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SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

FORM 10-QSB



|x |  | Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
|- |  | ---------------------------------------------------------------------------------

For the quarterly period ended October 31, 2002

OR



|o |  | Transition Report Under 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.

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| |                                                                |  |                                   | 
| | -------------------------------------------------------------- |  | --------------------------------- | 
| | Province of British Columbia, Canada                           |  | None                              | 
| |                                                                |  |                                   | 
| | (State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.) | 

1569 Dempsey Road
North Vancouver, British Columbia
Canada V7K 1S8

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(604) 681-6181

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

|                                           |  |                        
|------------------------------------------ |  | -----------------------
|Title of Class
Common Shares, no par value |  | No. of Shares
5,663,945



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

|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |       |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------- | ----- | ---------------- | ----- | ---------------- | ----- | ----- | ----- | 
|                                                                                                                                                  |                                          |                            |       | As at            |       | As at           
|                                                                                                                                                  |                                          |                            |       | October 31, 2002 |       | January 31, 2002
|                                                                                                                                                  |                                          |                            |       |                  |       |                 
|                                                                                                                                                  |                                          |                            |       | (unaudited)      |       | (audited)       
|ASSETS                                                                                                                                            |                                          |                            |       |                  |       |                  |       |      
|Current assets:                                                                                                                                   |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  | Cash and cash equivalents                |                            | $     | 2,798            |       |                  | $     | 3,806 |      
|                                                                                                                                                  | Short term investments                   |                            |       | 206              |       |                  |       | 100   |      
|                                                                                                                                                  | Accounts receivable, net                 |                            |       | 1,366            |       |                  |       | 1,135 |      
|                                                                                                                                                  | Inventories                              |                            |       | 854              |       |                  |       | 679   |      
|                                                                                                                                                  | Prepaid expenses                         |                            |       | 130              |       |                  |       | 186   |      
|                                                                                                                                                  | Receivable from related party            |                            |       | 26               |       |                  |       |      |      
|                                                                                                                                                  | Deferred income tax asset                |                            |       | 309              |       |                  |       | 905   |      
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  |                                          |                            | 5,689 |                  |       |                  | 6,811 |      
|                                                                                                                                                  | Property, plant and equipment            |                            |       | 3,777            |       |                  |       | 1,341 |      
|                                                                                                                                                  | Intangible assets                        |                            |       | 110              |       |                  |       | 105   |      
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  |                                          | $                          | 9,576 |                  |       | $                | 8,257 |      
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|LIABILITIES                                                                                                                                       |                                          |                            |       |                  |       |                  |       |      
|Current liabilities:                                                                                                                              |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  | Accounts payable and accrued liabilities |                            |       | 1,123            |       |                  |       | 993   |      
|                                                                                                                                                  | Income taxes payable                     |                            |       | 42               |       |                  |       | 52    |      
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  |                                          |                            | 1,165 |                  |       |                  | 1,045 |      
|Long term liability:                                                                                                                              |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  | Deferred income tax liability            |                            |       | 56               |       |                  |       | 56    |      
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  |                                          |                            | 1,221 |                  |       |                  | 1,101 |      
|SHAREHOLDERS EQUITY                                                                                                                              |                                          |                            |       |                  |       |                  |       |      
|Common stock, no par value,
100,000,000 shares authorized
5,663,945 and 5,662,144 issued and outstanding at
October 31, 2002 and January 31, 2002 |                                          |                            | 7,047 |                  |       |                  | 7,048 |      
|Additional paid in capital                                                                                                                        |                                          |                            | 433   |                  |       |                  | 288   |      
|Retained earnings (accumulated deficit)                                                                                                           |                                          |                            | 875   |                  |       |                  | (180  | )    
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  |                                          | Total shareholders equity |       |                  | 8,355 |                  |       |       | 7,156 | 
|                                                                                                                                                  |                                          |                            |       |                  |       |                  |       |      
|                                                                                                                                                  |                                          | $                          | 9,576 |                  |       | $                | 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)

|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |       | 
|------------------------------------------------------------ | -------------------------- | - | ----------------- | ----- | ------------------ | - | ---------------- | ----- | ---------------- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                             |                            |   | Nine Months Ended |       | Three Months Ended
|                                                             |                            |   |                   |       |                   
|                                                             |                            |   | October 31, 2002  |       | October 31, 2001   |   | October 31, 2002 |       | October 31, 2001
|                                                             |                            |   |                   |       |                    |   |                  |       |                 
|Sales revenue                                                |                            | $ | 11,557            |       |                    | $ | 9,209            |       |                  | $ | 4,299 |       |  | $ | 3,472 |      
|Cost of goods sold                                           |                            |   | 6,598             |       |                    |   | 4,925            |       |                  |   | 2,462 |       |  |   | 1,686 |      
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|                                                             |                            |   | 4,959             |       |                    |   | 4,284            |       |                  |   | 1,837 |       |  |   | 1,786 |      
|Corporate and administrative expenses:                       |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|                                                             | Marketing and sales        |   |                   | 1,639 |                    |   |                  | 1,265 |                  |   |       | 549   |  |   |       | 529   | 
|                                                             | General and administrative |   |                   | 1,712 |                    |   |                  | 1,221 |                  |   |       | 621   |  |   |       | 390   | 
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|                                                             |                            |   | 3,351             |       |                    |   | 2,486            |       |                  |   | 1,170 |       |  |   | 919   |      
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|Net income from operations                                   |                            |   | 1,608             |       |                    |   | 1,798            |       |                  |   | 667   |       |  |   | 867   |      
|Interest income                                              |                            |   | 43                |       |                    |   | 109              |       |                  |   | 13    |       |  |   | 31    |      
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|Net income before income taxes                               |                            |   | 1,651             |       |                    |   | 1,907            |       |                  |   | 680   |       |  |   | 898   |      
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|Current income tax provision                                 |                            |   |                   |       |                    |   | (24              | )     |                  |   |       |       |  |   | (14   | )    
|Deferred income tax provision                                |                            |   | (596              | )     |                    |   | (672             | )     |                  |   | (275  | )     |  |   | (312  | )    
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|Net income for the period                                    |                            | $ | 1,055             |       |                    | $ | 1,211            |       |                  | $ | 405   |       |  | $ | 572   |      
|                                                             |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|Basic earnings per share                                     |                            | $ | 0.19              |       |                    | $ | 0.21             |       |                  | $ | 0.07  |       |  | $ | 0.10  |      
|Fully diluted                                                |                            | $ | 0.18              |       |                    | $ | 0.21             |       |                  | $ | 0.07  |       |  | $ | 0.10  |      
|Weighted average number of shares
outstanding (in thousands) |                            |   |                   |       |                    |   |                  |       |                  |   |       |       |  |   |       |      
|                                                             | Basic                      |   |                   | 5,662 |                    |   |                  | 5,636 |                  |   |       | 5,663 |  |   |       | 5,667 | 
|                                                             | Diluted                    |   |                   | 5,763 |                    |   |                  | 5,712 |                  |   |       | 5,706 |  |   |       | 5,717 | 





