##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 31, 2006
 OR
 o
    
    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: 1-31642
 INTERNATIONAL ABSORBENTS INC.
  Province of British Columbia, Canada
    
    98-0487410(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1569 Dempsey RoadNorth Vancouver, British Columbia, Canada
  
     V7K 1S8(Address of principal executive offices)
    
    (Zip Code)
 (604) 681-6181
 None
 þ o
  o o þ
 o þ
  Class
    
    Outstanding at November 30, 2006Common Shares, no par value per share
    
    6,410,328 shares




---



##### 



PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
 INTERNATIONAL ABSORBENTS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 As at
    
    
    As atOctober 31,
    
    
    January 31,2006
    
    
    2006(unaudited)
    
    
    (audited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,805
    
    
    $
    2,198Restricted cash
    
    
    1,600
    
    
    
    Short term investments
    
    
    500
    
    
    
    609Accounts receivable, net
    
    
    2,739
    
    
    
    2,160Inventories
    
    
    2,639
    
    
    
    2,646Prepaid expenses
    
    
    199
    
    
    
    113Deferred income tax asset
    
    
    125
    
    
    
    96Total current assets
    
    
    10,607
    
    
    
    7,822Property, plant and equipment, net
    
    
    17,204
    
    
    
    16,430Other assets, net
    
    
    271
    
    
    
    261Total assets
    
    $
    28,082
    
    
    $
    24,513Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    3,621
    
    
    $
    2,243Related party payable
    
    
    5
    
    
    
    6Current portion of long-term debt
    
    
    643
    
    
    
    537Income taxes payable
    
    
    214
    
    
    
    62Total current liabilities
    
    
    4,483
    
    
    
    2,848Deferred income tax liability
    
    
    796
    
    
    
    785Long-term debt
    
    
    7,718
    
    
    
    6,726Total liabilities
    
    
    12,997
    
    
    
    10,359Stockholders equity:Common stock, no par value;
100,000,000 shares authorized,
6,410,328 and 6,320,768 issued and outstanding at
October 31, 2006 and January 31, 2006, respectively
    
    
    8,487
    
    
    
    8,299Additional paid in capital
    
    
    922
    
    
    
    652Retained earnings
    
    
    5,676
    
    
    
    5,203Total stockholders equity
    
    
    15,085
    
    
    
    14,154Total liabilities and stockholders equity
    
    $
    28,082
    
    
    $
    24,513
 2




---



##### 



INTERNATIONAL ABSORBENTS INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Nine Months Ended
    
    
    Three Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Sales, net
    
    $
    22,536
    
    
    $
    18,717
    
    
    $
    8,615
    
    
    $
    6,751Cost of goods sold
    
    
    15,254
    
    
    
    13,122
    
    
    
    5,546
    
    
    
    4,8427,282
    
    
    
    5,595
    
    
    
    3,069
    
    
    
    1,909Selling, general and administrative expenses
    
    
    6,294
    
    
    
    4,813
    
    
    
    2,924
    
    
    
    1,584Income from operations
    
    
    988
    
    
    
    782
    
    
    
    145
    
    
    
    325Interest expense
    
    
    (272
    )
    
    
    (241
    )
    
    
    (95
    )
    
    
    (80
    )Interest income
    
    
    88
    
    
    
    56
    
    
    
    35
    
    
    
    23Income before provision for income tax
    
    
    804
    
    
    
    597
    
    
    
    85
    
    
    
    268Income tax provision
    
    
    (331
    )
    
    
    (195
    )
    
    
    (16
    )
    
    
    (80
    )Net income
    
    $
    473
    
    
    $
    402
    
    
    $
    69
    
    
    $
    188Basic earnings per share
    
    $
    .07
    
    
    $
    .06
    
    
    $
    .01
    
    
    $
    .03Fully diluted earnings per share
    
    $
    .07
    
    
    $
    .06
    
    
    $
    .01
    
    
    $
    .03Weighted average number of shares outstanding
(in thousands)Basic
    
    
    6,402
    
    
    
