH 31,    MARCH 31,
                                                              2004       2004       2005         2005
                                                            --------   --------   ---------   -----------
<S>                                                         <C>        <C>        <C>         <C>
Net sales:
   Animal Health & Nutrition                                $65,806    $70,708     $69,005     $205,519
   Industrial Chemicals                                       8,393      7,686       8,871       24,950
   Distribution                                               7,661      8,104       7,838       23,603
   All Other                                                  5,037      5,519       4,541       15,097
                                                            -------    -------     -------     --------
      Total net sales                                        86,897     92,017      90,255      269,169
Cost of goods sold                                           64,727     68,915      67,132      200,774
Belgium Plant Transactions costs                                 --      9,536       4,372       13,908
                                                            -------    -------     -------     --------
      Gross profit                                           22,170     13,566      18,751       54,487
Selling, general and administrative expenses                 16,429     17,587      17,885       51,901
                                                            -------    -------     -------     --------
Operating income (loss):
   Animal Health & Nutrition                                  7,815      8,016       7,792       23,623
   Belgium Plant Transactions costs                              --     (9,536)     (4,372)     (13,908)
   Industrial Chemicals                                         773        655         957        2,385
   Distribution                                                 864        796         895        2,555
   All Other                                                    418        324         414        1,156
   Corporate Expenses                                        (4,166)    (4,565)     (4,761)     (13,492)
   Eliminations                                                  37        289         (59)         267
                                                            -------    -------     -------     --------
      Total operating income (loss)                           5,741     (4,021)        866        2,586
Other:
   Interest expense                                           5,246      5,389       5,891       16,526
   Interest (income)                                            (25)       (33)        (19)         (77)
   Other expense, net                                            24       (792)         77         (691)
                                                            -------    -------     -------     --------
      Income (loss) from continuing operations
         before income taxes                                    496     (8,585)     (5,083)     (13,172)
Provision for income taxes                                      844       (918)        773          699
                                                            -------    -------     -------     --------
      Income/(loss) from continuing operations                 (348)    (7,667)     (5,856)     (13,871)
Discontinued operations:
   Income (loss) from operations                                207         96         272          575
   Gain (loss) on disposal                                       --         --          --           --
                                                            -------    -------     -------     --------
      Net income/(loss)                                     $  (141)   $(7,571)    $(5,584)    $(13,296)
                                                            =======    =======     =======     ========
Depreciation and amortization from continuing operations:
   Animal Health & Nutrition                                $ 2,195    $ 2,172     $ 2,208     $  6,575
   Belgium Plant Transactions costs                              --        533       3,095        3,628
   Industrial Chemicals                                         403        413         374        1,190
   Distribution                                                   2          6           6           14
   All Other                                                     --         --          --           --
   Corporate Expenses                                           655        725         929        2,309
                                                            -------    -------     -------     --------
      Total depreciation and amortization                   $ 3,255    $ 3,849     $ 6,612     $ 13,716
                                                            =======    =======     =======     ========
</TABLE>


                                       41
<PAGE>
<TABLE>
<CAPTION>
                                                                          QUARTERS ENDED
                                                            ------------------------------------------   YEAR ENDED
                                                            SEPT 30,    DEC 31,   MARCH 31,   JUNE 30,    JUNE 30,
                                                              2003       2003        2004       2004        2004
                                                            --------   --------   ---------   --------   ----------
<S>                                                         <C>        <C>        <C>         <C>        <C>

Net sales:
   Animal Health & Nutrition                                $59,841    $ 68,687    $64,819    $72,074     $265,421
   Industrial Chemicals - ex PMC                              6,299       6,244     10,000      8,592       31,135
   Industrial Chemicals - PMC                                 5,683       5,435         --         --       11,118
   Distribution                                               7,939       7,656      7,916      7,350       30,861
   All Other                                                  4,280       3,542      3,241      4,786       15,849
                                                            -------    --------    -------    -------     --------
      Total net sales                                        84,042      91,564     85,976     92,802      354,384
Cost of goods sold                                           63,016      69,401     63,246     69,554      265,217
                                                            -------    --------    -------    -------     --------
      Gross profit                                           21,026      22,163     22,730     23,248       89,167
Selling, general and administrative expenses                 15,625      16,663     16,004     17,231       65,523
Costs of non-completed transaction                               --          --         --      5,261        5,261
                                                            -------    --------    -------    -------     --------
Operating income (loss):
   Animal Health & Nutrition                                  6,900       7,655      8,370     10,382       33,307
   Industrial Chemicals - ex PMC                               (391)       (287)     1,136        163          621
   Industrial Chemicals - PMC                                 1,213       1,065         --         --        2,278
   Distribution                                                 841         692        789        578        2,900
   All Other                                                    695         432        254        289        1,670
   Corporate Expenses                                        (3,377)     (4,132)    (4,116)    (4,468)     (16,093)
   Eliminations                                                  82         638        293       (927)          86
   Palladium management fee                                    (562)       (563)        --         --       (1,125)
   Costs of non-completed transaction                            --          --         --     (5,261)      (5,261)
                                                            -------    --------    -------    -------     --------
      Total operating income (loss)                           5,401       5,500      6,726        756       18,383
Other:
   Interest expense                                           3,933       4,549      4,918      5,218       18,618
   Interest (income)                                           (242)        168        (43)       (13)        (130)
   Other expense, net                                          (586)        126       (134)      (194)        (788)
   Net (gain) on extinguishment of debt                          --     (23,226)        --         --      (23,226)
                                                            -------    --------    -------    -------     --------
      Income (loss) from continuing operations
         before income taxes                                  2,296      23,883      1,985     (4,255)      23,909
Provision for income taxes                                      800       2,819      2,126      2,059        7,804
                                                            -------    --------    -------    -------     --------
   Income/(loss) from continuing operations                   1,496      21,064       (141)    (6,314)      16,105
Discontinued operations:
   Income (loss) from operations                               (472)        222       (254)      (662)      (1,166)
   Gain (loss) on disposal                                      231          --         --     (2,320)      (2,089)
                                                            -------    --------    -------    -------     --------
      Net income/(loss)                                     $ 1,255    $ 21,286    $  (395)   $(9,296)    $ 12,850
                                                            =======    ========    =======    =======     ========
Depreciation and amortization from continuing operations:
   Animal Health & Nutrition                                $ 2,029    $  2,059    $ 2,086    $ 2,089     $  8,263
   Industrial Chemicals - ex PMC                                406         395        403        432        1,636
   Industrial Chemicals - PMC                                   243         244         --         --          487
   Distribution                                                   3           4          3          1           11
   All Other                                                     --          --         --         --           --
   Corporate Expenses                                           372         576        660        759        2,367
                                                            -------    --------    -------    -------     --------
      Total depreciation and amortization                   $ 3,053    $  3,278    $ 3,152    $ 3,281     $ 12,764
                                                            =======    ========    =======    =======     ========
</TABLE>


                                       42
<PAGE>
CRITICAL ACCOUNTING POLICIES

     Critical accounting policies are those that require application of
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods.

     Not all of these significant accounting policies require management to make
difficult, subjective or complex judgments or estimates. However, management of
the Company is required to make certain estimates and assumptions during the
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. These estimates
and assumptions impact the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the
consolidated financial statements. Estimates and assumptions are reviewed
periodically and the effects of revisions are reflected in the period they are
determined to be necessary. Actual results could differ from those estimates.
The accounting policies and related risk described in our Annual Report on Form
10-K for the year ended June 30, 2004 are those that depend most heavily on
these judgments and estimates. As of December 31, 2004 there have been no
material changes to any of the critical accounting policies contained therein.

NEW ACCOUNTING PRONOUNCEMENTS

     During the quarter, the Financial Accounting Standards Board released three
new standards. These standards will be adopted by the Company during fiscal 2005
and are discussed in the notes to condensed consolidated financial statements
included in this report.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     In the normal course of operations, the Company is exposed to market risks
arising from adverse changes in interest rates, foreign currency exchange rates,
and commodity prices. As a result, future earnings, cash flows and fair values
of assets and liabilities are subject to uncertainty. The Company uses, from
time to time, foreign currency forward contracts as a means of hedging exposure
to foreign currency risks. The Company also utilizes, on a limited basis,
certain commodity derivatives, primarily on copper used in its manufacturing
processes, to hedge the cost of its anticipated purchase requirements. The
Company does not utilize derivative instruments for trading purposes. The
Company does not hedge its exposure to market risks in a manner that completely
eliminates the effects of changing market conditions on earnings, cash flows and
fair values. The Company monitors the financial stability and credit standing of
its major counterparties.

     For financial market risks related to changes in interest rates, foreign
currency exchange rates and commodity prices, reference is made to Part II, Item
7, Quantitative and Qualitative Disclosure about Market Risk, in our annual
report on Form 10-K for the fiscal year ended June 30, 2004 and to Notes 2 and
17 to our Consolidated Financial Statements included therein.

CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

FORWARD-LOOKING STATEMENTS

     This Report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Statements that are not
historical facts, including statements about our beliefs and expectations, are
forward-looking statements. Forward-looking statements include statements
preceded by, followed by or that include the words "may," "could," "would,"
"should," "believe," "expect," "anticipate," "plan," "estimate," "target,"
"project," "intend," or similar expressions. These statements include, among
others, statements regarding our expected business outlook, anticipated
financial and operating results, our business strategy and means to implement
the strategy, our objectives, the amount and timing of capital expenditures, the
likelihood of our success in expanding our business, financing plans, budgets,
working capital needs and sources of liquidity.


