<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

[x]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                  FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1998

                                       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 0-15673


                          INTERNATIONAL ABSORBENTS INC.
             (Exact name of registrant as specified in its charter)

    Province of British Columbia, Canada                      None
(State of other jurisdiction of incorporation     (IRS Employer Identification
            or organization)                                 Number)





                         410 - 1055 West Hastings Street
                           Vancouver, British Columbia
                                 Canada V6E 2E9
                    (Address of principal executive offices)

                                 (604) 681-6181
              (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 the number of shares outstanding of each of the issuer's classes of
common stock, as of May 31, 1998.

<TABLE>
<CAPTION>
No. of Shares                                      Title of Class
-------------                                      --------------
<S>                                                 <C>
Common Shares, no par value                         19,601,052
</TABLE>

UNAUDITED (ALL AMOUNTS IN US DOLLARS EXCEPT WHERE OTHERWISE NOTED)   PAGE 1 of 6

<PAGE>   2

                          INTERNATIONAL ABSORBENTS INC.
                           CONSOLIDATED BALANCE SHEETS
                           (US dollars, in thousands)


<TABLE>
<CAPTION>
                                                   APRIL 30, 1998   JANUARY 31, 1998
                                                   --------------   ----------------
<S>                                                <C>              <C>
ASSETS
Current assets:
        Cash                                          $    36           $    46
        Accounts receivable                               658               617
        Inventories                                       404               355
        Prepaid expenses                                   80                72
                                                      -------           -------
                                                      $ 1,178           $ 1,090
        Fixed assets                                    1,006             1,024
        Other assets                                       75                77
                                                      -------           -------
                                                      $ 2,259           $ 2,191
                                                      =======           =======
LIABILITIES
Current liabilities:
        Accounts payable                              $   706           $   740
        Operating line of credit                          501               504
        Convertible debentures                              0               250
        Due to related parties (Note 2)                    51                44
                                                      -------           -------
                                                      $ 1,258           $ 1,538
SHAREHOLDERS' EQUITY
        Share capital (Note 3)                        $ 6,643           $ 6,332
        Deficit                                        (5,642)           (5,679)
                                                      -------           -------
                                                      $ 2,259           $ 2,191
                                                      =======           =======
</TABLE>


                          INTERNATIONAL ABSORBENTS INC.
                           CONSOLIDATED BALANCE SHEETS
                           (US dollars, in thousands)
<TABLE>
<CAPTION>
                                                   3 MONTHS ENDED     3 MONTHS ENDED
                                                   APRIL 30, 1998    JANUARY 31, 1998
                                                   --------------    ----------------
<S>                                                <C>               <C>     
Sales revenues                                      $  1,411          $  1,117
Cost of goods sold                                      (926)             (807)
                                                    --------          --------
                                                         485               310
Gross margin                                              34%               28%
Corporate and administrative expenses:
        Marketing and sales                              195               176
        General and administrative                       261               345
                                                    --------          --------
                                                         456               521

Profit/(loss) before undernoted item                      29              (211)
Other income                                               8                 2
                                                    --------          --------
                                                          37              (209)

Deficit at beginning of period                        (5,679)           (5,118)
                                                    --------          --------
                                                      (5,642)           (5,327)
                                                    ========          ========
EBIDT                                                     74              (151)
Profit/(loss) per common share (in dollars)         $      0          $   (.01)
                                                    ========          ========
Weighted average number of common shares (in          16,696            14,951
thousands)
                                                    ========          ========
</TABLE>


UNAUDITED (ALL AMOUNTS IN US DOLLARS EXCEPT WHERE OTHERWISE NOTED)   PAGE 2 of 6
<PAGE>   3

                          INTERNATIONAL ABSORBENTS INC.
            CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
                           (US dollars, in thousands)


<TABLE>
<CAPTION>
                                                                      3 MONTHS ENDED
                                                              -------------------------------
                                                              APRIL 30, 1998   JANUARY 31, 1998
                                                              --------------   --------------
<S>                                                           <C>              <C> 
Cash flows from operating activities                                     (63)             (69)
Cash flows used in investing activities                                   (9)             (14)
Cash flows used in financing activities                                   62               29
Net decrease in cash                                                      10               51
                                                              --------------   --------------
Cash and cash equivalents, beginning of period                            46               97
                                                              --------------   --------------
Cash and cash equivalents, end of period                                  36               46
                                                              ==============   ==============
</TABLE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENT

(US dollars except where otherwise noted)

1.             BASIS OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of International
Absorbents Inc. ("IABS") and its wholly-owned subsidiaries Absorption Corp
("Absorption"), a Nevada company doing business in Washington State, and Total
Absorb Inc. ("TAI"), a British Columbia company.