    6,258
    
    
    
    6,410
    
    
    
    6,261Diluted
    
    
    6,404
    
    
    
    6,345
    
    
    
    6,410
    
    
    
    6,332
 3




---



##### 



INTERNATIONAL ABSORBENTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedOctober 31,
    
    
    October 31,2006
    
    
    2005(unaudited)
    
    
    (unaudited)Cash flows from operating activitiesNet income
    
    $
    473
    
    
    $
    402Adjustments
to reconcile net income to net cash from operating activitiesDepreciation and amortization
    
    
    1,108
    
    
    
    975Stock-based compensation
    
    
    270
    
    
    
    6Deferred tax
    
    
    (18
    )
    
    
    128Changes in operating assets and liabilitiesAccounts receivable
    
    
    (579
    )
    
    
    (404
    )Inventory
    
    
    7
    
    
    
    (775
    )Prepaid expenses
    
    
    (86
    )
    
    
    (11
    )Accounts payable and accrued liabilities
    
    
    1,402
    
    
    
    32Income tax receivable/payable
    
    
    152
    
    
    
    (70
    )Due to related party
    
    
    (1
    )
    
    
    Net cash flows from operating activities
    
    
    2,728
    
    
    
    283Cash flows from investing activitiesPurchase of short-term investments
    
    
    
    
    
    
    (110
    )Proceeds from short-term investments
    
    
    109
    
    
    
    220Purchase of property, plant and equipment
    
    
    (1,887
    )
    
    
    (1,560
    )Purchase of other assets
    
    
    (29
    )Increase in restricted cash
    
    
    (1,600
    )Proceeds from restricted cash
    
    
    
    
    
    
    437Net cash flows from investing activities
    
    
    (3,407
    )
    
    
    (1,013
    )Cash flows from financing activitiesProceeds from long-term debt
    
    
    1,600
    
    
    
    Repayment of long-term debt
    
    
    (502
    )
    
    
    (296
    )Proceeds from exercise of stock options
    
    
    188
    
    
    
    19Net cash flows from financing activities
    
    
    1,286
    
    
    
    (277
    )Net change in cash
    
    
    607
    
    
    
    (1,007
    )Cash and cash equivalents, beginning of period
    
    
    2,198
    
    
    
    3,520Cash and cash equivalents, end of period
    
    $
    2,805
    
    
    $
    2,513Supplemental Cash flow InformationCash paid for interest
    
    $
    135
    
    
    $
    248Cash paid for income taxes
    
    $
    188
    
    
    $
    130Non-cash investing activitiesChange in property, plant and equipment and accounts
payable for purchase of plant and equipment
    
    $
    (24
    )
    
    $
    64
 4




---



##### 



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Significant Accounting Policies
 Basis of consolidation and presentation
   Use of estimates
  New Accounting Pronouncements
 Fair Value Measurements
   Stock-based employee compensation
 5




---



##### 



6




---



##### 



Nine months ended
    
    
    Three months endedOctober 31,
    
    
    October 31,(U.S. dollars, in thousands, except for per share amounts)
    
    2005
    
    
    2005Net income
    
    $
    402
    
    
    $
    188Stock-based compensation recognized
under APB No. 25, net of related tax effects
    
    
    
    
    
    
    Compensation expense calculated in accordance
with SFAS 123, net of related tax effects
    
    
    (194
    )
    
    
    (67
    )Pro forma net income
    
    $
    208
    
    
    $
    121Basic earnings per shareAs reported
    
    $
    0.06
    
    
    $
    0.03Pro forma
    
    $
    0.03
    
    
    $
    0.02Diluted earnings per shareAs reported
    
    $
    0.06
    
    
    $
    0.03Pro forma
    
    $
    0.03
    
    
    $
    0.02
   Fiscal Year
    
    
    Fiscal Year2007
    
    
    2006a) risk free interest rate
    
    
    4.93
    %
    
    
    3.81
    %b) expected volatility
    
    
    128.5
    %
    
    
    124.2
    %c) expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %d) estimated average life (in years)
    
