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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549

FORM 10-QSB

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

For the quarterly period ended April 30, 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(Registrants telephone number, including area code)

State the number of shares outstanding of each of the issuers classes of
common stock, as of June 3, 2002.

|                                          |  |                       
|----------------------------------------- |  | ----------------------
|Title of ClassCommon Shares, no par value |  | No. of Shares5,662,144





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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
|                                                           | MANAGEMENTS DISCUSSION AND ANALYSIS                
|                                                           | RESULTS OF OPERATIONS                               
|                                                           | LIQUIDITY AND CAPITAL RESOURCES                     
|                                                           | SIGNIFICANT ACCOUNTING POLICIES                     
|                                                           | PART II  OTHER INFORMATION                         



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INTERNATIONAL ABSORBENTS INC.




CONDENSED CONSOLIDATED BALANCE SHEETS

|                          
|--------------------------
|(US dollars, in thousands)

|                                                                                                                                  |                                          |                            |       |                |       |                  |       |       |       | 
|--------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------- | ----- | -------------- | ----- | ---------------- | ----- | ----- | ----- | 
|                                                                                                                                  |                                          |                            |       | As at          |       | As at           
|                                                                                                                                  |                                          |                            |       | April 30, 2002 |       | January 31, 2002
|                                                                                                                                  |                                          |                            |       | (unaudited)    |       | (audited)       
|                                                                                                                                  |                                          |                            |       |                |       |                 
|ASSETS                                                                                                                            |                                          |                            |       |                |       |                  |       |      
|Current assets:                                                                                                                   |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  | Cash and cash equivalents                |                            | $     | 4,393          |       |                  | $     | 3,806 |      
|                                                                                                                                  | Short term investments                   |                            |       |               |       |                  |       | 100   |      
|                                                                                                                                  | Accounts receivable, net                 |                            |       | 1,098          |       |                  |       | 1,135 |      
|                                                                                                                                  | Inventories                              |                            |       | 677            |       |                  |       | 679   |      
|                                                                                                                                  | Prepaid expenses                         |                            |       | 145            |       |                  |       | 186   |      
|                                                                                                                                  | Deferred income tax asset                |                            |       | 617            |       |                  |       | 905   |      
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  |                                          |                            | 6,930 |                |       |                  | 6,811 |      
|                                                                                                                                  | Property, plant and equipment            |                            |       | 1,656          |       |                  |       | 1,341 |      
|                                                                                                                                  | Intangible assets                        |                            |       | 124            |       |                  |       | 105   |      
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  |                                          | $                          | 8,710 |                |       | $                | 8,257 |      
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|LIABILITIES                                                                                                                       |                                          |                            |       |                |       |                  |       |      
|Current liabilities:                                                                                                              |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  | Accounts payable and accrued liabilities |                            | $     | 966            |       |                  | $     | 993   |      
|                                                                                                                                  | Income taxes payable                     |                            |       | 52             |       |                  |       | 52    |      
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  |                                          |                            | 1,018 |                |       |                  | 1,045 |      
|Long term liability:                                                                                                              |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  | Deferred income tax liability            |                            |       | 56             |       |                  |       | 56    |      
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  |                                          |                            | 1,074 |                |       |                  | 1,101 |      
|SHAREHOLDERS EQUITY                                                                                                              |                                          |                            |       |                |       |                  |       |      
|Common stock, no par value,
100,000,000 shares authorized
5,662,144 issued and outstanding at
April 30, 2002 and January 31, 2002 |                                          |                            | 7,048 |                |       |                  | 7,048 |      
|Additional Paid in Capital                                                                                                        |                                          |                            | 377   |                |       |                  | 288   |      
|Retained earnings (accumulated deficit)                                                                                           |                                          |                            | 211   |                |       |                  | (180  | )    
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  |                                          | Total shareholders equity |       |                | 7,636 |                  |       |       | 7,156 | 
|                                                                                                                                  |                                          |                            |       |                |       |                  |       |      
|                                                                                                                                  |                                          | $                          | 8,710 |                |       | $                | 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)