                                       43
<PAGE>
     Forward-looking statements are only predictions and are not guarantees of
performance. These statements are based on our management's beliefs and
assumptions, which in turn are based on currently available information.
Important assumptions relating to the forward-looking statements include, among
others, assumptions regarding demand for our products, the expansion of product
offerings geographically or through new applications, the timing and cost of
planned capital expenditures, competitive conditions and general economic
conditions. These assumptions could prove inaccurate. Forward-looking statements
also involve risks and uncertainties, which could cause actual results that
differ materially from those contained in any forward-looking statement. Many of
these factors are beyond our ability to control or predict. Such factors
include, but are not limited to, the following:

     -    our substantial leverage and potential inability to service our debt

     -    our dependence on distributions from our subsidiaries

     -    risks associated with our international operations and significant
          foreign assets

     -    our dependence on our Israeli operations

     -    competition in each of our markets

     -    potential environmental liability

     -    potential legislation affecting the use of medicated feed additives

     -    extensive regulation by numerous government authorities in the United
          States and other countries

     -    our reliance on the continued operation and sufficiency of our
          manufacturing facilities

     -    our reliance upon unpatented trade secrets

     -    the risks of legal proceedings and general litigation expenses

     -    potential operating hazards and uninsured risks

     -    the risk of work stoppages

     -    our dependence on key personnel

     See also the discussion under "Risks, Uncertainties and Liquidity" in Note
2 of our Condensed Consolidated Financial Statements included in this Report.

     In addition, the issue of the potential for increased bacterial resistance
to certain antibiotics used in certain food producing animals is the subject of
discussions on a worldwide basis and, in certain instances, has led to
government restrictions on the use of antibiotics in these food producing
animals. The sale of feed additives containing antibiotics is a material portion
of our business. Should regulatory or other developments result in further
restrictions on the sale of such products, it could have a material adverse
impact on our financial position, results of operations and cash flows.

     We believe the forward-looking statements in this Report are reasonable;
however, no undue reliance should be placed on any forward-looking statements,
as they are based on current expectations. Further, forward-looking statements
speak only as of the date they are made, and we undertake no obligation to
update publicly any of them in light of new information or future events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Information regarding quantitative and qualitative disclosures about market
risk is set forth in Item 2 of this


                                       44
<PAGE>
Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

     (a) Based upon an evaluation, under the supervision and with the
participation of our Principal Executive Officers and our Principal Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures, they have concluded that, as of the end of the period
covered by this Report, our disclosure controls and procedures, as defined in
Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, are
effective.

     (b) As of the end of the period covered by this Report there have been no
changes in our internal controls that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

     It should be noted that any system of internal controls, however well
designed and operated, can provide only reasonable, but not absolute, assurance
that the objectives of the system are met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of
future events. Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential conditions, regardless of how remote.


                                       45
<PAGE>
                          PART II -- OTHER INFORMATION

Item 5. Other Information

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

<TABLE>
<CAPTION>
Exhibit No.                               Description
- -----------                               -----------
<S>           <C>
   3.1(a)     Certificate of Amendment of Certificate of Incorporation of Phibro
              Animal Health Corporation, dated February 28, 2005 (previously
              filed as an Exhibit to the Company's Current Report on Form 8-K
              dated February 28, 2005).

   4.2.3      Third Supplemental Indenture, dated as of March 10, 2005, by and
              among Phibro Animal Health Corporation and Philipp Brothers
              Netherlands III B.V., as Issuers, the Guarantors named therein,
              and HSBC Bank USA, National Association as Trustee and Collateral
              Agent.

   10.39      Redemption Agreement, dated as of February 28, 2005, among the
              Company, PAHC Holdings Corporation, Palladium Capital Management,
              L.L.C., Palladium Equity Partners II, L.P., Palladium Equity
              Partners II-A, L.P., Palladium Equity Investors II, L.P., Jack C.
              Bendheim and Marvin S. Sussman (previously filed as an Exhibit
              to the Company's Current Report on Form 8-K dated February 28,
              2005).

   10.40      Agreement for the Sale and Purchase of the Entire Share Capital in
              Wychem Limited dated as of April 29, 2005 among Ferro Metal and
              Chemical Corporation Limited, Koffolk (1949) Limited and MRG
              Holdings Limited.

    31.1      Certification of Gerald K. Carlson, Chief Executive Officer
              required by Rule 15d-14(a) of the Act.

    31.2      Certification of Jack C. Bendheim, Chairman of the Board required
              by Rule 15d-14(a) of the Act.

    31.3      Certification of Richard G. Johnson, Chief Financial Officer
              required by Rule 15d-14(a) of the Act.

      32      Section 1350 Certifications of Phibro Animal Health Corporation.
</TABLE>

(b)  Reports on Form 8-K

     On February 15, 2005, the Company furnished a report on Form 8-K reporting
items 7.01 and 9.01.

     On March 3, 2005, the Company furnished a report on Form 8-K reporting
items 1.01, 1.02 and 9.01.

     On March 8, 2005, the Company furnished a report on Form 8-K reporting
items 7.01 and 9.01.


                                       46
<PAGE>
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                        PHIBRO ANIMAL HEALTH CORPORATION


Date: May 16, 2005                      By: /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                                    JACK C. BENDHEIM
                                                  CHAIRMAN OF THE BOARD


Date: May 16, 2005                      By: /S/ GERALD K. CARLSON
                                            ------------------------------------
                                                    GERALD K. CARLSON
                                                 CHIEF EXECUTIVE OFFICER


Date: May 16, 2005                      By: /s/ RICHARD G. JOHNSON
                                            ------------------------------------
                                                   RICHARD G. JOHNSON
                                                 CHIEF FINANCIAL OFFICER
                                            (PRINCIPAL FINANCIAL OFFICER AND
                                              PRINCIPAL ACCOUNTING OFFICER)


                                       47
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                               Description
- -----------                               -----------
<S>           <C>
   3.1(a)     Certificate of Amendment of Certificate of Incorporation of Phibro
              Animal Health Corporation, dated February 28, 2005 (previously
              filed as an Exhibit to the Company's Current Report on Form 8-K
              dated February 28, 2005).

   4.2.3      Third Supplemental Indenture, dated as of March 10, 2005, by and
              among Phibro Animal Health Corporation and Philipp Brothers
              Netherlands III B.V., as Issuers, the Guarantors named therein,
              and HSBC Bank USA, National Association as Trustee and Collateral
              Agent.

   10.39      Redemption Agreement, dated as of February 28, 2005, among the
              Company, PAHC Holdings Corporation, Palladium Capital Management,
              L.L.C., Palladium Equity Partners II, L.P., Palladium Equity
              Partners II-A, L.P., Palladium Equity Investors II, L.P., Jack C.
              Bendheim and Marvin S. Sussman (previously filed as an Exhibit
              to the Company's Current Report on Form 8-K dated February 28,
              2005).

   10.40      Agreement for the Sale and Purchase of the Entire Share Capital in
              Wychem Limited dated as of April 29, 2005 among Ferro Metal and
              Chemical Corporation Limited, Koffolk (1949) Limited and MRG
              Holdings Limited.

    31.1      Certification of Gerald K. Carlson, Chief Executive Officer
              required by Rule 15d-14(a) of the Act.

    31.2      Certification of Jack C. Bendheim, Chairman of the Board required
              by Rule 15d-14(a) of the Act.

    31.3      Certification of Richard G. Johnson, Chief Financial Officer
              required by Rule 15d-14(a) of the Act.

      32      Section 1350 Certifications of Phibro Animal Health Corporation.
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2.3
<SEQUENCE>2
<FILENAME>y09095exv4w2w3.txt
<DESCRIPTION>EX-4.2.3: THIRD SUPPLEMENTAL INDENTURE
<TEXT>
<PAGE>

                                                                  Exhibit 4.2.3

                        PHIBRO ANIMAL HEALTH CORPORATION

                                       and

                      PHILIPP BROTHERS NETHERLANDS III B.V.

                                   as Issuers

                                       and

                           the GUARANTORS named herein

                                       and

                       HSBC BANK USA, NATIONAL ASSOCIATION

                         as Trustee and Collateral Agent

                           ---------------------------

                          THIRD SUPPLEMENTAL INDENTURE

                           Dated as of March 10, 2005

                                       to

                                    INDENTURE

                          Dated as of October 21, 2003

                          ----------------------------

                                  127,491 Units

                             Each Unit Consisting of
       $809.5238095 principal amount of 13% Senior Secured Notes due 2007
                       of Phibro Animal Health Corporation
                                       and
                   $190.4761905 principal amount of 13% Senior
                        Secured Notes due 2007 of Philipp
                          Brothers Netherlands III B.V.


<PAGE>

     THIRD SUPPLEMENTAL INDENTURE ("Third Supplemental Indenture"), dated as of
March 10, 2005, among Phibro Animal Health Corporation (the "U.S. Issuer"),
Phillip Brothers Netherlands III B.V. (the "Dutch Issuer" and with the U.S.
Issuer, the "Issuers"), each of the Guarantors named herein, as guarantors, and
HSBC Bank USA, National Association, as Trustee (the "Trustee"). All capitalized
terms not otherwise defined herein shall have the meaning assigned to them in
the Indenture (as defined herein).

                              W I T N E S S E T H:

     WHEREAS the Issuers and the Guarantors named therein have heretofore
executed and delivered to the Trustee an Indenture, dated as of October 21,
2003, as amended by that certain First Supplemental Indenture dated as of June
25, 2004 and Second Supplemental Indenture, dated as of December 8, 2004 (as
such may be amended and supplemented from time to time, the "Indenture"),
providing for the issuance of 127,491 Units due 2007 (the "Units"), each Unit
consisting of $809.5238095 principal amount of 13% Senior Secured Notes due 2007
issued by Phibro Animal Health Corporation (the "U.S. Notes") and $190.4761905
principal amount of 13% Senior Secured Notes due 2007 issued by Philipp Brothers
Netherlands III B.V. (the "Dutch Notes" together, the "Notes"), including the
issuance of the Exchange Units; and

     WHEREAS, pursuant to the Registration Rights Agreement, the Issuers filed a
Registration Statement on Form S-4 (File No. 333-122063) with the Securities and
Exchange Commission (the "Commission") on January 14, 2005 under the Securities
Act of 1933, as amended (the "Act"), as amended by Amendment No. 1 thereto as
filed with the Commission on February 2, 2005, as amended by Post-Effective
Amendment No. 1 thereto as filed with the Commission on February 24, 2005 (such
Registration Statement, as so amended, being hereinafter referred to as the
"Registration Statement"), in connection with the Issuers' offer to exchange
(the "Exchange Offer") the aggregate principal amount of the unregistered
Initial Units for a like principal amount of Exchange Units, as registered under
the Act pursuant to the Registration Statement; and