    
    5.8
    
    
    
    6.43e) weighted-average fair value per share
    
    $
    2.87
    
    
    $
    4.22
  Other stock-based compensation
  7




---



##### 



Options
  2. Segmented Information
    Business Segment Data  Nine Months Ended October 31, 2006
 Animal(U.S. dollars, in thousands)
    
    Care
    
    
    Industrial
    
    
    ConsolidatedRevenues
    
    $
    21,570
    
    
    $
    966
    
    
    $
    22,536Operating cost and expenses
    
    
    19,444
    
    
    
    996
    
    
    
    20,440Operating income (loss) before depreciation
and amortization
    
    
    2,126
    
    
    
    (30
    )
    
    
    2,096Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (1,108
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (272
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    88Net income before taxes
    
    
    
    
    
    
    
    
    
    $
    804
 8




---



##### 



Business
Segment Data  Nine Months Ended October 31, 2005
 Animal(U.S. dollars, in thousands)
    
    Care
    
    
    Industrial
    
    
    ConsolidatedRevenues
    
    $
    17,524
    
    
    $
    1,193
    
    
    $
    18,717Operating cost and expenses
    
    
    15,736
    
    
    
    1,224
    
    
    
    16,960Operating income (loss) before
depreciation and amortization
    
    
    1,788
    
    
    
    (31
    )
    
    
    1,757Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (975
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (241
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    56Net income before taxes
    
    
    
    
    
    
    
    
    
    $
    597
 Business Segment Data  Three Months Ended October 31, 2006
 Animal(U.S. dollars, in thousands)
    
    Care
    
    
    Industrial
    
    
    ConsolidatedRevenues
    
    $
    8,256
    
    
    $
    359
    
    
    $
    8,615Operating cost and expenses
    
    
    7,737
    
    
    
    368
    
    
    
    8,105Operating income (loss) before
depreciation and amortization
    
    
    519
    
    
    
    (9
    )
    
    
    510Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (365
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (95
    )Interest income
    
    
    
    
    
    
    
    
    
    
    35Net income before taxes
    
    
    
    
    
    
    
    
    
    $
    85
 Business Segment Data  Three Months Ended October 31, 2005
 Animal(U.S. dollars, in thousands)
    
    Care
    
    
    Industrial
    
    
    ConsolidatedRevenues
    
    $
    6,163
    
    
    $
    588
    
    
    $
    6,751Operating cost and expenses
    
    
    5,525
    
    
    
    564
    
    
    
    6,089Operating income (loss) before
depreciation and amortization
    
    
    638
    
    
    
    24
    
    
    
    662Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (337
    )Interest Expense
    
    
    
    
    
    
    
    
    
    
    (80
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    23Net income before taxes
    
    
    
    
    
    
    
    
    
    $
    268
 9




---



##### 



3. Inventories components
 October 31,
    
    
    January 31,(U.S. dollars, in thousands)
    
    2006
    
    
    2006Raw materials and supplies
    
    $
    1,292
    
    
    $
    1,351Finished goods
    
    
    1,347
    
    
    
    1,295$
    2,639
    
    
    $
    2,646
 4. Property, Plant and Equipment
 October 31,
    
    
    January 31,(U.S. dollars, in thousands)
    
    2006
    
    
    2006Property, plant and equipmentLand
    
    $
    1,547
    
    
    $
    1,547Buildings
    
    
    8,521
    
    
    
    8,474Leasehold improvements
    
    
    630
    
    
    
    630Equipment
    
    
    10,965
    
    
    
    10,127Construction in progress
    
    
    1,125
    
    
    
    147$
    22,788
    
    
    $
    20,925Less: Accumulated depreciation
    
    
    (5,584
    )
    
