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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, 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 July 31, 2002                   
|                                                                |  |                                                                                         
|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
(State of other jurisdiction of incorporation or organization) |  | None
(IRS Employer Identification Number)

1569 Dempsey Road
North Vancouver, British Columbia
Canada V7K 1S8
(Address of principal executive offices)

(604) 681-6181
(Issuers telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [   ] No [   ]

State the number of shares outstanding of each of the issuers classes of
common stock, as of September 5, 2002.

|                                           |  |                        
|------------------------------------------ |  | -----------------------
|Title of Class
Common Shares, no par value |  | No. of Shares
5,662,144



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TABLE OF CONTENTS



|                                                           |                                                        |  |  |  |  |  |  | 
|---------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  |  | 
|CONDENSED CONSOLIDATED BALANCE SHEETS                     
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS           
|CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      
|                                                           | Item 2.                                               
|MANAGEMENTS DISCUSSION AND ANALYSIS                      
|RESULTS OF OPERATIONS                                     
|                                                           | Sales                                                 
|                                                           | Gross Profits                                         
|                                                           | Other Expenses and Income                             
|                                                           | Net Income                                            
|                                                           | Currency                                              
|                                                           | Inflation                                             
|                                                           | Environmental Matters                                 
|LIQUIDITY AND CAPITAL RESOURCES                           
|                                                           | Financial Condition                                   
|                                                           | Cash Generated from Operations                        
|                                                           | Working Capital                                       
|                                                           | Financing and Investing Activities                    
|                                                           | Commitments and Guarantees                            
|CRITICAL ACCOUNTING POLICIES                              
|                                                           | Accounts Receivable                                   
|                                                           | Inventories                                           
|                                                           | Property, plant and equipment                         
|                                                           | Revenue recognition                                   
|                                                           | Income taxes                                          
|                                                           | Use of estimates                                      
|                                                           | Impairment of long-lived assets                       
|                                                           | New accounting pronouncements                         
|                                                           | Risk Factors                                          
|Forward-looking Statements                                
|PART II  OTHER INFORMATION                               
|                                                           | 4. Submission of Matters to a Vote of Security Holders
|                                                           | 5. Other Information                                  
|                                                           | 6. Exhibits and Reports on Form 8-K                   
|SIGNATURES                                                
|CERTIFICATION of Gordon L. Ellis                          
|CERTIFICATION of David H. Thompson                        



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

|                                        |                                                                                                      |                            |       |               |       |                  |       |       |       | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------------- | -------------------------- | ----- | ------------- | ----- | ---------------- | ----- | ----- | ----- | 
|                                        |                                                                                                      |                            |       | As at         |       | As at           
|                                        |                                                                                                      |                            |       | July 31, 2002 |       | January 31, 2002
|                                        |                                                                                                      |                            |       |               |       |                 
|                                        |                                                                                                      |                            |       | (unaudited)   |       | (audited)       
|ASSETS                                  |                                                                                                      |                            |       |               |       |                  |       |      
|Current assets:                         |                                                                                                      |                            |       |               |       |                  |       |      
|                                        | Cash and cash equivalents                                                                            |                            | $     | 3,920         |       |                  | $     | 3,806 |      
|                                        | Short term investments                                                                               |                            |       | 100           |       |                  |       | 100   |      
|                                        | Accounts receivable, net                                                                             |                            |       | 1,206         |       |                  |       | 1,135 |      
|                                        | Inventories                                                                                          |                            |       | 801           |       |                  |       | 679   |      
|                                        | Prepaid expenses                                                                                     |                            |       | 282           |       |                  |       | 186   |      
|                                        | Receivable from related party                                                                        |                            |       | 25            |       |                  |       |      |      
|                                        | Deferred income tax asset                                                                            |                            |       | 584           |       |                  |       | 905   |      
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|                                        |                                                                                                      |                            | 6,918 |               |       |                  | 6,811 |      
|                                        | Property, plant and equipment                                                                        |                            |       | 2,041         |       |                  |       | 1,341 |      
|                                        | Intangible assets                                                                                    |                            |       | 87            |       |                  |       | 105   |      
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|                                        |                                                                                                      | $                          | 9,046 |               |       | $                | 8,257 |      
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|LIABILITIES                             |                                                                                                      |                            |       |               |       |                  |       |      
|Current liabilities:                    |                                                                                                      |                            |       |               |       |                  |       |      
|                                        | Accounts payable and accrued liabilities                                                             |                            |       | 1,012         |       |                  |       | 993   |      
|                                        | Income taxes payable                                                                                 |                            |       | 42            |       |                  |       | 52    |      
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|                                        |                                                                                                      |                            | 1,054 |               |       |                  | 1,045 |      
|Long term liability:                    |                                                                                                      |                            |       |               |       |                  |       |      
|                                        | Deferred income tax liability                                                                        |                            |       | 56            |       |                  |       | 56    |      
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|                                        |                                                                                                      |                            | 1,110 |               |       |                  | 1,101 |      
|SHAREHOLDERS EQUITY                    |                                                                                                      |                            |       |               |       |                  |       |      
|Common stock, no par value,             |                                                                                                      |                            |       |               |       |                  |       |      
|                                        | 100,000,000 shares authorized
5,662,144 issued and outstanding at
July 31, 2002 and January 31, 2002 |                            |       | 7,048         |       |                  |       | 7,048 |      
|Additional paid in capital              |                                                                                                      |                            | 418   |               |       |                  | 288   |      
|Retained earnings (accumulated deficit) |                                                                                                      |                            | 470   |               |       |                  | (180  | )    
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|                                        |                                                                                                      | Total shareholders equity |       |               | 7,936 |                  |       |       | 7,156 | 
|                                        |                                                                                                      |                            |       |               |       |                  |       |      
|                                        |                                                                                                      | $                          | 9,046 |               |       | $                | 8,257 |      
|                                        |                                                                                                      |                            |       |               |       |                  |       |      