     WHEREAS, the Registration Statement was declared effective by the
Commission on February 4, 2005, and Post-Effective Amendment No. 1 thereto was
declared effective by the Commission on March 2, 2005 and, pursuant to the
Registration Rights Agreement, the Exchange Offer was consummated on March 10,
2005; and

     WHEREAS, Section 9.01 of the Indenture provides that the Issuers and the
Trustee may execute this Third Supplemental Indenture without notice to or the
consent of any Holder to provide for issuance of the Exchange Units; and

     WHEREAS, the execution and delivery of this Third Supplemental Indenture
and the Exchange Units in the form of Exhibit B to the Indenture and the
Domestic, Dutch and Company Guaranties substantially in the form of Exhibits E,
F and G to the Indenture, respectively, have been authorized by resolution of
the respective Boards of Directors and shareholders of the Issuers and the
Guarantors; and

                                       2

<PAGE>

     WHEREAS, the Issuers and the Guarantors authorize the Trustee to cancel the
Initial Units and related Guarantees and to authenticate the Exchange Units and
related Guarantees in replacement therefor; and

     WHEREAS, all conditions and requirements necessary to make this Third
Supplemental Indenture and the Exchange Units the valid obligations of the
Issuers, and to make this Third Supplemental Indenture and the Guarantees
relating to the Exchange Units a valid and binding agreement of each of the
Guarantors, have been performed and fulfilled by the applicable parties hereto
and the execution and delivery hereof and thereof have been in all respects duly
authorized by the applicable parties hereto;

     NOW, THEREFORE, in consideration of the above premises, each party agrees,
for the benefit of the others and for the equal and ratable benefit of the
Holders of the Units, as follows:

          1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

          (b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.

          2. Exchange Offer - Initial Units for Exchange Units. Promptly
following the execution and delivery of this Third Supplemental Indenture, the
Trustee shall, upon the written order of the Issuers, in the form of an
Officers' Certificate of the Issuers, authenticate and deliver Exchange Units
substantially in the form of Exhibit B to the Indenture in replacement of
Initial Units whose Holders have accepted the Exchange Offer and exchanged their
Units in accordance therewith, and upon delivery of certificates representing
the Initial Units to the Trustee for cancellation, the Trustee shall cancel such
Initial Units.

          3. Acceptance by Trustee. The Trustee accepts this Third Supplemental
Indenture and agrees to execute the trust created by the Indenture as hereby
supplemented, but only upon the terms and conditions set forth in the Indenture,
including the terms and provisions defining and limiting the liabilities and
responsibilities of the Trustee, which terms and provisions shall in like manner
define and limit its liabilities and responsibilities in the performance of the
trust created by the Indenture as hereby supplemented.

          4. Supplemental Indenture Part of Indenture; Ratification of
Indenture. This Third Supplemental Indenture is executed and shall be construed
as an indenture supplemental to the Indenture and, as provided in the Indenture,
this Third Supplemental Indenture forms a part thereof. Except as otherwise
expressly provided for in this Third Supplemental Indenture, all of the terms
and conditions of the Indenture are hereby ratified and shall remain unchanged
and continue in full force and effect.

                                       3

<PAGE>

          5. Trustees Makes No Representation. The recitals contained in this
     Third Supplemental Indenture shall be taken as the statements made solely
     by the Issuers and the Guarantors, and the Trustee shall have no liability
     or responsibility for their correctness, and, without limiting the
     generality of the foregoing, the Trustee shall not be responsible in any
     manner whatsoever for or with respect to any of (i) the validity or
     sufficiency of this Third Supplemental Indenture or any of the terms or
     provisions hereof, (ii) the proper authorization hereof by the Issuers and
     the Guarantors by corporate action or otherwise, (iii) the due execution
     hereof by the Issuers and the Guarantors or (iv) the consequences (direct
     or indirect and whether deliberate or inadvertent) of any amendment herein
     provided for, and the Trustee makes no representation with respect to any
     such matters.

          6. Effective Date. This Third Supplemental Indenture shall become
     effective upon the execution and delivery hereof by the Issuers, the
     Guarantors and the Trustee.

          7. Governing Law. THIS THIRD SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
     BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS
     APPLIED TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK, WITHOUT
     GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
     THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED
     THEREBY.

          8. Counterparts. This Third Supplemental Indenture may be signed in
     any number of counterparts, each of which shall be an original, with the
     same effect as if the signatures thereto and hereto were upon the same
     instrument.

          9. Effect of Headings. The Section headings herein are for convenience
     only and shall not affect the construction thereof.



                    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       4

<PAGE>

                                   SIGNATURES

     IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental
Indenture to be duly executed, all as of the date written above.

                                      PHIBRO ANIMAL HEALTH CORPORATION

                                      By: /s/  Richard G. Johnson
                                          -------------------------------------
                                          Name:  Richard G. Johnson
                                          Title: Chief Financial Officer


                                      PHILIPP BROTHERS NETHERLANDS III B.V.

                                      By: /s/  Jack C. Bendheim
                                          -------------------------------------
                                          Name:  Jack C. Bendheim
                                          Title: Managing Director

                                      By: /s/  Joseph M. Katzenstein
                                          -------------------------------------
                                          Name:  Joseph M. Katzenstein
                                          Title: Managing Director


                                      DOMESTIC GUARANTORS:
                                      --------------------
                                      PRINCE AGRIPRODUCTS, INC.
                                      PHIBROCHEM, INC.
                                      PHIBRO ANIMAL HEALTH HOLDINGS, INC.
                                      PHIBRO CHEMICALS, INC.
                                      WESTERN MAGNESIUM CORP.
                                      C P CHEMICALS, INC.
                                      PHIBRO-TECH, INC.
                                      PHIBRO ANIMAL HEALTH U.S., INC.

                                      By: /s/  David C. Storbeck
                                          -------------------------------------
                                          Name:  David C. Storbeck
                                          Title: Vice President


                                      FOREIGN GUARANTOR:
                                      ------------------
                                      PHIBRO ANIMAL HEALTH SA

                                      By: /s/  Jack C. Bendheim
                                          -------------------------------------
                                          Name: Jack C. Bendheim
                                          Title: Managing Director


Accepted and Agreed to:
HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee and Collateral Agent

By: /s/  Herawattee Alli
    --------------------------------
    Name:  Herawattee Alli
    Title: Assistant Vice President

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>3
<FILENAME>y09095exv10w40.txt
<DESCRIPTION>EX-10.40: AGREEMENT FOR SALE AND PURCHASE
<TEXT>
<PAGE>
                                                                   Exhibit 10.40

                                                                  CONFORMED COPY

                              DATED 29 APRIL, 2005

                  FERRO METAL AND CHEMICAL CORPORATION LIMITED

                                       and

                             KOFFOLK (1949) LIMITED

                                       and

                              MRG HOLDINGS LIMITED

                     AGREEMENT FOR THE SALE AND PURCHASE OF
                   THE ENTIRE SHARE CAPITAL IN WYCHEM LIMITED
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>   <C>                                                                   <C>
1.    Definitions and interpretation.....................................     1
2.    Sale of the Sale Shares............................................     9
3.    Consideration......................................................    10
4.    Completion.........................................................    10
5.    Post-completion matters and further assurances.....................    11
6.    Warranties.........................................................    14
7.    Tax covenant.......................................................    15
8.    Restrictive covenants..............................................    15
9.    Claw-Back Provisions...............................................    17
10.   Announcements and confidentiality..................................    18
11.   Preservation of rights.............................................    19
12.   Notices............................................................    20
13.   Time...............................................................    21
14.   Entire agreement...................................................    21
15.   Alterations........................................................    22
16.   Severability.......................................................    22
17.   Counterparts.......................................................    22
18.   Payment of costs...................................................    22
19.   Successors, assigns and third party rights.........................    23
20.   Applicable law and submission to jurisdiction......................    23
</TABLE>


                                        i
<PAGE>
Schedule 1 - Sellers Details
Schedule 2 - Details of the Company
Schedule 3 - Warranties
Schedule 4 - Sellers Protection Provisions
Schedule 5 - Completion Provisions
Schedule 6 - The Properties
Schedule 7 - Tax Covenant
Schedule 8 - Business Information
Schedule 9 - Completion Accounts
Schedule 10 - Restricted Products


                                        1
<PAGE>
                              SHARE SALE AGREEMENT

Date: 29 April, 2005

Parties:

(1)  THE PERSONS whose names and addresses are stated in schedule 1 (together
     the "Sellers"); and

(2)  MRG HOLDINGS LIMITED (a company registered in England and Wales with number
     05315200) having its registered office at Market House, 10 Market Walk,
     Saffron Walden, Essex, CB10 1JZ (the "Buyer").