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in Canada and with the
instructions to form 10-Q and Rule 10 of Regulation S-X promulgated by the
United States Securities and Exchange Commission. Differences with respect to
accounting principles generally accepted in the United States, which are not
significant, are disclosed in Note 12. Such financial statements do not include
all disclosures required by generally accepted accounting principles for annual
financial statement reporting purposes. However, there has been no material
change in the information disclosed in the Company's annual consolidated
financial statements dated January 31, 1998, except as disclosed herein.
Accordingly, the information contained herein should be read in conjunction with
such annual consolidated financial statements and related disclosures. Certain
amounts have been restated to conform with the presentation for Fiscal Year
1998.

The accompanying interim consolidated statements reflect, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the results of the interim periods
presented. Results of operations for the period ended April 30, 1998 are not
necessarily indicative of results expected for an entire year.

2.             CONVERTIBLE DEBENTURES

Pursuant to agreements entered into in July 1996, the company issued an
aggregate $625,000 of convertible debentures to private lenders in consideration
for cash. The debentures paid interest at an annual rate of 8% and were
converted, at the option of the holder, to common shares of the Company at a
price of $0.50 per share or less, dependent upon the market price of the
Company's shares on OTC Bulletin Board at the time of conversion. The terms of
the debentures required payment of any remaining principal and accrued interest
at their expiry in June 1998.

On April 6, 1998 the remaining principal due to the holders of the convertible
debentures was paid through the purchase of stock by employees of the company
($196,125) and the conversion of the debentures for 451,250 common shares from
treasury ($45,125).


UNAUDITED (ALL AMOUNTS IN US DOLLARS EXCEPT WHERE OTHERWISE NOTED)   PAGE 3 of 6

<PAGE>   4

3.             SHARE CAPITAL

               AUTHORIZED

               100,000,000 common shares without par value.

COMMON SHARES ISSUED
<TABLE>
<CAPTION>
                                                   SHARES              AMOUNT
                                                -----------         -----------
<S>                                             <C>                 <C>        
Balance as of January 31, 1997                   14,687,149         $ 5,950,565
For period ended January 31, 1998
For Cash
        Exercise of warrants                         65,000              32,500
        Exercise of options                               0                   0
Conversion of debentures                          1,943,789             353,125
                                                -----------         -----------
Issued during the year                            2,008,789             385,625
Share issue and registration expenses                                    (3,697)
                                                -----------         -----------
Balance as of January 31, 1998                   16,695,938         $ 6,332,493
                                                -----------         -----------
For period ended April 30, 1998
For Cash
        Exercise of warrants
        Exercise of options
Employee stock purchase                           3,013,867             256,177
Retirement of escrow shares                        (560,000)           (132,000)
Contributed capital                                                     150,997
                                                -----------         -----------
Conversion of debentures                            451,250             320,299
                                                -----------         -----------
Issued during the period                          2,905,117             320,299
Share issue and registration expenses                                   (10,102)
                                                -----------         -----------
Balance as of January 31, 1998                   19,601,055         $ 6,642,690
                                                -----------         -----------
</TABLE>

ESCROW SHARES

The 560,000 common shares issued in August 1988 to acquire the remaining
shareholdings in Absorption and Canadian Absorption corp. (a predecessor
subsidiary to TAI) are subject to the earn-out escrow agreement which provides
for release of the shares on the basis of cumulative cash flow (as defined by
the agreement) from the company's operations. Any of the 560,000 earn-out shares
that are not released from escrow on or before August 24, 1998 were subject to
cancellations.

On April 30, 1998 the 560,000 escrow shares owned by an officer and director of
the company were purchased for $50,000. The proceeds were reinvested as part of
the employee stock purchase.

STOCK OPTIONS
<TABLE>
<CAPTION>
                                                    NUMBER OF
                                                UNDERLYING SHARES     EXERCISE PRICE
                                                -----------------     --------------
<S>                                                 <C>              <C>  
Stock options outstanding January 31, 1997         1,291,500         $ 0.50 to C$3.90
        Granted                                            0
        Exercised                                          0
        Surrendered or expired                       (35,000)        $ 0.75 to $1.00
                                                  ----------         ----------------
Stock options outstanding January 31, 1998         1,256,500         $ 0.50 to C$3.90
                                                  ==========         ================
        Granted                                            0
        Exercised                                          0
        Surrendered or expired                       (56,000)        $ 0.75 to $1.00
                                                  ----------         ----------------
Stock options outstanding April 30, 1998           1,200,500         $ 0.50 to C$3.90
                                                  ==========         ================
</TABLE>
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<PAGE>   5

Stock options outstanding at April 30, 1997 are due to expire from June 24, 1998
to May 6, 2000. Pursuant to the vesting terms of the option agreements, stock
options to purchase 1,200,500 common shares were eligible for exercise at April
30, 1998 (January 31, 1998 - 1,256,500).