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

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INTERNATIONAL ABSORBENTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US dollars, in thousands, except for per share amounts)

|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |       | 
|------------------------------------------------------------ | -------------------------- | - | ---------------- | ----- | ------------------ | - | ------------- | ----- | ------------- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                             |                            |   | Six Months Ended |       | Three Months Ended
|                                                             |                            |   |                  |       |                   
|                                                             |                            |   | July 31, 2002    |       | July 31, 2001      |   | July 31, 2002 |       | July 31, 2001
|                                                             |                            |   |                  |       |                    |   |               |       |              
|Sales revenue                                                |                            | $ | 7,258            |       |                    | $ | 5,737         |       |               | $ | 3,570 |       |  | $ | 3,196 |      
|Cost of goods sold                                           |                            |   | 4,136            |       |                    |   | 3,239         |       |               |   | 2,147 |       |  |   | 1,710 |      
|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|                                                             |                            |   | 3,122            |       |                    |   | 2,498         |       |               |   | 1,423 |       |  |   | 1,486 |      
|Corporate and administrative expenses:                       |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|                                                             | Marketing and sales        |   |                  | 1,090 |                    |   |               | 736   |               |   |       | 536   |  |   |       | 427   | 
|                                                             | General and administrative |   |                  | 1,091 |                    |   |               | 831   |               |   |       | 599   |  |   |       | 497   | 
|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|                                                             |                            |   | 2,181            |       |                    |   | 1,567         |       |               |   | 1,135 |       |  |   | 924   |      
|                                                            
|Net income from operations                                   |                            |   | 941              |       |                    |   | 931           |       |               |   | 288   |       |  |   | 562   |      
|Interest income                                              |                            |   | 30               |       |                    |   | 78            |       |               |   | 4     |       |  |   | 36    |      
|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|Net income before income taxes                               |                            |   | 971              |       |                    |   | 1,009         |       |               |   | 292   |       |  |   | 598   |      
|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|Income tax provision                                         |                            |   |                  |       |                    |   | (10           | )     |               |   |       |       |  |   | (5    | )    
|Deferred income tax provision                                |                            |   | (321             | )     |                    |   | (360          | )     |               |   | (33   | )     |  |   | (222  | )    
|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|Net income for the period                                    |                            | $ | 650              |       |                    | $ | 639           |       |               | $ | 259   |       |  | $ | 371   |      
|                                                             |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|Basic earnings per share                                     |                            | $ | 0.11             |       |                    | $ | 0.11          |       |               | $ | 0.05  |       |  | $ | 0.07  |      
|Fully diluted                                                |                            | $ | 0.11             |       |                    | $ | 0.11          |       |               | $ | 0.04  |       |  | $ | 0.06  |      
|Weighted average number of shares
outstanding (in thousands) |                            |   |                  |       |                    |   |               |       |               |   |       |       |  |   |       |      
|                                                             | Basic                      |   |                  | 5,662 |                    |   |               | 5,620 |               |   |       | 5,662 |  |   |       | 5,620 | 
|                                                             | Diluted                    |   |                  | 5,796 |                    |   |               | 5,707 |               |   |       | 5,801 |  |   |       | 5,710 | 




INTERNATIONAL ABSORBENTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
(US dollars, in thousands)

|                                               |  |                  |       |               |  |   |       |  
|---------------------------------------------- |  | ---------------- | ----- | ------------- |  | - | ----- | -
|                                               |  | Six Months Ended
|                                               |  |                 
|                                               |  | July 31, 2002    |       | July 31, 2001
|                                               |  |                  |       |              
|Cash flows from operating activities           |  | $                | 992   |               |  | $ | 1,184 |  
|Cash flows from investing activities           |  |                  | (878  | )             |  |   | (125  | )
|Cash flows from financing activities           |  |                  |      |               |  |   | (5    | )
|                                               |  |                  |       |               |  |   |       |  
|Net change in cash                             |  | $                | 114   |               |  | $ | 1,054 |  
|Cash and cash equivalents, beginning of period |  | $                | 3,806 |               |  | $ | 2,071 |  
|                                               |  |                  |       |               |  |   |       |  
|Cash and cash equivalents, end of period       |  | $                | 3,920 |               |  | $ | 3,125 |  
|Cash paid for income taxes                     |  | $                | 10    |               |  |   |       |  
|                                               |  |                  |       |               |  |   |       |  

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars, in thousands, except where otherwise noted)

1. Significant Accounting Policies

Basis of consolidation and presentation

The consolidated financial statements include the accounts of International
Absorbents Inc. (the Company) 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.