Operative provisions:

1.   DEFINITIONS AND INTERPRETATION

1.1  In this agreement unless the context otherwise requires the following
     expressions have the following meanings:

     "ACCOUNTING STANDARDS" statements of standard accounting practice
     (including financial reporting standards) issued pursuant to Section 256 of
     CA 1985 by the Accounting Standards Board Limited or such other body
     prescribed by the Secretary of State from time to time pursuant to Section
     256 of CA 1985;

     "ACCOUNTS" the Company's audited annual accounts (as defined in section 262
     CA 1985) for the accounting reference period ended on the Accounts Date,
     including the notes to those accounts and the associated directors' and
     auditors' reports;

     "ACCOUNTS DATE" 30 June, 2004;

     "ACCOUNTS RELIEF" any Relief the availability of which has been (i) shown
     or taken into account as an asset in the Accounts or (ii) taken into
     account in computing (and so reducing) any provision for deferred tax which
     appears in the Accounts or has resulted in no provision for deferred tax
     being shown in the Accounts;

     "AFFILIATE" any holding company or subsidiary undertaking of any company or
     any subsidiary undertaking of such holding company;

     "AGREED DOCUMENTS" this agreement and all the agreed form documents
     referred to in it;

     "AGREED FORM" in a form which has been agreed by the parties and which has
     been duly executed or initialled for identification by them or on their
     behalf;


                                       1
<PAGE>
     "BUSINESS DAY" any day other than a Saturday, Sunday or public holiday in
     England and Wales;

     "BUSINESS INFORMATION" Confidential Information belonging exclusively to
     the Company, including the processes employed by the Company in the
     creation of the products listed in schedule 8;

     "BUYER'S ACCOUNTANTS" such accountants as the Buyer may from time to time
     appoint;

     "BUYER'S SOLICITORS" Pellys LLP of The Old Monastery, Windhill, Bishops
     Stortford, Hertfordshire CM23 2ND;

     "CA 1985" the Companies Act 1985;

     "COMPANY" Wychem Limited, details of which are set out in schedule 2;

     "COMPLETION" completion of the sale and purchase of the Sale Shares by the
     performance by the parties of their respective obligations under clause 4
     and schedule 5;

     "COMPLETION ACCOUNTS" the accounts referred to in clause 5, prepared in
     accordance with schedule 9;

     "COMPLETION DATE" the date of this agreement;

     "CONFIDENTIAL INFORMATION" all information and records of a confidential or
     proprietary nature wherever located (including accounts, business plans and
     financial forecasts, Tax records, correspondence, designs, drawings,
     manuals, specifications, customer, sales and supplier information,
     technical or commercial expertise, software, formulae, processes, trade
     secrets, methods, knowledge and know-how) and which (either in their
     entirety or in the precise configuration or assembly of their components)
     are not publicly available and in each case whether or not recorded;

     "CONTRACTS ACT" the Contracts (Rights of Third Parties) Act 1999;

     "DPA 1998" the Data Protection Act 1998;

     "DISCLOSURE LETTER" the agreed form letter of the same date as this
     agreement from the Sellers to the Buyer disclosing certain matters in
     relation to the Warranties which has been delivered to the Buyer prior to
     the execution of this agreement;

     "ENACTMENT" any statute or statutory provision (whether of the United
     Kingdom or elsewhere), subordinate legislation (as defined by section 21(1)
     Interpretation Act 1978) and any other subordinate legislation made under
     any such statute or statutory provision;


                                       2
<PAGE>
     "ENCUMBRANCE" any option, trust, power of sale, title retention,
     pre-emption right, right of first refusal, Security Interest or other
     right, claim or interest, whether legal or equitable, of any third party
     (or an agreement or commitment to create any of them);

     "ENVIRONMENT" means air (including the air within buildings and the air
     within other natural or man-made structures whether above or below ground),
     water (including water under or within land or in drains or sewers and
     coastal and inland waters), and land (including land under water) and any
     other meaning given to "Environment" under any Environmental Law;

     "ENVIRONMENTAL LAWS" any and all statutes and subordinate legislation and
     any and all licences, consents, permits or other authorisations made or
     issued pursuant to or under or required by Environmental Laws in relation
     to the carrying on of the business of the Company which relate to:-

     (a)  the protection of the Environment; and/or

     (b)  the mitigation, abatement, containment or prevention of harm or damage
          to or other interference with the Environment, including by Relevant
          Substances; and/or

     (c)  the provision of remedies in respect of harm or damage to or other
          interference with the Environment;

     "ENVIRONMENTAL LICENCE" any and all licences, consents, permits or other
     authorisations made or issued pursuant to or under or required by
     Environmental Laws in relation to the carrying on of the business of the
     Company;

     "ENVIRONMENTAL PROCEEDINGS" any judgment, order, injunction or any
     proceeding (whether criminal, civil, judicial, regulatory or
     administrative), suit, action, claim, demand, citation, notice or complaint
     by or on behalf of any Relevant Authority or third party against the
     Company arising out of or in connection with any of the Properties pursuant
     to Environmental Laws;

     "EVENT" any event, act, transaction, action or omission (whether or not the
     Company is a party to it) and includes the disposal of the Sale Shares
     under this agreement, any change in the residence of any person for the
     purposes of Tax, the death or dissolution of any person, the receipt or
     accrual of any income profits or gains, any distribution, any transfer
     payment, loan or advance, and any event which is deemed to have occurred or
     is treated or regarded as having occurred for the purposes of Tax
     Legislation;

     "FAIRLY DISCLOSED" disclosed in such manner and in such detail as to enable
     a reasonable buyer having the characteristics of the Buyer, and in
     particular the fact that the certain directors of the Buyer are employees
     or former employees of the Company, to make an informed and accurate
     assessment of the matter concerned;


                                       3
<PAGE>
     "GOOD INDUSTRY PRACTICE" means the exercise of that degree of skill,
     diligence, prudence and foresight and the use of investigation, design and
     environmental and engineering principles which would reasonably and
     ordinarily be expected from a skilled and experienced person undertaking
     activities of the type in question under the same or similar circumstances
     and conditions and location concerned;

     "GUARANTEE" any guarantee, indemnity, suretyship, letter of comfort or
     other assurance, security or right of set-off given or undertaken directly
     or by way of counter-indemnity by a person to secure or support the
     obligations (actual or contingent) of any third party;

     "HISTORIC CONTAMINATION" means any Relevant Substances present on or before
     the Completion Date in the Environment at, on or under any Property
     (including any migration of such Relevant Substances from the Properties
     whether before or after the Completion Date);

     "HOLDING COMPANY" a holding company as defined by sections 736 and 736A CA
     1985;

     "ICTA 1988" the Income and Corporation Taxes Act 1988;

     "INCOME, PROFITS OR GAINS" includes income, profits or gains (including
     capital gains) of any description or from any source and income, profits or
     gains which are deemed to have been treated as earned, accrued or received
     for the purposes of any Tax;

     "INTELLECTUAL PROPERTY" means:

     (a)  patents, patent applications, know-how, trade marks, trade mark
          applications, service marks, trade names, registered designs,
          applications and rights to apply for any of those rights, trade,
          business and company names, copyright or other similar industrial or
          commercial right, database rights;

     (b)  rights under licences, consents, orders, statutes or otherwise in
          relation to a right in paragraph (a);

     (c)  rights of the same or similar effect or nature as or to those in
          paragraphs (a) and (b) which now or in the future may subsist; and

     (d)  the right to sue for past infringements of any of the foregoing rights

     "INTELLECTUAL PROPERTY RIGHTS" all Intellectual Property owned by the
     Company;

     "INTRA-GROUP DEBT" any amounts owing from the Company to any member of the
     Sellers' group of companies other than debts arising in the ordinary course
     of trading;


                                        4
<PAGE>
     "IT SYSTEMS" any computer hardware, software, operating systems, firmware,
     networking equipment or other equipment which is reliant on microchip
     technology owned by the Company;

     "LOSS" in relation to an Accounts Relief, the reduction modification
     claw-back counter-action disallowance or failure to obtain that Accounts
     Relief and "lost" shall be construed accordingly;

     "NEW RELIEF" any Relief which arises:

     (a)  as a result of any Event occurring after the Accounts Date; or

     (b)  in respect of any period commencing on or after the Accounts Date;

     "NOMINATED ACCOUNT" the Sellers' Solicitors' client account with the
     following details:

     Bank:         Coutts & Co
                   440 Strand
                   London WC2 0QS
     Swift Code:   COUTGB22
     Sort Code:    18-00-91
     IBAN No.:     GB97 COUT 180091 59812140
     A/c No.:      59812140
     A/c Name:     Cleary Gottlieb Steen & Hamilton LLP Client Dollar A/c;

     or such other account as the Sellers' Solicitors shall specify in writing;

     "OFFICIAL REQUIREMENT" any enactment, ordinance, pact, decree, treaty,
     code, directive, order, notice or official published plan or policy with
     legal or actual force in any geographical area and/or over any class of
     persons;

     "PERMIT" means:

     (a)  a permit, licence, consent, approval, certificate, qualification,
          specification, registration or other authorisation; or

     (b)  a filing of a notification, report or assessment,

     in each case necessary for the effective operation of the Company's
     business, its ownership, possession, occupation or use of an asset or the
     execution or performance of this Agreement;


                                        5
<PAGE>
     "PERSONAL DATA" any data held by the Company or sold or otherwise
     transferred or disclosed to the Buyer under or in contemplation of this
     agreement which falls within the definition of "personal data" given from
     time to time in DPA 1998;

     "PHIBRO" Phibro Animal Health Corporation, a company incorporated under the
     laws of the State of New York;

     "PROCESS" has the meaning given in DPA 1998;

     "PROHIBITED AREA" worldwide;

     "PROPERTIES" the freehold properties details of which are respectively set
     out in schedule 6;

     "RELEVANT AUTHORITY" any person or authority (including any nation,
     national or local governmental or international organisation and any
     subdivision or agency or executive arm of any of them, any court or
     judicial officer or any securities exchange) with legal or de facto power
     to impose and/or enforce compliance with any Official Requirement;

     "RELEVANT BREACH" any event, matter or circumstance which is inconsistent
     with, contrary to or otherwise a breach of any of the Warranties;

     "RELEVANT DATE" the date of the First Phase Report of the Site Protection
     and Monitoring Programme for the Company, being 30 April, 2004;

     "RELEVANT SUBSTANCE" any substance (whether in a solid or liquid form or in
     the form of a gas or vapour and whether alone or in combination with any
     other substance) or waste (as defined in the Environmental Protection Act
     1990) which is capable of causing harm to man or any other living organism
     supported by the Environment or damaging the Environment or public health
     or welfare;

     "RELIEF" any loss relief allowance exemption set-off deduction credit right
     to repayment or other relief available in relation to Tax or to the
     computation of income profits or gains for the purposes of Tax;

     "REMEDIAL ACTION" any action that is required by Environmental Law or by a
     Relevant Authority, or that is reasonably necessary to address a
     significant risk to human health or the Environment, to investigate, clean
     up, treat, remediate, control or remove Historic Contamination but to no
     higher standard than to achieve the Remedial Action standard required by
     Environmental Law or by a Relevant Authority or to the extent reasonably
     necessary to address any significant risk to human health or the
     Environment assuming in all cases the category of use (as laid down in the
     planning and/or zoning laws of the relevant Property) continues as that at
     the Completion Date;


                                        6
<PAGE>
     "RESPECTIVE PROPORTIONS" the respective proportions in which the Sellers
     are entitled to share the consideration for the Sale Shares as shown in
     schedule 1;