|                                                             |                            |   |                    |       |                |   |       |       | 
|------------------------------------------------------------ | -------------------------- | - | ------------------ | ----- | -------------- | - | ----- | ----- | 
|                                                             |                            |   | Three Months Ended
|                                                             |                            |   |                   
|                                                             |                            |   | April 30, 2002     |       | April 30, 2001
|                                                             |                            |   |                    |       |               
|Sales revenue                                                |                            | $ | 3,688              |       |                | $ | 2,541 |      
|Cost of goods sold                                           |                            |   | 1,989              |       |                |   | 1,529 |      
|                                                             |                            |   |                    |       |                |   |       |      
|                                                             |                            |   | 1,699              |       |                |   | 1,012 |      
|Corporate and administrative expenses:                       |                            |   |                    |       |                |   |       |      
|                                                             | Marketing and sales        |   |                    | 554   |                |   |       | 310   | 
|                                                             | General and administrative |   |                    | 492   |                |   |       | 333   | 
|                                                             |                            |   |                    |       |                |   |       |      
|                                                             |                            |   | 1,046              |       |                |   | 643   |      
|Net income from operations                                   |                            |   | 653                |       |                |   | 369   |      
|Interest income                                              |                            |   | 26                 |       |                |   | 42    |      
|                                                             |                            |   |                    |       |                |   |       |      
|Net income before income taxes                               |                            |   | 679                |       |                |   | 411   |      
|                                                             |                            |   |                    |       |                |   |       |      
|Income tax provision                                         |                            |   |                   |       |                |   | (5    | )    
|Deferred income tax provision                                |                            |   | (288               | )     |                |   | (138  | )    
|                                                             |                            |   |                    |       |                |   |       |      
|Net income for the period                                    |                            | $ | 391                |       |                | $ | 268   |      
|                                                             |                            |   |                    |       |                |   |       |      
|Basic earnings per share                                     |                            | $ | 0.07               |       |                | $ | 0.05  |      
|Fully diluted                                                |                            | $ | 0.07               |       |                | $ | 0.05  |      
|Weighted average number of shares
outstanding (in thousands) |                            |   |                    |       |                |   |       |      
|Basic                                                        |                            |   | 5,662              |       |                |   | 5,625 |      
|                                                             | Diluted                    |   |                    | 5,793 |                |   |       | 5,655 | 

INTERNATIONAL ABSORBENTS INC.




CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS

(US dollars, in thousands)

|                                               |  |                    |       |                |  |   |       | 
|---------------------------------------------- |  | ------------------ | ----- | -------------- |  | - | ----- | 
|                                               |  | Three Months Ended
|                                               |  |                   
|                                               |  | April 30, 2002     |       | April 30, 2001
|                                               |  |                    |       |               
|Cash flows from operating activities           |  | $                  | 906   |                |  | $ | 483   | 
|Cash flows from investing activities           |  |                    | (319  | )              |  |   | 35    | 
|Cash flows from financing activities           |  |                    |      |                |  |   | 1     | 
|                                               |  |                    |       |                |  |   |       | 
|Net change in cash                             |  | $                  | 587   |                |  | $ | 519   | 
|Cash and cash equivalents, beginning of period |  | $                  | 3,806 |                |  | $ | 2,071 | 
|                                               |  |                    |       |                |  |   |       | 
|Cash and cash equivalents, end of period       |  | $                  | 4,393 |                |  | $ | 2,590 | 
|                                               |  |                    |       |                |  |   |       | 

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 affective 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.
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 April 30, 2002, its results of operations for
the three months ended April 30, 2002 and 2001 and statement of changes in cash
flows for the three months ended April 30, 2002 and 2001.

The Company adopted SFAS No. 142 on January 1, 2002, as required by the new
statement. The adoption of SFAS No. 142 did not have a material impact on its
financial position or its results of operations.

2. Share Capital

Common Shares

|                                            |  |        |           |         |  |   |       | 
|------------------------------------------- |  | ------ | --------- | ------- |  | - | ----- | 
|                                            |  | Shares |           | Capital
|                                            |  |        |           |        
|Common shares outstanding, January 31, 2002 |  |        | 5,662,144 |         |  | $ | 7,048 | 
|Common shares outstanding, April 30, 2002   |  |        | 5,662,144 |         |  | $ | 7,048 | 

Options

Stock options at April 30, 2002 and January 31, 2002 were 622,062. Stock based
compensation expense for options granted in prior periods was $42,000 during
the quarter that ended April 30, 2002.