    
    (4,495
    )$
    17,204
    
    
    $
    16,430
 5. Selling, general and administration expenses
 Nine Months Ended
    
    
    Three Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,(U.S. dollars, in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Selling, general and administrative expenses
    
    $
    5,108
    
    
    $
    4,813
    
    
    $
    1,738
    
    
    $
    1,584Arbitration award
    
    
    1,186
    
    
    
    
    
    
    
    1,186
    
    
    
    $
    6,294
    
    
    $
    4,813
    
    
    $
    2,924
    
    
    $
    1,584
  6. Credit arrangements
  7. Long-term debt
  10




---



##### 



8. Legal Matters
   9. Earnings per share
 11




---



##### 



For the nine months endedOctober 31, 2006Net Income
    
    
    Shares
    
    
    Per share(U.S. dollars)
    
    (numerator)
    
    
    (denominator)
    
    
    amountBasic earnings per shareNet income available to stockholders
    
    $
    473,000
    
    
    
    6,401,682
    
    
    $
    0.07Effect of dilutive securitiesStock options to purchase common stock
    
    
    
    
    
    
    2,483Diluted earnings per sharesNet income available to stockholders
    
    $
    473,000
    
    
    
    6,404,165
    
    
    $
    0.07
 For the nine months endedOctober 31, 2005Net Income
    
    
    Shares
    
    
    Per share(numerator)
    
    
    (denominator)
    
    
    amountBasic earnings per shareNet income available to stockholders
    
    $
    402,000
    
    
    
    6,258,231
    
    
    $
    0.06Effect of dilutive securitiesStock options to purchase common stock
    
    
    
    
    
    
    87,019Diluted earnings per sharesNet income available to stockholders
    
    $
    402,000
    
    
    
    6,345,250
    
    
    $
    0.06
 For the three months endedOctober 31, 2006Net Income
    
    
    Shares
    
    
    Per share(U.S. dollars)
    
    (numerator)
    
    
    (denominator)
    
    
    amountBasic earnings per shareNet income available to stockholders
    
    $
    69,000
    
    
    
    6,410,328
    
    
    $
    0.01Effect of dilutive securitiesStock options to purchase common stock
    
    
    
    
    
    
    Diluted earnings per sharesNet income available to stockholders
    
    $
    69,000
    
    
    
    6,410,328
    
    
    $
    0.01
 For the three months endedOctober 31, 2005Net Income
    
    
    Shares
    
    
    Per share(numerator)
    
    
    (denominator)
    
    
    amountBasic earnings per shareNet income available to stockholders
    
    $
    188,000
    
    
    
    6,260,568
    
    
    $
    0.03Effect of dilutive securitiesStock options to purchase common stock
    
    
    
    
    
    
    71,185Diluted earnings per sharesNet income available to stockholders
    
    $
    188,000
    
    
    
    6,331,753
    
    
    $
    0.03
 12




---



##### 



For the nine months endedOctober 31,2006
    
    2005Stock options excluded from the computation of diluted net income
per share, other than those used in the determination of common
stock equivalents disclosed above
    
    
    497,150
    
    
    
    317,530
 For the three months endedOctober 31,2006
    
    2005Stock options excluded from the computation of diluted net income
per share, other than those used in the determination of common
stock equivalents disclosed above
    
    
    497,150
    
    
    
    317,530
 10. Subsequent event
  ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Overview
  Care FRESH ® Care FRESH ®
 13




---



##### 



Care FRESH ®
  Care FRESH ® Care FRESH ® Ultra Care FRESH ® Colors Care FRESH ® Colors Care FRESH ® Colors Care FRESH ® Ultra Care FRESH ® Colors Healthy Pet  Healthy Pet 
  RESULTS OF OPERATIONS
  October 31,
    