     "RESTRICTED PRODUCTS" the products listed in schedule 10;

     "SALE SHARES" the 200,000 Ordinary "A" Shares of L1.00 each and the 600,000
     Ordinary "B" Shares of L1.00 each in the capital of the Company as referred
     to in schedules 1 and 2;

     "SECURITY INTEREST" a mortgage, lien, pledge, charge (fixed or floating),
     assignment by way of security, hypothecation or other security interest (or
     an agreement or commitment to create any of them);

     "SELLERS' ACCOUNTANTS" such accountants as the Sellers may from time to
     time appoint;

     "SELLERS' SOLICITORS" Cleary Gottlieb Steen & Hamilton LLP of City Place
     House, 55 Basinghall Street, London EC2V 5EH;

     "SELLING DIRECTORS" Jack Clifford Bendheim, James Owen Herlands and Marvin
     Stuart Sussman, each being ex-directors of the Company that resigned from
     their positions as directors of the Company on or shortly prior to the date
     hereof;

     "SUBSIDIARY" a subsidiary as defined by sections 736 and 736A CA 1985;

     "TAX" any tax and any duty, levy, contribution or charge in the nature of
     tax, whether domestic or foreign, and any penalty or interest connected
     therewith;

     "TAX AUTHORITY" the Inland Revenue, HM Customs & Excise or other relevant
     Authority, (whether within or outside the United Kingdom) involved in the
     assessment, collection or administration of Tax;

     "TAX CLAIM" any notice, demand, assessment, letter or other document issued
     or action taken by or on behalf of any Tax Authority (whether before, on or
     after the date of this agreement) from which it appears that a Tax
     Liability is to be or may come to be imposed on the Company or that the
     Company is liable or is sought to be made liable to make any payment or
     increased or further payment to that Tax Authority;

     "TAX COVENANT" the covenant by the Sellers contained in schedule 7;

     "TAX LEGISLATION" any enactment, law or regulation providing for the
     imposition of Tax;

     "TAX LIABILITY" a liability to make an actual payment of, or of an amount
     in respect of, Tax (whether or not that liability is also or alternatively
     a liability of, or chargeable


                                        7
<PAGE>
     against or attributable to, any other person and whether or not the Company
     shall or may have a right of recovery or reimbursement against any other
     person);

     "TAX WARRANTIES" the Warranties contained in paragraphs 21, 22, 23 and 24
     of schedule 3;

     "TCGA 1992" the Taxation of Chargeable Gains Act 1992;

     "VATA 1994" the Value Added Tax Act 1994;

     "WARRANTIES" means the warranties contained in clause 6 and schedule 3;

     "WARRANTY CLAIM" any claim made by the Buyer for breach of any of the
     Warranties or any claim made under the Tax Covenant; and

     "WORKING CAPITAL AMOUNT" the aggregate value, as at the date of Completion,
     of all the Company's cash, stock and inventory, debtors and prepayments
     less creditors and accruals (but excluding any deferred taxes, deferred
     pollution control costs, management fees or Intra-Group Debt) as shown in
     the Completion Accounts.

1.2  In this agreement unless the context otherwise requires:

     1.2.1 references to a clause or schedule are to a clause of, or a schedule
          to, this agreement, references to this agreement include its schedules
          and references in a schedule or part of a schedule to a paragraph are
          to a paragraph of that schedule or that part of that schedule;

     1.2.2 references to this agreement or any other document or to any
          specified provision in any of them are to this agreement, that
          document or that provision as in force for the time being and as
          amended from time to time in accordance with their terms or, as the
          case may be, with the agreement of the relevant parties;

     1.2.3 words importing the singular include the plural and vice versa, words
          importing a gender include every gender and references to persons
          include corporations, partnerships and other unincorporated
          associations or bodies of persons;

     1.2.4 the words and phrases "other", "including" and "in particular" shall
          not limit the generality of any preceding words or be construed as
          being limited to the same class as the preceding words where a wider
          construction is possible;

     1.2.5 a person is connected with another person if he is so connected
          within the meaning of section 839 ICTA 1988;

     1.2.6 a reference to any enactment shall include:


                                        8
<PAGE>
          (a)  any provision which it has re-enacted (with or without
               modification) or modified; and

          (b)  that enactment as re-enacted, replaced or modified from time to
               time, whether before, on or after the date of this agreement;

          but any such changes taking effect after the date of this agreement
          shall not impose any additional liability or obligation on any of the
          parties or (except as specified in clause 16.1) deprive any of them of
          any right, in each case under this agreement; and

     1.2.7 references to books, records or other information include paper,
          electronically or magnetically stored data, film, microfilm, and
          information in any other form and references to "writing" or "written"
          include faxes and any other method of reproducing words in a legible
          and non-transitory form (excluding email).

1.3  The contents table and the descriptive headings to clauses, schedules and
     paragraphs in this agreement (and notes in brackets describing the subject
     matter of any enactment) are inserted for convenience only, have no legal
     effect and shall be ignored in interpreting this agreement.

1.4  Where any party gives in this agreement any indemnity in favour of any
     other party, the obligation of the indemnifying party shall be to make the
     relevant payment forthwith in full on demand and without any set-off,
     counterclaim or other deduction.

1.5  All agreements, obligations and liabilities (whether under warranties,
     representations, indemnities or otherwise) in this agreement on the part of
     any two or more of the Sellers are (unless expressly provided otherwise)
     joint and several and shall be construed accordingly and references to the
     Sellers shall include each of them severally.

1.6  Reference to an Event occurring on or before any date shall be deemed to
     include:

     1.6.1 any combination of two or more Events only the first or some of which
          shall have occurred before that date; and

     1.6.2 any Event which is treated or deemed to occur on or before that date
          for the purposes of any Tax.

2.   SALE OF THE SALE SHARES

2.1  The Sellers shall sell to the Buyer and the Buyer (relying, as the Sellers
     acknowledge, on the warranties, undertakings, covenants and indemnities of
     the Sellers referred to or contained in the Agreed Documents) shall
     purchase from the Sellers the Sale Shares.


                                        9
<PAGE>
2.2  The Sellers warrant to the Buyer that:

     2.2.1 the Sellers have the right to dispose of the Sale Shares on the terms
          set out in this agreement; and

     2.2.2 the Sellers are the legal and beneficial owners of the Sale Shares
          set alongside their names in schedule 1 and such Sale Shares are free
          of any Encumbrances;

     and the transfers of the Sale Shares to the Buyer shall be deemed to
     include expressly and be made subject to all the above provisions of this
     clause 2.2.

2.3  Title to, beneficial ownership of, and any risk attaching to, the Sale
     Shares shall pass on Completion and the Sale Shares shall be sold and
     purchased together with all rights and benefits attached or accruing to
     them at Completion (including the right to receive any dividends,
     distributions or returns of capital declared, paid or made by the Company
     after Completion).

2.4  Each Seller waives and releases (to the extent entitled to do so) any
     Encumbrance created by the Articles of Association of the Company or
     otherwise over Sale Shares agreed to be sold by the other Sellers.

2.5  The Buyer shall not be obliged to complete the purchase of any of the Sale
     Shares unless the purchase of all the Sale Shares is completed
     simultaneously.

3.   CONSIDERATION

3.1  The consideration for the Sale Shares shall be the payment on Completion by
     the Buyer to the Sellers of $3,741,664.20 subject to adjustment as provided
     in clause 5 and clause 9. The amount of the Intra-Group Debt is
     $1,008,335.80 and, upon Completion, the Buyer shall procure that the
     Company repays this amount to Phibro.

3.2  As between themselves the Sellers shall be entitled to the consideration
     received in respect of the Sale Shares in their Respective Proportions.

4.   COMPLETION

4.1  Completion shall take place at the offices of the Sellers' Solicitors (or
     at such other place as the parties may agree) on the Completion Date when
     all (but not part only unless the parties shall so agree) of the business
     set out in schedule 5 shall be transacted and the parties agree the matters
     contained in schedule 5.

4.2  Following compliance with the provisions of schedule 5, the Buyer shall pay
     the consideration for the Sale Shares by electronic funds transfer to the
     Nominated Account (the Sellers' Solicitors being authorised to receive it
     in that account), payment of the consideration for the Sale Shares into
     that account, and repayment of


                                       10
<PAGE>
     the Intra-Group Debt to Phibro, shall discharge the obligations of the
     Buyer under clause 3 and the Buyer shall have no obligation as to the
     distribution to or allocation of the consideration for the Sale Shares
     between the Sellers.

4.3  In consideration of the Buyer entering into this agreement each Seller:

     4.3.1 confirms that following Completion neither he nor any person
          connected with him will have any claim of any kind (actual or
          contingent) against the Company on any account except in respect of
          amounts due and payable for goods and services supplied by way of
          trading in the ordinary course of business; and

     4.3.2 irrevocably and unconditionally waives and undertakes to procure that
          each person connected with him shall waive with effect from Completion
          any claim (actual or contingent) which any of them may have against
          the Company except for those identified in clause 4.3.1.

5.   COMPLETION ACCOUNTS, POST-COMPLETION MATTERS AND FURTHER ASSURANCES

     PREPARATION OF COMPLETION ACCOUNTS

5.1  Forthwith after Completion and in any event within 30 Business Days of
     Completion, the Buyer shall procure that the Completion Accounts are
     prepared in accordance with schedule 9 and that the Completion Accounts
     shall be delivered to the Sellers.

5.2  For the purposes of this clause 5, the Sellers shall pay the charges of the
     Sellers' Accountants and other representatives and the Buyer shall pay the
     charges of the Buyer's Accountants and other representatives.

5.3  Unless within 20 Business Days after receipt of the Completion Accounts
     pursuant to clause 5.1 the Sellers shall have notified the Buyer of any
     disagreement or difference of opinion relating to the Completion Accounts,
     the parties shall be deemed to have accepted such Completion Accounts as
     accurate.