Warrants

|                                       |        |  |        |        |  |                |                |  | 
|-------------------------------------- | ------ |  | ------ | ------ |  | -------------- | -------------- |  | 
|Warrants outstanding, January 31, 2002 |        |  |       |        |  |                |               | 
|                                       | Issued |  |        | 44,120 |  |                | $2.25 to $2.29
|                                       |        |  |        |        |  |                |               
|Warrants outstanding, April 30, 2002   |        |  | 44,120 |        |  | $2.25 to $2.29
|                                       |        |  |        |        |  |               

During the first quarter of fiscal year 2003, the Company issued warrants to
purchase 44,120 common shares of the Company, to certain non-affiliated
investors in W4, in exchange for their investment in W4. W4 is an entity whom
the Company has a note receivable for $667,000 and a corresponding allowance of
$667,000 as it is doubtful the funds will be repaid. The allowance would
become an extraordinary gain if it could be collected in the future. The
exercise price of the warrants was made at the fair market value ranging from
$2.25 to $2.29. Stock based compensation of $47,000 relating to the warrants
was recognized during the first quarter of 2003.

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 cleanup 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  Three Months Ended April 30, 2002

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 3,444 |            |  | $            | 244 |  |  | $ | 3,688 |  
|Operating costs and expenses                          |  |             | 2,732 |            |  |              | 229 |  |  |   | 2,961 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation
and amortization |  |             | 712   |            |  |              | 15  |  |  |   | 727   |  
|Depreciation & amortization  corporate               |  |             |       |            |  |              |     |  |  |   | (74   | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 26    |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 679   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 394   |            |  | $            | 25  |  |  | $ | 419   |  

Business Segment Data  Three Months Ended April 30, 2001

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 2,243 |            |  | $            | 298 |  |  | $ | 2,541 |  
|Operating costs and expenses                          |  |             | 1,846 |            |  |              | 276 |  |  |   | 2,122 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation
and amortization |  |             | 397   |            |  |              | 22  |  |  |   | 419   |  
|Depreciation & amortization  corporate               |  |             |       |            |  |              |     |  |  |   | (50   | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 42    |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 411   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 35    |            |  | $            | 0   |  |  | $ | 35    |  

Assets

|                    |  |             |       |            |  |              |       |  |  |   |       | 
|------------------- |  | ----------- | ----- | ---------- |  | ------------ | ----- |  |  | - | ----- | 
|                    |  | Animal Care |       | Industrial |  | Consolidated
|                    |  |             |       |            |  |             
|At April 30, 2002   |  | $           | 7,317 |            |  | $            | 1,393 |  |  | $ | 8,710 | 
|At January 31, 2002 |  | $           | 6,909 |            |  | $            | 1,348 |  |  | $ | 8,257 | 

4. Acquisitions

The Companys subsidiary, Absorption Corp, acquired the assets of a hydro mulch
manufacturer, Advanced Fibers, LLC, in February 2002 for $35,200, the fair
market value. The Company additionally acquired the technology and processing
rights for $10,000 and is amortized over the estimated useful life, which is
determined by management. As part of the acquisition, a fee of $18,375 was
paid to the owners of Advanced

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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Fibers for assisting in arranging a three-year hydro mulch-manufacturing
contract between Absorption Corp and Mat, Inc. The contract calls for the
production of twenty-one thousand tons of product to be sold to Mat, Inc. over
the life of the contract. Management is amortizing the fee over the life of
the contract. A fee of $12,500 will be paid to the owners of Advanced Fibers
under a consulting agreement for technical support, and will be expensed in
2003.

5. Subsequent Events

A loan of $25,000 was made to a member of the board of directors and officer of
the Company in May of 2002. Market rate interest is being charged on the loan
and it is fully secured by fully paid shares of the Companys common stock.

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.

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

Net sales for the quarter ended April 30, 2002 were $3,688,000 compared to the
quarter ended April 30, 2001 total of $2,541,000. This was an increase of
45%. 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

During the first quarter of the current fiscal year, our gross profits
were $1,699,000 (46%), versus $1,102,000 (40%) for the first quarter of the
previous year. Gross margins (gross profit divided by sales revenue) improved
because of continued production efficiencies and lower energy costs. We believe
that an increase in sales of new products with lower gross margins is expected
during the remainder of fiscal 2003 and will cause some downward pressure on
margin results.

Other Expenses and Income

In the first three months of fiscal year 2003, we spent $554,000 on
marketing and sales compared to $310,000 in the same period last year,
resulting in a 79% 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 newly launched products.