These unaudited interim condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States and include the accounts of the Company and its wholly owned
subsidiaries. The Company changed its reporting from Canadian generally
accepted accounting principles to United States generally accepted accounting
principles effective January 31, 2001. All significant inter-company
transactions and balances have been eliminated upon consolidation. Our
accompanying interim condensed consolidated financial statements do not include
all notes normally included in audited annual financial statements and
therefore should be read in conjunction with our annual financial statements
(10-KSB for January 31, 2002). The accompanying financial statements include
all normal recurring adjustments, which, in the opinion of management, are
necessary to present fairly the Companys financial position at July 31, 2002,
its results of operations for the three months ended July 31, 2002 and 2001 and
statement of changes in cash flows for the three months ended July 31, 2002 and
2001.

New accounting pronouncements

In July 2001, Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) 141, Business Combinations and SFAS
142, Goodwill and Other Intangible Assets. SFAS 141 requires business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting, and broadens the criteria for recording
intangible assets separate from goodwill. Recorded goodwill and intangibles
will be evaluated against this new criteria and may result in certain
intangibles being subsumed into goodwill, or alternatively, amounts initially
recorded as goodwill may be separately identified and recognized apart from
goodwill. SFAS 142 requires the use of a nonamortization approach to account
for purchased goodwill and certain intangibles. Under this nonamortization
approach, goodwill and certain intangibles will not be amortized into results
of operations, but instead will be reviewed for impairment and written down and
charged to results of operations only in the periods in which the recorded
value of goodwill and certain intangibles is more than this fair value. The
Company adopted the provisions of SFAS 142 on February 1, 2002 and it had no
material effect on its results of operations or financial position.

In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and (or) normal use of the
asset. SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The fair value of the liability
is added to the carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. The liability is
accreted at the end of each period through charges to operating expense. If the
obligation is settled for other than the carrying amount of the liability, the
Company will recognize a gain or loss on settlement. The Company is required
and plans to adopt the provisions of SFAS 143 for the quarter ending April 30,
2003. The Company is currently evaluating the impact that this statement will
have on its financial position and results of operations, however, it does not
expect such impact to be material.

On October 3, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While SFAS 144 supersedes SFAS 121, Accounting for the Impairment of Long-Lived

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

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Assets and for Long-Lived Assets to Be Disposed Of, it retains many of the
fundamental provisions in that SFAS 144 also supersedes the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business. However, it retains the requirement
in Opinion No. 30 to report separately discontinued operations and extends that
reporting to a component of an entity that either has been disposed of (by
sale, abandonment, or in a distribution to owners) or is classified as held for
sale. The Company adopted the provisions of SFAS 144 on February 1, 2002 and it
had no material effect on its results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as
of April 2002, which is effective for fiscal years beginning after May 15,
2002. SFAS No. 145 rescinds SFAS No. 4 which required that all gains and losses
from extinguishment of debt be aggregated, and if material, classified as an
extraordinary item. As a result, gains and losses from debt extinguishment are
to be classified as extraordinary only if they meet the criteria set forth in
Accounting Principles Board Opinion No. 30, Reporting the Results of Operations
 Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS
No. 145 also requires that sale-leaseback accounting be used for capital lease
modifications with economic effects similar to sale-leaseback transactions. The
Company does not expect implementation of SFAS No. 145 to have a significant
effect on its results of operation or consolidated financial condition.

In June 2002, the FASB issued SFAS No. 146, Accounting for Restructuring
Costs. FAS No. 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets, such as
eliminating or reducing product lines, terminating employees and contracts, and
relocating plant facilities or personnel. Under SFAS No. 146, a company will
record a liability for a cost associated with an exit or disposal activity when
that liability is incurred and can be measured at fair value. SFAS No. 146 will
require a company to disclose information about its exit and disposal
activities, the related costs, and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an
exit activity is initiated and in any subsequent period until the activity is
completed. SFAS
No. 146 is effective prospectively for exit or disposal activities initiated
after December 31, 2002, with earlier adoption encouraged. Under SFAS No. 146,
a company may not restate its previously issued financial statements, and SFAS
No. 146 grandfathers the accounting for liabilities that a company had
previously recorded under Emerging Issues Task Force Issue 94-3. The Company
has not yet determined the impact, if any, of the adoption of SFAS No. 146.

2. Share Capital

Common Shares

|                                            |  |        |           |         |  |   |       | 
|------------------------------------------- |  | ------ | --------- | ------- |  | - | ----- | 
|                                            |  | Shares |           | Capital
|                                            |  |        |           |        
|Common shares outstanding, January 31, 2002 |  |        | 5,662,144 |         |  | $ | 7,048 | 
|Common shares outstanding, July 31, 2002    |  |        | 5,662,144 |         |  | $ | 7,048 | 

Options

Stock options at July 31, 2002 and January 31, 2002 were 622,062. Stock based
compensation expense for options granted in prior periods was $41,000 during
the quarter that ended July 31, 2002, and $82,000 for the six months ended July
31, 2002.

Warrants

|                                       |        |  |        |        |  |                |                |  | 
|-------------------------------------- | ------ |  | ------ | ------ |  | -------------- | -------------- |  | 
|Warrants outstanding, January 31, 2002 |        |  |       |        |  |                |               | 
|                                       | Issued |  |        | 44,120 |  |                | $2.25 to $2.29
|                                       |        |  |        |        |  |               
|Warrants outstanding, July 31, 2002    |        |  | 44,120 |        |  | $2.25 to $2.29
|                                       |        |  |        |        |  |               

Stock based compensation expense for the warrants issued was $47,000 during the
first quarter ending and for the six months ending July 31, 2002.