5.4  If within the period of 20 Business Days referred to in clause 5.3 the
     Sellers shall have notified the Buyer of any disagreement or difference of
     opinion relating to the Completion Accounts, and if, using their respective
     reasonable endeavours, the Buyer and the Sellers are able to resolve, or
     procure the resolution of, such disagreement or difference of opinion
     within 15 Business Days of the receipt of such notice, the parties shall be
     deemed to have accepted such accounts (as revised by such resolution) as
     accurate.

5.5  If the Sellers and the Buyer are unable to so resolve or procure such
     resolution within the 15 Business Day period referred to in clause 5.4, the
     matter in dispute shall be referred to a person agreed by the Sellers and
     the Buyer or, in the absence of such


                                       11
<PAGE>
     agreement, or if such agreement has not occurred within a further five
     Business Days, by a person nominated by the President for the time being of
     the Institute of Chartered Accountants in England and Wales upon the
     application of either the Sellers or the Buyer, such person (the
     "INDEPENDENT ACCOUNTANT") to act as an expert and not an arbitrator, whose
     decision (in the absence of manifest error) shall be final and binding on
     the Sellers and the Buyer and whose costs shall be borne equally by the
     Sellers and the Buyer. The Independent Accountant shall be instructed to
     determine the form and content of the Completion Accounts in accordance
     with the provisions of this clause 5 and schedule 9 and to make such
     determination within 15 Business Days of such instruction.

5.6  The parties shall use their respective reasonable endeavours to assist the
     Buyer's and the Sellers' respective representatives, the Buyer's
     Accountants, the Sellers' Accountants and (if applicable) the Independent
     Accountant and shall endeavour to procure that the matters required of each
     of them under this clause 5 are fulfilled as soon as practicable after
     their respective appointments. Without prejudice to the generality of the
     foregoing, each of the parties shall promptly on request supply, or procure
     that promptly on request there is supplied, to such persons all such
     documents and information as they each may require for such fulfilment.

     ADJUSTMENT OF CONSIDERATION

5.7  If the Working Capital Amount is more than L15,000 greater than L779,000,
     the Buyer shall pay to the Sellers the full amount of the excess and if the
     Working Capital Amount is more than L15,000 less than L779,000, the Sellers
     shall pay to the Buyer the full amount of the deficiency, provided that the
     Sellers shall have no obligation under this clause 5.7 to pay to the Buyer
     an amount in excess of L779,000. The amount of the excess or the deficiency
     to be paid pursuant to this clause 5.7 shall be referred to in this
     Agreement as the "WORKING CAPITAL ADJUSTMENT".

5.8  The Working Capital Adjustment shall be paid in cash:-

     (a)  within 60 days of Completion or, if the Completion Accounts have not
          been accepted or settled (whether under clause 5.3, 5.4 or 5.5) prior
          to such date, within 10 Business Days after the date on which the
          Completion Accounts have been accepted or settled (whether under
          clause 5.3, 5.4 or 5.5) together with interest on the amount to be
          paid calculated at the rate of 2 per cent. above the base lending rate
          from time to time of Lloyds TSB Bank plc from Completion until the
          date of actual payment;

     (b)  by electronic transfer for same day value to such bank account of the
          Buyer (if payment is to be made by the Sellers) as is notified to the
          Sellers by the Buyer (such notification to be made prior to the due
          date for payment) or to the bank account of the Sellers' Solicitors
          (if payment is to be made by the Buyer). Payment of such sum by such
          method shall be an effective discharge of the


                                       12
<PAGE>
          payer's obligation to pay such sum and the payer shall not be
          concerned to see to the application or be answerable for the loss or
          misapplication of such sum; and

     (c)  in full without any deduction, set-off or counterclaim.

5.9  Each Seller declares that for so long as he remains the registered holder
     of any of the Sale Shares after Completion he shall:

     5.9.1 hold the Sale Shares and the dividends and other distributions of
          profits or surplus or other assets declared, paid or made in respect
          of them after Completion and all rights arising out of or in
          connection with them in trust for the Buyer and any successors in
          title to the Buyer; and

     5.9.2 deal with and dispose of the Sale Shares and all such dividends,
          distributions and rights as are described in clause 5.9.1 as the Buyer
          or any such successor may direct.

5.10 Each Seller appoints the Buyer as his lawful attorney for the purpose of
     receiving notices of and attending and voting at all meetings of the
     members of the Company from Completion to the day on which the Buyer or its
     nominee is entered in the register of members of the Company as the holder
     of the Sale Shares and for that purpose each Seller authorises:

     5.10.1 the Company to send any notices or other communications in respect
          of his holding of Sale Shares to the Buyer; and

     5.10.2 the Buyer to complete in such manner as it thinks fit and to return
          proxy forms, consents to short notice and any other document required
          to be signed by him in his capacity as a member.

5.11 As soon as reasonably practicable following Completion the Sellers shall
     (and shall procure that any relevant third party shall) send to the Buyer
     at its registered office for the time being all documents, correspondence,
     memoranda, files and other records to which the Company is entitled and
     which are not located at the Properties or delivered at Completion (whether
     or not referred to in schedule 5).

5.12 Each Seller shall execute or, so far as is within his power, procure that
     any relevant third party shall execute, all such documents and/or do or, so
     far as each is able, procure the doing of such acts and things as the Buyer
     shall after Completion require in order to give effect to this agreement
     and any documents entered into under it and to give to the Buyer the full
     benefit of all the provisions of this agreement.


                                       13
<PAGE>
6.   WARRANTIES

6.1  In consideration of the Buyer entering into this agreement the Sellers
     warrant to the Buyer:

     6.1.1 (subject to clause 6.3) in the terms set out in schedule 3; and

     6.1.2 that any statement in schedule 3 which is qualified as being made "so
          far as the Sellers are aware" or "to the best of the knowledge,
          information and belief of the Sellers" or any similar expression is so
          qualified by reference to the actual knowledge of Dani Bendheim,
          having made due enquiry of Terry Robinson.

6.2  Subject to the provisions of Schedule 4 and without prejudice to any other
     provision of this Agreement, the Sellers shall indemnify the Buyer against
     any loss, claim, demand or damage (including costs) arising from breach of
     the Warranties in paragraphs 2.1 and 2.2 of schedule 3 or of the warranties
     in clause 2.2.

6.3  The Warranties are qualified to the extent of those matters Fairly
     Disclosed in the Disclosure Letter. Any claim in respect of any purported
     breach of any Warranty or representation contained herein, other than those
     Warranties and representations contained in paragraphs 5, 14 and 16 of
     schedule 3 or in the Tax Warranties, arising in respect of any matter known
     or which ought to have been known by the Buyer, by Terry Robinson, or by
     Bill Mathison, to be a breach of such Warranty or representation prior to
     Completion is hereby waived by the Buyer. Any claim in respect of any
     purported breach of any Warranty or representation contained in paragraphs
     5, 14 and 16 of schedule 3 or the Tax Warranties, arising in respect of any
     matter known by the Buyer, by Terry Robinson, or by Bill Mathison, to be a
     breach of such Warranty or representation prior to Completion is hereby
     waived by the Buyer.

6.4  Each of the paragraphs in schedule 3:

     6.4.1 shall be construed as a separate and independent warranty; and

     6.4.2 except as expressly provided otherwise in this agreement, shall not
          be limited by reference to any other paragraph in schedule 3 or by any
          other provision of any Agreed Document;

     and the Buyer shall have a separate claim and right of action in respect of
     every Relevant Breach.

6.5  All claims by the Buyer for damages or compensation in respect of any
     Relevant Breach shall be subject to the provisions for the protection of
     the Sellers in schedule 4.

6.6  The Warranties shall not in any respect be extinguished or affected by
     Completion.


                                       14
<PAGE>
6.7  Each Seller agrees with the Buyer:

     6.7.1 that the giving by the Company and/or any of its directors,
          employees, agents or advisers to any of the Sellers or their
          respective agents or advisers of any information or opinion in
          connection with the Warranties or the Agreed Documents or otherwise in
          relation to the business or affairs of the Company or in connection
          with the negotiation and preparation of the Agreed Documents shall not
          be deemed a representation, warranty or guarantee to any party of the
          accuracy of any such information or opinion;

     6.7.2 to waive any right or claim which he may have against the Company
          and/or any of its directors, employees agents or advisers for any
          error, omission or misrepresentation in any such information or
          opinion; and

     6.7.3 that any such right or claim shall not constitute a defence to any
          claim by the Buyer under or in relation to the Agreed Documents
          (including the Warranties).

7.   TAX COVENANT

7.1  The Sellers covenant with the Buyer in the terms of the Tax Covenant, which
     shall take effect from Completion.

8.   RESTRICTIVE COVENANTS

8.1  In order to protect the value of the Sale Shares and the Business
     Information each Seller covenants with the Company and the Buyer that
     without the prior consent in writing of the Buyer (such consent not to be
     unreasonably withheld) he shall not directly or indirectly, whether
     himself, or by his employees or agents and whether on his own behalf or on
     behalf of any other person, firm or company or otherwise, for the period
     specified in clause 8.2:

     8.1.1 carry on, be employed or otherwise engaged, concerned or interested
          in any capacity (whether or not for reward) in, provide any technical,
          commercial or professional advice to, or assist in any manner any
          business which is or is about to be involved in the manufacture,
          production, distribution or sale of the Restricted Products or any of
          them in the Prohibited Area in competition with the Company;

     8.1.2 in relation to the Restricted Products or any of them, solicit or
          canvass, accept orders from or otherwise deal with any person who:

          (a)  was a customer of the Company at any time during the 24 months
               prior to the Completion Date; or


                                       15
<PAGE>
          (b)  at the Completion Date was in the process of negotiating or
               contemplating doing business with the Company;

          and with whom that Seller had personal dealing in the course of the
          Company's business;

     8.1.3 solicit or entice away or attempt to solicit or entice away from the
          Company any senior employee employed or otherwise engaged by the
          Company on the Completion Date, whether or not that person would
          commit any breach of any employment contract by leaving the employment
          of the Company; or

     8.1.4 employ or otherwise engage any person, other than George Moffett, who
          at the Completion Date or during the preceding 24 months was employed
          or otherwise engaged by the Company and who as a result is or is
          reasonably likely to be in possession of any Business Information.