    
    Percent
    
    
    October 31,
    
    
    Percent
    
    
    Percentage2006
    
    
    of Sales
    
    
    2005
    
    
    of Sales
    
    
    ChangeSales, net
    
    $
    8,615
    
    
    
    100
    %
    
    $
    6,751
    
    
    
    100
    %
    
    
    28
    %Costs of goods sold
    
    
    5,546
    
    
    
    64
    %
    
    
    4,842
    
    
    
    72
    %
    
    
    15
    %Gross Profit
    
    
    3,069
    
    
    
    36
    %
    
    
    1,909
    
    
    
    28
    %
    
    
    61
    %Selling, administrative
and general expenses
    
    
    2,924
    
    
    
    34
    %
    
    
    1,584
    
    
    
    23
    %
    
    
    85
    %Income from operations
    
    
    145
    
    
    
    2
    %
    
    
    325
    
    
    
    5
    %
    
    
    -55
    %Interest income
    
    
    35
    
    
    
    0
    %
    
    
    23
    
    
    
    0
    %
    
    
    52
    %Interest expense
    
    
    (95
    )
    
    
    -1
    %
    
    
    (80
    )
    
    
    -1
    %
    
    
    19
    %Income before
provision for income
tax
    
    
    85
    
    
    
    1
    %
    
    
    268
    
    
    
    4
    %
    
    
    -68
    %Income taxes
    
    
    (16
    )
    
    
    0
    %
    
    
    (80
    )
    
    
    -1
    %
    
    
    -80
    %Net income
    
    $
    69
    
    
    
    1
    %
    
    $
    188
    
    
    
    3
    %
    
    
    -63
    %
 14




---



##### 



October 31,
    
    
    Percent
    
    
    October 31,
    
    
    Percent
    
    
    Percentage2006
    
    
    of Sales
    
    
    2005
    
    
    of Sales
    
    
    ChangeSales, net
    
    $
    22,536
    
    
    
    100
    %
    
    $
    18,717
    
    
    
    100
    %
    
    
    20
    %Costs of goods sold
    
    
    15,254
    
    
    
    68
    %
    
    
    13,122
    
    
    
    70
    %
    
    
    16
    %Gross Profit
    
    
    7,282
    
    
    
    32
    %
    
    
    5,595
    
    
    
    30
    %
    
    
    30
    %Selling,
administrative and
general expenses
    
    
    6,294
    
    
    
    28
    %
    
    
    4,813
    
    
    
    26
    %
    
    
    31
    %Income from operations
    
    
    988
    
    
    
    4
    %
    
    
    782
    
    
    
    4
    %
    
    
    26
    %Interest income
    
    
    88
    
    
    
    0
    %
    
    
    56
    
    
    
    0
    %
    
    
    57
    %Interest expense
    
    
    (272
    )
    
    
    -1
    %
    
    
    (241
    )
    
    
    -1
    %
    
    
    13
    %Income before
provision for income
tax
    
    
    804
    
    
    
    4
    %
    
    
    597
    
    
    
    3
    %
    
    
    35
    %Income taxes
    
    
    (331
    )
    
    
    -1
    %
    
    
    (195
    )
    
    
    -1
    %
    
    
    70
    %Net income
    
    $
    473
    
    
    
    2
    %
    
    $
    402
    
    
    
    2
    %
    
    
    1
    %
  Net Sales
 Care FRESH ® Ultra Care FRESH ® Colors
 Care FRESH ® Care FRESH Ultra Care FRESH ® Colors. Care FRESH ®
 Gross Profit
  15




---



##### 



Selling, General and Administrative Expenses
     16




---



##### 



Interest Expense
  Income Tax
  Net Income
   Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
   17




---



##### 



For the quarter ended(U.S. dollars in thousands)
    
    October 31, 2007
    
    October 31, 2006
    
    Percentage ChangeNet Income (Loss) (as
reported on Condensed
Consolidated Statement of
Operations)
    
    $
    69
    
    
    $
    188Interest expense
    
    
    95
    
    
    