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

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3. Segmented Information

The Company is involved primarily in the development, manufacture, distribution
and sale of absorbent products. Its assets are located and its operations are
primarily conducted in the United States.

The Company defines its business segments based upon the market in which its
customers sell products. The Company operates principally in two business
segments, the animal care industry and the industrial products industry.

Management of the Company evaluates these segments based upon the operating
income before depreciation and amortization generated by each segment.
Depreciation and amortization are managed on a consolidated basis and as such
are not allocated to individual segments. There are no intersegment
transactions or significant differences between segment accounting and
corporate accounting basis.

Business Segment Data  Six Months Ended July 31, 2002

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 6,705 |            |  | $            | 553 |  |  | $ | 7,258 |  
|Operating costs and expenses                          |  |             | 5,628 |            |  |              | 518 |  |  |   | 6,146 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 1,077 |            |  |              | 35  |  |  |   | 1,112 |  
|Depreciation and amortization  corporate             |  |             |       |            |  |              |     |  |  |   | (171  | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 30    |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 971   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 423   |            |  | $            | 430 |  |  | $ | 853   |  

Business Segment Data  Six Months Ended July 31, 2001

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 5,063 |            |  | $            | 674 |  |  | $ | 5,737 |  
|Operating costs and expenses                          |  |             | 4,045 |            |  |              | 645 |  |  |   | 4,690 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 1,018 |            |  |              | 29  |  |  |   | 1,047 |  
|Depreciation and amortization  corporate             |  |             |       |            |  |              |     |  |  |   | (116  | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 78    |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 1,009 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital Expenditures                                  |  | $           | 26    |            |  | $            | 3   |  |  | $ | 29    |  

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

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Business Segment Data  Three Months Ended July 31, 2002

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 3,261 |            |  | $            | 309 |  |  | $ | 3,570 |  
|Operating costs and expenses                          |  |             | 2,896 |            |  |              | 289 |  |  |   | 3,185 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 365   |            |  |              | 20  |  |  |   | 385   |  
|Depreciation and amortization  corporate             |  |             |       |            |  |              |     |  |  |   | (97   | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 4     |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 292   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 29    |            |  | $            | 405 |  |  | $ | 434   |  

Business Segment Data  Three Months Ended July 31, 2001

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 2,820 |            |  | $            | 376 |  |  | $ | 3,196 |  
|Operating costs and expenses                          |  |             | 2,199 |            |  |              | 369 |  |  |   | 2,568 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 621   |            |  |              | 7   |  |  |   | 628   |  
|Depreciation and amortization  corporate             |  |             |       |            |  |              |     |  |  |   | (66   | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 36    |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 598   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 23    |            |  | $            | 3   |  |  | $ | 26    |  

Assets

|                    |  |             |       |            |  |              |       |  |  |   |       | 
|------------------- |  | ----------- | ----- | ---------- |  | ------------ | ----- |  |  | - | ----- | 
|                    |  | Animal Care |       | Industrial |  | Consolidated
|                    |  |             |       |            |  |             
|At July 31, 2002    |  | $           | 7,298 |            |  | $            | 1,748 |  |  | $ | 9,046 | 
|At January 31, 2002 |  | $           | 6,909 |            |  | $            | 1,348 |  |  | $ | 8,257 | 

Approximately 6% and 5% of our sales during the six months ended July 31, 2002
and 2001 respectively were to foreign customers. Approximately 7% and 5% of our
sales during the three months ended July 31, 2002 and 2001 were to foreign
customers.

4. Other Items

During fiscal 2002 an allowance was taken against a corresponding note
receivable for $667,000 to a related company named W4, because it is doubtful
the funds will be repaid. As of the filing dated of this report there has been
no change to the status of this allowance.




Item 2.




MANAGEMENTS DISCUSSION AND ANALYSIS

Some statements and information contained in this Managements Discussion and
Analysis are not historical facts but are forward-looking statements. For a
discussion of important factors that could cause results to differ materially
from the forward-looking statements contained in this Quarterly Report, see
Risk Factors and Forward-Looking Statements.

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

7



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##### Table of Contents



Please read the following discussion together with the consolidated financial
statements and the related notes included elsewhere in this Quarterly Report.




RESULTS OF OPERATIONS




Sales

Our net sales for the six month period ending July 31, 2002 were
$7,258,000, representing a 27% increase over the $5,737,000 generated during
the same period in the previous year. Net sales for the quarter ended July
31, 2002 were $3,570,000 compared to the quarter ended July 31, 2001 total of
$3,196,000, representing an increase of 12%. This increase was achieved
primarily through an increase in sales of the Animal Care divisions flagship
product, CareFRESH®small animal bedding. Also, there were additional
increases among the other Animal Care product lines. Sales to both regional
distributors and direct buying accounts increased due to customer recognition
of the products performance, Company-sponsored promotional activity and
increased customer support. The rate of future sales growth will be determined
by continued growth of our CareFRESH®small animal bedding, increased
distribution of products that we introduced over the past two years, and the
introduction of several new ancillary small animal products. We anticipate that
our sales will continue to increase in the short-term at a rate consistent with
rates achieved in recent prior periods.