8.2  The covenants in clause 8.1 shall apply for the period of three years from
     the Completion Date; and

8.3  Each Seller covenants with the Buyer that he shall not at any time after
     Completion directly or indirectly, whether himself, or by his employees or
     agents or otherwise:

     8.3.1 carry on any trade or business or be associated with any person
          involved in any trade or business using the name Wychem or any name
          incorporating any words in that trading name or any confusingly
          similar name;

     8.3.2 in the course of carrying on any trade or business, claim, represent
          or otherwise indicate any ongoing association with the Company or, for
          the purpose of obtaining or retaining any business or custom, claim,
          represent or otherwise indicate any past association with the Company
          (other than in the case of any announcement made in accordance with
          the provisions of clause 10 upon Completion in respect of the sale of
          the Company hereunder);

     8.3.3 interfere or seek to interfere with, or with the continuance of, the
          supply of goods and services to or by the Company (or the terms of any
          such supply); or

     8.3.4 (subject to clause 8.5) without the consent of the Company or the
          Buyer use, whether on his own behalf or on behalf of any third party,
          or disclose to any third party, any Business Information; or

8.4  The Sellers shall not, either alone or jointly with, through or as
     managers, adviser, consultant or agent for a person, directly or indirectly
     use or authorise, encourage or assist any person to use in connection with
     any business or company, any of the Intellectual Property Rights (in
     particular (but without limitation) a name consisting of


                                       16
<PAGE>
     the word "Wychem" or resembling the same) or use in that connection
     anything which is intended, or is likely to be confused with any of the
     Intellectual Property Rights.

8.5  The restrictions in clauses 8.3.4 shall not apply:

     8.5.1 to any Business Information which is in or becomes part of the public
          domain, other than through a breach of the obligations of
          confidentiality set out in this agreement; or

     8.5.2 to any Seller to the extent that he is required to disclose Business
          Information by any Official Requirement (including the regulations of
          any securities exchange or other Relevant Authority to which he is
          subject).

8.6  Each Seller agrees with the Buyer that the covenants in clauses 8.1 to 8.3
     inclusive (on which each Seller confirms that he has received independent
     legal advice):

     8.6.1 are necessary for the protection of the value of the Sale Shares and
          the Company; and

     8.6.2 are given to induce the Buyer to enter into this agreement and in
          consideration of it doing so.

9.   CLAW-BACK PROVISIONS

9.1  In the event that the Buyer sells or transfers, whether directly or
     indirectly through the transfer in ownership of any holding company of the
     Company or otherwise, the Sale Shares or transfers in any way the business
     or a majority of the assets of the Company (the "CLAW-BACK SALE") within
     the period of two years (2) from the date of Completion (the "CLAW-BACK
     PERIOD") then;

9.2  the Buyer shall notify the Sellers of any Claw-Back Sale within the
     Claw-Back Period giving to the Sellers details of the Buyer of the
     Claw-Back Sale and the price payable under the agreement for the Claw-Back
     Sale, which price so notified shall include all forms of consideration
     whatsoever, whensoever and howsoever payable, whether cash or otherwise and
     whether actual, contingent or deferred; and

9.3  other than in the case of a Claw-Back Sale to an Affiliate of, or person
     connected with, the Buyer, on completion of any Claw-Back Sale the Buyer
     shall account to the Sellers for 50% of the amount which represents the
     difference between the consideration for the Sale Shares paid by the Buyer
     for the Sale Shares pursuant to this Agreement as provided in clause 3
     above and the net proceeds of the Claw-Back Sale by way of an adjustment to
     the consideration for the Sale Shares payable under clause 3; or


                                       17
<PAGE>
9.4  in the case of a Claw-Back Sale to an Affiliate, or person connected with,
     the Buyer, the Buyer shall ensure that the purchaser under such Claw-Back
     Sale undertakes in the agreement for such Claw-Back Sale to perform the
     obligations of the Buyer in respect of the Claw-Back Sale contained in this
     clause 9 on any future Claw-Back Sale to any non-Affiliate of the Buyer,
     or, in the event of any further Claw-Back Sale to another Affiliate, or
     person connected with, the Buyer, to ensure that the buyer under that
     further Claw-Back Sale undertakes in like manner.

9.5  For the avoidance of doubt, the net proceeds of any Claw-Back Sale shall be
     the total consideration paid under the Claw-Back Sale and shall include all
     forms of consideration whatsoever, whensoever and howsoever payable,
     whether cash or otherwise and whether actual, contingent or deferred.

9.6  Nothing in this clause 9 shall imply or impose any charge, lien, or
     restriction or other inhibition in the nature of such on the Buyer in
     relation to the Sale Shares.

10.  ANNOUNCEMENTS AND CONFIDENTIALITY

10.1 Except as expressly required by any Official Requirement or by any Relevant
     Authority, all announcements or circulars by, for or on behalf of any of
     the parties and relating to any matter provided for in any Agreed Document
     shall be in a form approved in writing by the parties in advance of issue.

10.2 Each party shall (without limit in time, but subject to clause 10.3) keep
     and procure to be kept secret and confidential all Confidential Information
     belonging to any other party disclosed or obtained as a result of the
     discussions and negotiations leading to the execution of, or the
     performance of, this agreement and shall neither use nor disclose any such
     Confidential Information except for the purposes of the proper performance
     of this agreement or with the prior written consent of that other party.
     Where disclosure is made to any employee, consultant, adviser or agent, it
     shall be made subject to obligations equivalent to those set out in this
     agreement. Each party shall use its best endeavours to procure that any
     such employee, consultant, adviser or agent complies with all those
     obligations. Each party shall be responsible to each other party in respect
     of any disclosure or use of any of that other party's Confidential
     Information by a person to whom disclosure is made. In this clause 10
     disclosure includes disclosure in writing or by any other means.

10.3 The obligations of confidentiality in this clause 10 shall not extend to a
     party in respect of any matter which that party can show:

     10.3.1 is in, or has become part of, the public domain other than as a
          result of a breach of the obligations of confidentiality under this
          agreement;

     10.3.2 was in that party's written records prior to the date of this
          agreement and not subject to any obligations as to confidentiality;


                                       18
<PAGE>
     10.3.3 was independently disclosed to that party by a third party entitled
          to disclose it; or

     10.3.4 is required to be disclosed under any Official Requirement or by any
          Relevant Authority.

11.  PRESERVATION OF RIGHTS

11.1 Either party may, in its discretion, in whole or in part release, compound
     or compromise, or waive its rights or grant time or indulgence in respect
     of, any liability to it under any Agreed Document and may do so as regards
     any one or more of the parties under that liability without affecting the
     liability of or its rights against any other party in respect of the same
     or any other liability, whether joint and several or otherwise.

11.2 If either party:

     11.2.1 grants any other party any indulgence, forbearance or extension of
          time; or

     11.2.2 does not ascertain or exercise any of its rights or remedies, or
          delays in doing so;

     the rights and remedies of either party in respect of this agreement are
     not diminished, waived or extinguished.

11.3 Any waiver of any right, obligation or remedy under, or compliance with or
     breach of any provision of, this agreement must be expressly stated in
     writing to be such a waiver, must specify the right, remedy, obligation,
     provision or breach to which it applies and must be signed by an authorised
     signatory of the party granting such waiver.

11.4 If either party waives any right, obligation or remedy under, or compliance
     with or breach of any provision of this agreement, it can still enforce
     that right, obligation or provision or claim that remedy subsequently and
     that waiver shall not be deemed to be a waiver of any subsequent breach of
     that or any other provision or of any other right, obligation or remedy.

11.5 The discontinuance, abandonment or adverse determination of any proceedings
     taken by either party to enforce any right or any provision of this
     agreement shall not operate as a waiver of, or preclude any exercise or
     enforcement or (as the case may be) further or other exercise or
     enforcement by such party of, that or any other right or provision.

11.6 All references in clauses 11.2 to 11.5 to:


                                       19
<PAGE>
     11.6.1 any right shall include any power, right or remedy conferred by this
          agreement on, or provided by law or otherwise available to, the
          parties; and

     11.6.2 any failure to do something shall include any delay in doing it.

11.7 The giving by any party of any consent to any act which by the terms of
     this agreement requires that consent shall not prejudice the right of such
     party to withhold or give consent to any similar act.

11.8 Clauses 11.1 to 11.6 inclusive shall apply (with the appropriate changes)
     to any rights under this agreement enforceable under the Contracts Act by
     any person who is not party to it.

11.9 All of the provisions of this agreement shall, so far as they are capable
     of being performed or observed, continue to be effective notwithstanding
     Completion except in respect of those matters then already performed and
     Completion shall not constitute a waiver of any of the parties' rights in
     relation to this agreement.

11.10 Without prejudice to the generality of this clause 11, if any Seller shall
     for any reason (including the illegality, invalidity or unenforceability of
     any obligation) not be liable in respect of any Relevant Breach or be
     released by the Buyer from any such liability, the other Seller shall
     remain liable in full in respect of that Relevant Breach (but without
     prejudice to their right to a contribution).

12.  NOTICES

12.1 Except as otherwise provided in this agreement, every notice under this
     agreement shall be in writing and shall be deemed to be duly given if it
     (or the envelope containing it) identifies the intended recipient as the
     addressee and:

     12.1.1 it is delivered by being handed personally to the addressee (or,
          where the addressee is a corporation, any one of its directors or its
          secretary);

     12.1.2 it is delivered by being left in a letter box or other appropriate
          place for the receipt of letters at the addressee's authorised address
          (as defined below); or

     12.1.3 the envelope containing the notice is properly addressed to the
          addressee at the addressee's authorised address and duly posted by the
          recorded delivery service (or by international recorded post if
          overseas) or the notice is duly transmitted to that address by
          facsimile transmission;

     and, in proving the service of any such notice, it shall be conclusive
     evidence to prove that the notice was duly given within the meaning of this
     clause 12.1.


                                       20
<PAGE>
12.2 A notice sent by post (or the envelope containing it) shall not be deemed
     to be duly posted for the purposes of clause 12.1.3 unless it is put into
     the post properly stamped or with all postal or other charges in respect of
     it otherwise prepaid. A notice sent by facsimile shall not be deemed duly
     sent for the purposes of clause 12.1.3 unless a transmission report showing
     successful transmission of the whole of the relevant notice to the correct
     facsimile number at the authorised address is obtained.