Comparing the first quarters of fiscal 2002 and 2003, general and
administrative expenses increased by 48% from $333,000 to $492,000. 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

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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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 three months of fiscal 2003, $26,000 in interest income was
earned as compared to $42,000 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.

Net Income

During the first quarter of fiscal year 2003 we had a net income before
taxes of $679,000, versus $411,000 for the first quarter of fiscal 2002,
resulting in a 65% increase. In the first three months of 2003, we recognized
income tax provision of $288,000 compared with income tax provision of $143,000
in the first three months of 2002. Profits after taxes increased by 46% from
$268,000 for the first quarter of fiscal 2002 to $391,000 for the first quarter
of fiscal 2003. 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 5% of our sales during the first three months of the fiscal
year were to foreign customers. Of the foreign sales, 24% 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 first quarter of fiscal year 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 year 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 three months of fiscal year 2003, our capital
structure was comprised of $1,018,000 in short-term liabilities, $56,000 of
long-term deferred tax liability and $7,636,000 of stockholders equity. The
ratio of total assets to total liabilities, at April 30, 2002, was 8.11:1
compared to 7.50:1 at January 31, 2002. Our total liabilities has decreased by
$27,000 during the first three months of fiscal 2003. Total stockholders
equity has increased by $480,000 to $7,636,000 in the first three months of
2003. The increase was primarily due to net income for the period and from an
increase in other capital accounts.

As fiscal year 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.

As described in item 2, part II of this filing warrants were issued to
non-affiliated individuals in exchange for their agreement to invest in W4.

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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Cash Generated from Operations

The cash flow generated from operations increased to $906,000 during the
first three months of fiscal year 2003 from $483,000 at the end of the same
period in 2002. This was substantially due to increases in our sales and
profits. 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 April
30, 2002 was $5,295,000, 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 6.20:1 compared to 5.65:1 at the end of fiscal
2002. Cash flows generated from operations resulted in an increase in working
capital.

As 2003 continues, we expect working capital will grow but not as fast as
in recent history. We also anticipate that sufficient cash and cash equivalents
will be generated throughout 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 three months of fiscal year 2003, we used $319,000 in
cash for investing activities, which involved the purchase of plant equipment
and intangible assets related to Advanced Fibers, LLC. This is compared to
$35,000 being received from investing activities and $1,000 received from
financing activities in the first three months of 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 year ended January 31, 2003 are anticipated to total
$17,000 for the property on which the plant stands and $44,000 for warehouse
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.




SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable

We typically offers credit terms to our customers. We considered all accounts
receivable in excess of our standard bad debt allowance of $15,000 and financing fees 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.

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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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.

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. Our audit committee reviews and approves our material 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 policies

We adopted SFAS No. 142 on January 1, 2002, as required by the new statement.
The adoption of SFAS No. 142 did not have a material impact on its financial
position or its results of operations.

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
advertising, promotion and research and development projects unachievable.                                                                                                                                                                                                                                                                                                                                  

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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| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                         

Forward-looking Statements

Statements made in the preceding Managements Discussion and Analysis 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.

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PART II  OTHER INFORMATION

2. Changes in securities



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On February 2, 2002, March 8, 2002 and March 26, 2002 we issued warrants
to purchase 22,220, 11,000, and 10,900 shares of our common stock,
respectively, to certain non affiliated investors in W4 in exchange for
their agreement to invest funds in W4, a company in which we have made
investments and which currently owes us approximately $667,000. We have a
corresponding allowance on our financial statements for the loan, because
it is doubtful that the funds will be paid back. The allowance would
become an extraordinary gain if it could be collected in the future. The
warrants have exercise prices of $2.25, $2.27 and $2.29 per share,
respectively, representing the fair market value of our common stock on
each respective date of grant. These transactions were exempt from
registration pursuant to Section 4(2) of the Securities Act. These
warrants have a term of two years and may be exercised at any time during
their term.

6. Exhibits and Reports on Form 8-K



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

SIGNATURES

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

|               |  |  |                                                    | 
|-------------- |  |  | -------------------------------------------------- | 
|               |  |  | INTERNATIONAL ABSORBENTS, INC.
(Registrant)        | 
|              
|Date: 6/5/2002 |  |  | /s/ Gordon L. EllisGordon L. Ellis
President & CEO | 

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

11