Gross Profits

Gross profits on net sales for the first six months of fiscal 2003 were
$3,122,000, a gross margin of 43%. In the first six months of fiscal 2002
gross profits on net sales were $2,498,000, or 44%. During the second quarter
of the current fiscal year, our gross profits were $1,423,000 (40%), versus
$1,486,000 (46%) for the second quarter of the previous year. Gross margins
(gross profit divided by sales revenue) decreased mainly because of start-up
costs related to our new hydro-mulch production facility and the need to
increase our warehousing space. The new warehouse space which we are leasing
is needed to fully service our customers. We expect that these factors along
with a changing product mix will continue during the remainder of fiscal 2003
and will maintain some downward pressure on margin results.




Other Expenses and Income

During the first six months of fiscal year 2003, we spent $1,090,000 on
marketing and sales expenses compared to $736,000 in the same period last
year, resulting in a 48% increase. In the second quarter of fiscal 2003, we
spent $536,000 on marketing and sales compared to $427,000 in the same period
last year, representing a 26% increase. In fiscal 2003, there continues to be a
significant investment in marketing programs for existing products. Over the
remainder of the year, we anticipate that significant investments will continue
to be made in marketing, advertising and promoting products launched over the
past two years.

General and administrative expenses were $1,091,000 for the first six
months of fiscal 2003 representing a 31% increase over the general and
administrative expenses for the first six months of fiscal 2002 of $831,000.
Comparing the second quarter of fiscal 2002 to that of fiscal 2003, general and
administrative expenses increased by 21% from $497,000 to $599,000. As sales
increase, basic operating and administrative functions have been expanded to
support the growth. We will not hesitate to add infrastructure as we grow, so
that we will be able to remain efficient and competitive. We are currently in
the process of negotiating a debt facility in connection with building new
production plants. As a result, sometime during fiscal 2003, we will begin
paying finance charges on debt acquired for property plant and equipment. The
structure of the financing will not be defined until final locations have been
determined and production facilities have been designed.

As cash is accumulated and invested in short-term cash equivalents, the
balance of our interest bearing deposits has increased. Even so, interest
income has dropped due to significantly lower interest rates during fiscal year
2003. In the first six months of fiscal 2003, $30,000 in interest income was
accumulated as compared to $78,000 in the same period the previous year.
During the second quarter of fiscal 2003, $4,000 in interest income was earned
as compared to $36,000 in the same period the previous year. Until a
significant capital investment is made, this income will continue at a rate
dependent on short-term interest rates.

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

8



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Net Income

Our net income before taxes decreased by 4% to $971,000 for the six months
ended July 31, 2002 compared to $1,009,000 in the same period last year.
During the second quarter of fiscal 2003 we had a net income before taxes of
$292,000, versus $598,000 for the second quarter of fiscal 2002, representing a
51% decrease. We recognized income tax provision of $321,000 during the first
six months of fiscal 2003, and $33,000 in the second quarter of fiscal 2003, as
compared with income tax provision of $370,000 in the first six months of
fiscal 2002 and $227,000 in the second quarter of fiscal 2002. Profits after
taxes increased by 2% from $639,000 for the first six months of fiscal 2002 to
$650,000 during the same period in fiscal 2003. During the second quarter of
fiscal 2003, profits after taxes decreased to $259,000 as compared to $371,000
for the same quarter in the previous year, representing a decrease of 30%. The
amount of the deferred income tax provision is determined in accordance with
United States generally accepted accounting principles. Net income before
taxes increased as a result of higher sales revenues, an improved gross margin
and ongoing efforts to control general and administrative expenses. We
anticipate that we will make our largest non-capital investment in marketing
and sales during fiscal 2003. We will also continue to invest in
infrastructure to help make our operations more efficient as the year
progresses.




Currency

Approximately 6% of our sales during the first six months of fiscal 2003
were to foreign customers. Of the foreign sales, 28% were to Canadian
customers. Over the past three years, the value of the Canadian dollar,
compared to other global currencies, has been stable in relation to the value
of the U.S. dollar. Sales in the second quarter of fiscal 2003 were not
significant enough to be adversely affected by fluctuations in the value of the
U.S. dollar. This trend is expected to continue through fiscal 2003.




Inflation

During the most recent quarter, inflation was not a major factor affecting
our operations. It is impossible to project how the war on terrorism will
affect economic conditions, consumer spending, and inflation.




Environmental Matters

We are committed to being an environmentally friendly company and to
producing products which benefit the quality of the environment. Hazardous
wastes are not produced, treated or stored at any company owned or operated
facilities. State federal and local laws all have authority over production
activities. We believe that we are currently in compliance with these laws and
expect to remain so through fiscal 2003.




LIQUIDITY AND CAPITAL RESOURCES




Financial Condition

At the end of the first six months of fiscal 2003, our capital structure
was comprised of $1,054,000 in short-term liabilities, $56,000 of long-term
deferred tax liability and $7,936,000 of stockholders equity. The ratio of
total assets to total liabilities at July 31, 2002 was 8.15:1 compared to
7.50:1 at January 31, 2002. Our total liabilities have increased by $9,000
during the first six months of fiscal 2003. Total stockholders equity has
increased by $780,000 to $7,936,000 in the first six months of fiscal 2003.
The increase was primarily due to net income for the period and from an
increase in other capital accounts.