WARRANTS
<TABLE>
<CAPTION>
                                               NUMBER OF
                                            UNDERLYING SHARES     EXERCISE PRICE
                                            ----------------       --------------
<S>                                         <C>                  <C>  
Warrants outstanding January 31, 1997         1,994,980         $ 0.50 to $1.75
        Granted                                       0
        Exercised                               (65,000)                  $0.50
        Surrendered or expired                 (549,980)        $ 0.50 to $0.625
                                             ----------         -----------------
Warrants outstanding January 31, 1998         1,380,000         $ 0.50 to $1.75
                                             ==========         =================
        Granted                               1,506,933                   $0.25
        Exercised                                     0
        Surrendered or expired                 (400,000)                  $0.75
                                             ----------         -----------------
Warrants outstanding April 30, 1998           2,486,933         $ 0.25 to $1.75
                                             ==========         =================
</TABLE>

Warrants outstanding at April 30, 1998 are due to expire from January 31, 1999
to April 28, 2000.

MANAGEMENT'S DISCUSSION AND ANALYSIS

SALES REVENUE for the three months ended April 30, 1998 net of allowances and
discounts, were $1,411,000, an increase of 26% in comparison to the three months
ended April 30, 1997 total of $1,117,000. This increase in sales revenue was
mainly due to an increase in animal care products sales volumes.

For the balance of fiscal year 1998, further sales revenue growth is expected
due to continued expansion of the company's animal care distribution in the pet
bedding market. This sales growth will result from the addition of new regional
distributors, a regional sales manager, and an increase in volume through
existing distributors. The company's industrial division is also expected to
experience sales revenue growth as revised marketing strategies take effect and
its reformulated products gain acceptance.

GROSS PROFITS on total sales for the three months ended April 30, 1998 were
$485,000 (or 34%) versus $310,000 (or 28%) for the three months ended April 30,
1997. These increases were due to improvements in the company's manufacturing
efficiencies and an increase in the sales price of our animal care products.

NET PROFIT AND EBIDT improved for the three months ended April 30, 1998 versus
the three month period ended April 30, 1997. Net profits increase to $37,000
profit, from a loss of $209,105. The company's EBIDT increased from negative
$151,000 to positive $74,000 for the period. These increases were due to an
increase in sales, an improvement in the gross margin and a reduction of general
and administrative costs.

GENERAL AND ADMINISTRATIVE EXPENSES decreased for the three months ended April
30, 1998 to $261,000 from $345,000 for the three months ended April 30, 1997.
These decreases were principally due to a decrease in administrative staff and
the implementation of new cost controls.

Total general and administrative expenses for the fiscal year are expected to
remain at current levels, but decrease significantly as a percentage of sales.

MARKETING EXPENSES were $195,000 for the three months ended April 30, 1998, an
increase of 11% from the three month period ended April 30, 1997 total of
$176,000. This increase reflects an expansion of our animal care sales
activities.

Marketing expenses are expected to continue near this level for the remainder of
the 1998 fiscal year, while decreasing significantly as a percentage of sales
revenue.

UNAUDITED (ALL AMOUNTS IN US DOLLARS EXCEPT WHERE OTHERWISE NOTED)   PAGE 5 of 6

<PAGE>   6

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 1998 the company had a negative $80,000 in working capital. This
was an improvement from negative $448,000 at January 31, 1998. The current ratio
(current assets to current liabilities) at period end increased to 0.94 from
0.71 at January 31, 1998. These changes were mainly due to the retirement of the
convertible debentures.

CASH FLOW

Cash flow from operations improved to negative $63,000 for the three months
ended April 30, 1998 versus negative $69,000 for the three months ended April
30, 1997. The cash use for the period was mainly composed of a reduction in
accounts payable, an increase in inventory to meet customer needs and increased
accounts receivable due to increased sales. As sales revenues continue to grow,
the company's reliance on cash reserves for operations is expected to be
eliminated.

OUTLOOK

Additional sales revenue growth is anticipated through the rest of the current
fiscal year as the Animal Care division adds staff and continues to expand its
distributor network. The industrial division is anticipated to continue its
business expansion and to gain sales revenue domestically. With spending
continuing near current levels and sales revenue growth, there will be a
positive effect on income.

PART II - OTHER INFORMATION

5.             OTHER INFORMATION

               Directors as at April 30, 1998:

                      Gordon L. Ellis

                      Stephen H. Silbernagel

                      John J. Sutherland, Jr.

6.             EXHIBITS AND REPORTS ON FORM 8-K

                      No exhibits

                      No reports on Form 8-K have been filed during the period
ended April, 30, 1998.

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.


                                          INTERNATIONAL ABSORBENTS INC.
                                          (Registrant)



Date: 
     -------------------                   -------------------------------------
                                           Gordon L. Ellis
                                           President & CEO

UNAUDITED (ALL AMOUNTS IN US DOLLARS EXCEPT WHERE OTHERWISE NOTED)   PAGE 6 of 6