12.3 For the purposes of this clause 12 the authorised address of the Buyer and
     the Company respectively shall be the address of its registered office for
     the time being or (in the case of notices sent by facsimile transmission)
     its facsimile number at that address and the authorised address of each
     Seller shall be his address as set out in this agreement or such other
     address as he shall notify to the Buyer for this purpose or (in the case of
     notices sent by facsimile transmission) the facsimile number at the
     relevant address.

12.4 Any notice duly given within the meaning of clause 12.1 shall be deemed to
     have been both given and received:

     12.4.1 if it is delivered in accordance with clauses 12.1.1 or 12.1.2, on
          that delivery; and

     12.4.2 if it is duly posted or transmitted in accordance with clause 12.1.3
          by any of the methods specified in that clause, on the second (or,
          when sent by airmail, fifth) business day after the day of posting or
          (in the case of a notice transmitted by facsimile transmission) on
          receipt by the sender of a transmission report showing the successful
          transmission of the whole of the relevant notice or (if that
          transmission is not made during normal working hours on a business
          day) at 9.00 a.m. on the next business day.

12.5 For the purposes of this clause "notice" shall include any request, demand,
     instruction, communication or other document.

13.  TIME

13.1 Time shall be of the essence of this agreement as regards any time, date or
     period whether as originally fixed or as altered in accordance with this
     agreement.

14.  ENTIRE AGREEMENT

14.1 The Agreed Documents constitute the entire agreement between the parties in
     relation to the sale and purchase of the Sale Shares and other matters
     covered by them and supersede any previous agreement between the parties in
     relation to those matters, which shall cease to have any further effect. It
     is agreed that:


                                       21
<PAGE>
     14.1.1 no party has entered into any Agreed Document in reliance on, and
          each party unconditionally waives any claims in relation to, any
          statement, representation, warranty or undertaking that is not
          expressly set out or referred to in the Agreed Documents;

     14.1.2 in the absence of fraud, no party shall have any remedy in respect
          of any untrue statement made, to it or its representatives or agents,
          prior to this agreement being entered into and on which it or they
          relied other than representations, warranties or undertakings set out
          or referred to in the Agreed Documents and that party's only remedy in
          respect of representations, warranties and undertakings set out in the
          Agreed Documents shall be for breach of contract; and

     14.1.3 this clause shall not exclude any remedy or liability for fraudulent
          concealment or fraudulent misrepresentation.

14.2 Each Seller confirms that there are no agreements to which both he (or any
     connected person) and the Company are party, other than those of the Agreed
     Documents (if any) to which they are parties.

15.  ALTERATIONS

15.1 No purported alteration of this agreement shall be effective unless it is
     in writing, refers specifically to this agreement and is duly executed by
     each party to this agreement.

16.  SEVERABILITY

16.1 Each provision of this agreement is severable and distinct from the others.
     The parties intend that each of those provisions shall be and remain valid
     and enforceable to the fullest extent permitted by law. If any such
     provision is or at any time becomes to any extent invalid, illegal or
     unenforceable under any enactment or rule of law, it shall to that extent
     be deemed not to form part of this agreement but (except to that extent in
     the case of that provision) it and all other provisions of this agreement
     shall continue to be effective and their validity, legality and
     enforceability shall not be affected or impaired as a result, subject to
     the operation of this clause not negating the commercial intent and purpose
     of the parties under this agreement. The proviso to clause 1.2.6 shall be
     read subject to this clause 16.1.

16.2 If any provision of this agreement is illegal or unenforceable because any
     period or area specified in it exceeds that permitted by a Relevant
     Authority, that provision shall take effect with the minimum modification
     necessary to make it valid, effective and acceptable to that Relevant
     Authority subject to that modification not negating the commercial intent
     of the parties under this agreement.


                                       22
<PAGE>
17.  COUNTERPARTS

17.1 This agreement may be entered into in the form of two or more counterparts
     each executed by one or more of the parties but, taken together, executed
     by all of them and, provided that each party duly executes such a
     counterpart, each of the executed counterparts, when duly exchanged or
     delivered, shall be deemed to be an original, but, taken together, they
     shall constitute one instrument.

18.  PAYMENT OF COSTS

18.1 Each party shall be responsible for that party's own legal and other costs
     incurred in relation to the negotiation, preparation and completion of each
     of the Agreed Documents and all other relevant documents.

18.2 The Company shall not directly or indirectly pay or reimburse any costs or
     expenses in connection with any investigation relating to the Company or
     with the negotiation, completion or implementation of the Agreed Documents.

19.  SUCCESSORS, ASSIGNS AND THIRD PARTY RIGHTS

19.1 This agreement shall be binding on and shall enure for the benefit of the
     successors in title and personal representatives of each party.

19.2 None of the parties (nor any other person entitled to enforce rights under
     this agreement) may assign the benefit of any rights under this agreement.

19.3 The Company shall be entitled under the Contracts Act to enforce clause 8
     of this agreement.

19.4 Except as provided in clauses 19.3:

     19.4.1 the Contracts Act shall not apply to this agreement; and

     19.4.2 no person (including any employee, officer, agent, representative or
          sub-contractor of a party) other than a party to this agreement shall
          have the right (whether under the Contracts Act or otherwise) to
          enforce any term of this agreement which expressly or by implication
          confers a benefit on that person without the express prior agreement
          in writing of the parties, which agreement must refer to this clause
          19.4.

19.5 No consent shall be required from any person having rights under this
     agreement by virtue only of the Contracts Act to any amendment, variation,
     waiver or settlement of this agreement or any right or claim arising from
     or under it which (in each case) has been agreed by any party to it.


                                       23
<PAGE>
20.  APPLICABLE LAW AND SUBMISSION TO JURISDICTION

20.1 This agreement and any dispute or claim arising out of or in connection
     with it shall be governed by and construed in accordance with English law.

20.2 All disputes or claims arising out of or relating to this agreement shall
     be subject to the non-exclusive jurisdiction of the English Courts, to
     which the parties irrevocably submit.

IN WITNESS of the above the parties have executed this agreement as a deed on
the date written at the head of this agreement.


                                       24
<PAGE>
EXECUTED AND DELIVERED         )
AS A DEED by FERRO METAL AND   )
CHEMICAL CORPORATION LIMITED   )
acting by:                     )


/s/ George MOFFETT
- -------------------------------------
Director


/s/ Jack BENDHEIM
- -------------------------------------
Director/Secretary


EXECUTED AND DELIVERED                )
AS A DEED by KOFFOLK (1949) LIMITED   )
acting by:                            )


/s/ Jack BENDHEIM
- -------------------------------------
duly authorized for and on behalf of
Koffolk (1949) Limited


EXECUTED AND DELIVERED              )
AS A DEED by MRG HOLDINGS LIMITED   )
acting by:                          )


/s/ William MATHISON
- -------------------------------------
Director


/s/ Loretta MATHISON
- -------------------------------------
Director/Secretary


                                     -162-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>y09095exv31w1.txt
<DESCRIPTION>EX-31.1: CERTIFICATION
<TEXT>
<PAGE>
                                                                    Exhibit 31.1

                          Rule 15d-14(a) Certification


     I, Gerald K. Carlson, Chief Executive Officer of Phibro Animal Health
Corporation, certify that:

(1)  I have reviewed this quarterly report on Form 10-Q of Phibro Animal Health
     Corporation;

(2)  Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

(3)  Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

(4)  The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

(5)  The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.


Date:  May 16, 2005


/s/ Gerald K. Carlson
- ---------------------------
Gerald K. Carlson,
Chief Executive Officer
(Principal Executive Officer)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>y09095exv31w2.txt
<DESCRIPTION>EX-31.2: CERTIFICATION
<TEXT>
<PAGE>
                                                                    Exhibit 31.2

                          Rule 15d-14(a) Certification


     I, Jack C. Bendheim, Chairman of the Board of Phibro Animal Health
Corporation, certify that:

(1)  I have reviewed this quarterly report on Form 10-Q of Phibro Animal Health
     Corporation;

(2)  Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

(3)  Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

(4)  The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)  Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     b)  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     c)  Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter (the registrant's fourth fiscal quarter in
         the case of an annual report) that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

(5)  The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b)  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


Date:  May 16, 2005


/s/ Jack C. Bendheim
- ---------------------------
Jack C. Bendheim,
Chairman of the Board
(Principal Executive Officer)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.3
<SEQUENCE>6
<FILENAME>y09095exv31w3.txt
<DESCRIPTION>EX-31.3: CERTIFICATION
<TEXT>
<PAGE>
                                                                    Exhibit 31.3

                          Rule 15d-14(a) Certification


     I, Richard G. Johnson, Chief Financial Officer of Phibro Animal Health
Corporation, certify that:

(1)  I have reviewed this quarterly report on Form 10-Q of Phibro Animal Health
     Corporation;

(2)  Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

(3)  Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

(4)  The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)  Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     b)  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     c)  Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter (the registrant's fourth fiscal quarter in
         the case of an annual report) that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

(5)  The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b)  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


Date:  May 16, 2005


/s/ Richard G. Johnson
- ---------------------------
Richard G. Johnson,
Chief Financial Officer
(Principal Financial Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>y09095exv32.txt
<DESCRIPTION>EX-32: 1350 CERTIFICATION
<TEXT>
<PAGE>
                                                                      Exhibit 32


                           Section 1350 Certifications

     The undersigned hereby certifies that the quarterly report on Form 10-Q of
Phibro Animal Health Corporation (the "Registrant") for the quarter ended March
31, 2005, as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, and that the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Registrant.




Date: May 16, 2005                                    /s/ Gerald K. Carlson
                                                 -------------------------------
                                                        Gerald K. Carlson
                                                     Chief Executive Officer
                                                  (Principal Executive Officer)




Date: May 16, 2005                                   /s/ Richard G. Johnson
                                                 -------------------------------
                                                       Richard G. Johnson
                                                     Chief Financial Officer
                                                  (Principal Financial Officer)




</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