As fiscal 2003 progresses, our capital structure will be changed
significantly as debt is incurred, with the proceeds being used to purchase new
property, plant, and equipment. We are in the process of negotiating a debt
facility to finance the associated expansion of property, plant and equipment.
The structure and amount of the financing will be determined when sites are
selected and production facilities are designed. As growth opportunities are
sought, working capital may be reduced or debt may be incurred to fund capital
expansion.




Cash Generated from Operations

The cash flow generated from operations decreased to $992,000 during the
first six months of fiscal 2003 from $1,184,000 at the end of the same period
in fiscal 2002. This was substantially due to the hydro-mulch facility
start-up costs, which contributed to a reduced gross margin. During the
remainder of fiscal 2003, cash generated from operations will be invested in
short-term instruments.




Working Capital

Our working capital position, net of current deferred tax assets, at July
31, 2002 was $5,280,000, as compared to $4,861,000 at the end of fiscal 2002.
The current ratio (current assets to current liabilities), net of current deferred tax assets, improved to 6.01:1

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

9



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compared to 5.65:1 at the
end of fiscal 2002. Cash flows generated from operations resulted in an
increase in working capital.

As fiscal 2003 continues, we expect working capital will grow until a
significant investment is made in new capital assets. We also anticipate that
sufficient cash and cash equivalents will be generated throughout fiscal 2003
to meet our short-term working capital needs, even after cash has been used to
build infrastructure.




Financing and Investing Activities

During the first six months of fiscal 2003, we used $878,000 in cash for
investing activities, which involved the purchase of plant equipment and
intangible assets related to Advanced Fibers, LLC and the installation of our
new hydro-mulch production facility. This is compared to $125,000 being used in
investing activities and $5,000 being used in financing activities in the first
six months of fiscal 2002.

New manufacturing and production opportunities are continuously being
sought. During the remainder of the current fiscal year, we will be investing
funds in new plant infrastructure and equipment.




Commitments and Guarantees

The majority of our capital assets are located on land and in warehouse
space leased from the Port of Bellingham in Washington State. Rental expenses
under lease agreements for the remainder of fiscal 2003 are anticipated to
total $9,000 for the property on which the plant stands, $175,000 for warehouse
space, and $43,000 for office space. The current lease agreement on property
expires in year 2006 for the warehouse space and in year 2003 for the new
office space.

We are subject to guaranteed payments for product produced under the Mat,
Inc. manufacturing agreement.




CRITICAL ACCOUNTING POLICIES




Accounts Receivable

We typically offer credit terms to our customers. We considered all
accounts receivable in excess of our standard bad debt allowance and financing
fees of $32,000 to be fully collectible. Our standard allowance was determined
based on our review of our bad debt history and is our best estimate of the
amount of bad debt we should have in any given period.




Inventories

Finished goods inventories are valued at the lower of cost (determined on
the first-in, first-out basis) or net realizable value. Cost includes direct
materials, labor and overhead allocation. Raw materials and supplies are valued
at the lower of cost (determined on the first-in, first-out basis) or
replacement cost.




Property, plant and equipment

Property, plant and equipment assets are recorded at cost. Building and
equipment are located on leased land. Buildings and leasehold improvements are
depreciated on a straight-line basis over the life of the lease agreement.
Equipment is depreciated over the estimated useful life applying the 15%
declining balance basis, which is in accordance with general accepted
accounting principles.




Revenue recognition

Revenue from the sale of products is recognized at the time title passes
to the purchaser, which is when the goods are conveyed to a carrier.




Income taxes

We account for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Income taxes and liabilities
are recognized for the expected future tax consequences of events that have
been included in the financial statements or income tax returns. Deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

10



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Use of estimates

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




Impairment of long-lived assets

We review the carrying amount of long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. The determination of any impairment would include a comparison of
estimated future operating cash flows anticipated to be generated during the
remaining life with the net carrying value of the asset.




New accounting pronouncements

In July 2001, Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141
requires business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting, and broadens the criteria for
recording intangible assets separate from goodwill. Recorded goodwill and
intangibles will be evaluated against this new criteria and may result in
certain intangibles being subsumed into goodwill, or alternatively, amounts
initially recorded as goodwill may be separately identified and recognized
apart from goodwill. SFAS 142 requires the use of a nonamortization approach to
account for purchased goodwill and certain intangibles. Under this
nonamortization approach, goodwill and certain intangibles will not be
amortized into results of operations, but instead will be reviewed for
impairment and written down and charged to results of operations only in the
periods in which the recorded value of goodwill and certain intangibles is more
than this fair value. The Company adopted the provisions of SFAS 142 on
February 1, 2002 and it had no material effect on its results of operations or
financial position.

In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and (or) normal use of the
asset. SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The fair value of the liability
is added to the carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. The liability is
accreted at the end of each period through charges to operating expense. If the
obligation is settled for other than the carrying amount of the liability, the
Company will recognize a gain or loss on settlement. The Company is required
and plans to adopt the provisions of SFAS 143 for the quarter ending April 30,
2003. The Company is currently evaluating the impact that this statement will
have on its financial position and results of operations, however, it does not
expect such impact to be material.