    80Interest income
    
    
    (35
    )
    
    
    (23
    )Income tax provision
    
    
    16
    
    
    
    80Depreciation & amortization
    
    
    365
    
    
    
    337EBITDA
    
    $
    510
    
    
    $
    662
    
    
    
    -23
    %
 For the nine months ended(U.S. dollars in thousands)
    
    October 31, 2007
    
    October 31, 2006
    
    Percentage ChangeNet Income (Loss) (as
reported on Condensed
Consolidated Statement of
Operations)
    
    $
    385
    
    
    $
    402Interest expense
    
    
    272
    
    
    
    241Interest income
    
    
    (88
    )
    
    
    (56
    )Income tax provision
    
    
    270
    
    
    
    195Depreciation & amortization
    
    
    1,108
    
    
    
    975EBITDA
    
    $
    1,947
    
    
    $
    1,757
    
    
    
    11
    %
  LIQUIDITY AND CAPITAL RESOURCES
   As of October 31,
    
    As of January 31,2006
    
    2006Financial ConditionTotal Assets
    
    $
    28,082
    
    
    $
    24,513Total Liabilities
    
    
    12,997
    
    
    
    10,359Total Equity
    
    $
    15,085
    
    
    $
    14,154Debt/equity ratio
    
    
    0.86
    
    
    
    0.73Assets/debt ratio
    
    
    2.16
    
    
    
    2.37Working CapitalCurrent assets
    
    $
    10,607
    
    
    $
    7,822Current liabilities
    
    $
    4,483
    
    
    $
    2,848Current ratio
    
    
    2.37
    
    
    
    2.75Cash PositionCash and short term investments
    
    $
    4,905
    
    
    $
    2,807Cash generated from operations
    
    $
    2,728
    
    
    $
    667
    *
 
 *
    
    for the entire year ended January 31, 2006 18




---



##### 



Financial Condition
    Working Capital
  Cash Position
  19




---



##### 



Cash Generated from Operations
  Financing and Investing Activities
      Environmental Matters
  Off-Balance Sheet Arrangements
  20




---



##### 



CRITICAL ACCOUNTING POLICIES
   FORWARD-LOOKING STATEMENTS
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      21




---



##### 



ITEM 4. CONTROLS AND PROCEDURES
   PART II
 OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
   ITEM 1A. RISK FACTORS
  ITEM 6. EXHIBITS
 ExhibitNumber
    
    Exhibit Description3.1
    
    Notice of Articles of the Company.3.2
    
    Articles of the Company.10.19
    
    Washington Economic Development Finance Authority Economic Development Revenue Bond dated
September 14, 2006.10.20
    
    Loan Agreement among GE Capital Public Finance, Inc., as lender, Washington Economic
Development Finance Authority, as issuer, and Absorption Corp., as borrower, dated as of
September 1, 2006.10.21
    
    Corporate Guaranty and Negative Pledge Agreement given by International Absorbents Inc.
dated as of September 1, 2006.31.1
    
    Certification of Gordon Ellis, President and Chief Executive Officer of International
Absorbents Inc., pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of David Thompson, Chief Financial Officer of International Absorbents Inc.,
pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Gordon Ellis, President and Chief Executive Officer of International
Absorbents Inc., pursuant to 18 U.S.C. Section 1350.32.2
    
    Certification of David Thompson, Chief Financial Officer of International Absorbents Inc.,
pursuant to 18 U.S.C. Section 1350.
 22




---



##### 



SIGNATURES
  INTERNATIONAL ABSORBENTS INC.(Registrant)Date: December 8, 2006
    
    /s/ GORDON L. ELLIS
     
      Gordon L. EllisPresident and Chief Executive Officer(Principal Executive Officer)Date: December 8, 2006
    
    /s/ DAVID H. THOMPSON
     
      David H. ThompsonSecretary and Chief Financial Officer(Principal Financial Officer)
 23