On October 3, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While SFAS 144 supersedes SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it retains many
of the fundamental provisions in that SFAS 144 also supersedes the accounting
and reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business. However, it retains the requirement
in Opinion No. 30 to report separately discontinued operations and extends that
reporting to a component of an entity that either has been disposed of (by
sale, abandonment, or in a distribution to owners) or is classified as held for
sale. The Company adopted the provisions of SFAS 144 on February 1, 2002 and it
had no material effect on its results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as
of April 2002, which is effective for fiscal years beginning after May 15, 2002. SFAS No. 145

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

11



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rescinds SFAS No. 4
which required that all gains and losses from extinguishment of debt be
aggregated, and if material, classified as an extraordinary item. As a result,
gains and losses from debt extinguishment are to be classified as extraordinary
only if they meet the criteria set forth in Accounting Principles Board Opinion
No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. SFAS No. 145 also requires that
sale-leaseback accounting be used for capital lease modifications with economic
effects similar to sale-leaseback transactions. The Company does not expect
implementation of SFAS No. 145 to have a significant effect on its results of
operation or consolidated financial condition.

In June 2002, the FASB issued SFAS No. 146, Accounting for Restructuring
Costs. FAS No. 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets, such as
eliminating or reducing product lines, terminating employees and contracts, and
relocating plant facilities or personnel. Under SFAS No. 146, a company will
record a liability for a cost associated with an exit or disposal activity when
that liability is incurred and can be measured at fair value. SFAS No. 146 will
require a company to disclose information about its exit and disposal
activities, the related costs, and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an
exit activity is initiated and in any subsequent period until the activity is
completed. SFAS
No. 146 is effective prospectively for exit or disposal activities initiated
after December 31, 2002, with earlier adoption encouraged. Under SFAS No. 146,
a company may not restate its previously issued financial statements, and SFAS
No. 146 grandfathers the accounting for liabilities that a company had
previously recorded under Emerging Issues Task Force Issue 94-3. The Company
has not yet determined the impact, if any, of the adoption of SFAS No. 146.




Risk Factors

The following factors and other information included in this Quarterly
Report should be carefully considered. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also may impair our
business operations. If any of the following risks occur, our business,
financial condition, operating results, and cash flow could be materially
adversely affected.

We are dependent solely on the operations of our subsidiary, Absorption Corp,
and its success in a highly competitive business, which has a number of
inherent risks. These may be summarized as follows:



| |  | Our success is largely predicated upon our ability to produce superior
products and sell our products at a competitive price. Our markets
are subject to intense competition from both private and public
businesses, many of whom have greater financial resources and
considerably larger operations than us and may benefit from greater
name recognition than us. Such competition, as well as any future
competition, may adversely affect our success in the market place. We
cannot guarantee that we will continue to be able to successfully
compete against our competitors or that the competitive pressures
faced by us will not affect our financial performance.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Our business places heavy reliance on raw materials being readily
available. Although there are a number of pulp and paper mills in
British Columbia, Canada and Washington State that can provide us with
raw material, any significant increase in cost or increase in
delivered costs could result in decreased margins.                                                                                                                                                                                                                                                                                                                                                   
| 
| |  | We are required to comply with environmental regulations applicable to
our operations, including air emission standards enforced by the
Northwest Air Pollution Authority. We cannot guarantee that existing
regulations and licensing will not be amended, or new regulations
adopted, in a way that negatively impacts our business. In addition,
we cannot guarantee that we will be able to comply with all
regulations which may be in force from time to time, or that any
expenditures necessary for corrective actions would be economical.                                                                                                                           
| 
| |  | Our marketing is based upon a number of wholesale pet supply
distributors and direct buying retailers. Poor market acceptance of
our products or other unanticipated events may result in lower
revenues than anticipated, making certain planned expenditures on                                                                                                                                                                                                                                                                                                                                                                                                             

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

12



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|  |  | advertising, promotion
and research and development projects unachievable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | We have signed a number of lease agreements for manufacturing,
warehousing and office space. We anticipate that we will need to
locate an existing building or construct a new facility within the
next three years. If we build a new facility, we may need to enter
into a high-rate interest mortgage or raise additional capital in the
future to finance the construction. In either case, we may not be
able to obtain such funds in sufficient amounts on terms we consider
acceptable and there is no assurance that we will operate profitably
in the future.
| 
| |  | We are dependent on a relatively small number of key employees, the
loss of any of whom would have a significant adverse effect on our
operations. We do not carry key-man insurance on any of our employees.                                                                                                                                                                                                                                                                                                                                                         
| 
| |  | During fiscal year 2002, two of our customers accounted for
approximately 34% of our total revenue. The loss of either of these
customers could cause our revenue to decline And would have a negative
impact on our operating results.                                                                                                                                                                                                                                                                                                                               




Forward-looking Statements

Statements made in Quarterly Report referring to the Companys outlook, future
sales revenue, gross profits, other expenses, net income, currency, inflation,
environmental matters, risk factors, financial condition, cash generated from
operations, working capital, financing and investing activities that state the
Company managements intentions, hopes, beliefs, expectations, anticipations,
or predictions of the future, are forward-looking statements. It is important
to note that the Companys actual results could differ materially from those
projected in such forward-looking statements. Additional information
concerning factors that could cause actual results to differ materially from
those in the forward-looking statements is contained from time to time in the
Companys SEC filings, including but limited to the Companys report on forms
10-KSB, 10-QSB and the Companys proxy statement to shareholders. Copies of
these filings may be obtained by contacting the Company or the SEC.

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

13



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PART II  OTHER INFORMATION




4.     Submission of Matters to a Vote of Security Holders



| |  | At the annual general meeting of shareholders held on June 27, 2002, the
following proposals were adopted by the margins indicated.
| |  | -----------------------------------------------------------------------------------------------------------------------------------



| | 1. |  | The election of the following directors who will serve until
their successors are elected and qualified, or their earlier death or
resignation:
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |                  |           |          |  |  |         | 
|---------------- |  | ---------------- | --------- | -------- |  |  | ------- | 
|                 |  | Number of Shares
|                 |  |                 
|                 |  | For              |           | Withheld
|                 |  |                  |           |         
|Gordon L. Ellis  |  |                  | 4,552,713 |          |  |  | 563,593 | 
|Douglas E. Ellis |  |                  | 4,987,191 |          |  |  | 129,115 | 
|Shawn M. Dooley  |  |                  | 5,054,631 |          |  |  | 61,675  | 



| | 2. |  | The selection of Moss Adams, LLP to continue as the auditors
for International Absorbents, Inc., was approved by the following
vote: For  5,056,597; Against  20,327; Withheld  39,382.                                                                                                                          
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | A grant of options to directors and executive officers to
purchase Common Shares pursuant to the 1993 Stock Option Plan was
approved by the following vote: For  1,439,020; Against  682,722;
Withheld  23,681; Not Voted  2,973,153.                                                                           
|
| | 4. |  | A stock option plan titled The 2003 Stock Option Plan for
U.S. Participants was approved to replace The 1993 Stock Option Plan
for U.S. Participants upon the expiration of the latter plan at the
end of 2002, by the following vote: For  1,122,170; Against -
997,252; Withheld  23,681; Not Voted  2,973,153.
|
| | 5. |  | A stock option plan titled The 2003 Equity Stock Option Plan
was approved to replace The 1993 Equity Stock Option Plan upon the
expiration of the latter plan at the end of 2002, by the following
vote: For  1,074,982; Against  1,037,465; Withheld  30,656; Not
Voted  2,973,203.                            
|
| | 6. |  | The amalgamation of the Company and its subsidiary Total
Absorb, Inc., was approved by the following vote: For  2,040,495;
Against  86,019; Withheld  16,589; Not Voted  2,973,203.                                                                                                                             




5.     Other Information



| |  | On July 9, 2002 we made an offer to re-purchase shares of common stock,
from shareholders as of June 28, 2002, which are held in odd lots (blocks
of less than 100 shares). The price offered per share will be the average
closing price over the program period. The offer will expire on September
9, 2002.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




6.     Exhibits and Reports on Form 8-K



| | a) |  | Not applicable
| | -- |  | --------------



| | b) |  | Not applicable
| | -- |  | --------------

Unaudited (all amounts in U.S. dollars except where otherwise noted). The accompanying notes
are an integral part of these consolidated financial statements.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                        |  |                               
|----------------------- |  | ------------------------------
|                        |  | INTERNATIONAL ABSORBENTS, INC.
|                        |  | (Registrant)                  
|                        |  |                               
|                        |  |                               
|Date:
September 6, 2002 |  | /s/ Gordon L. Ellis           
|                        |  |                               
|                        |  | Gordon L. Ellis               
|                        |  | President & CEO               

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##### Table of Contents






CERTIFICATION

I, Gordon L. Ellis, President and CEO, certify that:

(1)  I have reviewed this quarterly report on Form 10-QSB of International
Absorbents Inc.;

(2)  Based on my knowledge, this quarterly 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 the
report; and

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

Date: September 6, 2002

/s/Gordon L. Ellis                    Gordon
L. Ellis                    President
and CEO

CERTIFICATION

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley
Act of 2002, I, Gordon L. Ellis, certify that:

1.     I have read this quarterly report on Form 10-QSB of International
Absorbents, Inc.;

2.     To my knowledge, this report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

3.     To my knowledge, the information in this report fairly presents, in all
material respects, the financial condition and results of operations as of July
31, 2002.

Date: September 6, 2002

/s/ Gordon L. Ellis
Gordon L. Ellis
President & CEO

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##### Table of Contents






CERTIFICATION

I, David H. Thompson, Chief Financial Officer, certify that:

(1)  I have reviewed this quarterly report on Form 10-QSB of International
Absorbents Inc.;

(2)  Based on my knowledge, this quarterly 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 the
report; and

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

Date: September 6, 2002

/s/ David H. Thompson                    David
H. Thompson                    Chief
Financial Officer

CERTIFICATION

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley
Act of 2002, I, David H. Thompson, certify that:

1.     I have read this quarterly report on Form 10-QSB of International
Absorbents, Inc.;

2.     To my knowledge, this report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

3.     To my knowledge, the information in this report fairly presents, in all
material respects, the financial condition and results of operations as of July
31, 2002.

Date: September 6, 2002

/s/ David H. Thompson
David H. Thompson
Chief Financial Officer

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