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

|                                               |  |                   |        |                  |  |   |       |  
|---------------------------------------------- |  | ----------------- | ------ | ---------------- |  | - | ----- | -
|                                               |  | Nine Months Ended
|                                               |  |                  
|                                               |  | October 31, 2002  |        | October 31, 2001
|                                               |  |                   |        |                 
|Cash flows from operating activities           |  | $                 | 1,723  |                  |  | $ | 1,944 |  
|Cash flows from investing activities           |  |                   | (2,730 | )                |  |   | (570  | )
|Cash flows from financing activities           |  |                   | (1     | )                |  |   | 155   |  
|                                               |  |                   |        |                  |  |   |       |  
|Net change in cash                             |  | $                 | (1,008 | )                |  | $ | 1,529 |  
|Cash and cash equivalents, beginning of period |  | $                 | 3,806  |                  |  | $ | 2,071 |  
|                                               |  |                   |        |                  |  |   |       |  
|Cash and cash equivalents, end of period       |  | $                 | 2,798  |                  |  | $ | 3,600 |  
|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. The
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 October 31,
2002, its results of operations for the three and nine months ended October 31,
2002 and 2001, respectively, and statement of cash flows for the nine months
ended October 31, 2002 and 2001.

New accounting pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Restructuring
Costs. SFAS 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
adopted the provisions of SFAS No. 146 and it had no material effect on its
results of operations or financial position.

In October 2002, the FASB issued SFAS No. 147, Acquisition of Certain
Financial Institution  an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9. Adoption of SFAS No. 147
does not have material impact on the company's financial position or results of
operations.

2.   Share Capital

Common Shares

|                                            |                                        |  |           |        |         |   |       |    |  
|------------------------------------------- | -------------------------------------- |  | --------- | ------ | ------- | - | ----- | -- | -
|                                            |                                        |  | Shares    |        | Capital
|                                            |                                        |  |           |        |        
|Common shares outstanding, January 31, 2002 |                                        |  | 5,662,144 |        |         | $ | 7,048 |   
|                                            | Returned to treasury, odd-lot buy back |  |           | (3,199 | )       |   |       | (8 | )
|                                            | Exercise of options                    |  |           | 5,000  |         |   |       | 7  |  
|                                            |                                        |  |           |        |         |   |       |   
|Common shares outstanding, October 31, 2002 |                                        |  | 5,663,945 |        |         | $ | 7,047 |   
|                                            |                                        |  |           |        |         |   |       |   

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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On July 9, 2002 the Company 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). This offer was approved by the board of
directors. The price offered per share was $2.35, which was the average
closing price over the program period. The offer expired on September 9, 2002
and we repurchased 3,199 shares of common stock at an aggregate purchase price
of $8,000 as a result of this program.

Options

Stock options at October 31, 2002 and January 31, 2002 were 615,786 and 622,062
respectively. Stock options vested as of October 31, 2002 and January 31, 2002
were 413,686 and 208,262, respectively. Stock based compensation expense for
options granted in prior periods was $14,000 during the quarter that ended
October 31, 2002, and $98,000 for the nine months ended October 31, 2002.
During the three months ended October 31, 2002, 5,000 stock options were
exercised for $7,000 and 10,000 options were granted with an exercise price of
$1.65, which was the fair market value at the date of grant.

Warrants

|                                       |        |  |                 |        |             |                |                |  | 
|-------------------------------------- | ------ |  | --------------- | ------ | ----------- | -------------- | -------------- |  | 
|                                       |        |  | # of underlying |        |             |                |               
|                                       |        |  | common shares   |        | Price range
|                                       |        |  |                 |        |            
|Warrants outstanding, January 31, 2002 |        |  |                |        |             |                |               | 
|                                       | Issued |  |                 | 44,120 |             |                | $2.25 to $2.29
|                                       |        |  |                 |        |             |                |                | 
|Warrants outstanding, October 31, 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, a related company, in exchange for their investment in W4. 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.

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 three business
segments, the animal care industry, the hydro-mulch 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  Nine Months Ended October 31, 2002

|                                                      |  |             |        |             |  |            |     |              |  |   |     |  |  |   |        |  
|----------------------------------------------------- |  | ----------- | ------ | ----------- |  | ---------- | --- | ------------ |  | - | --- |  |  | - | ------ | -
|                                                      |  | Animal Care |        | Hydro-Mulch |  | Industrial |     | Consolidated
|                                                      |  |             |        |             |  |            |     |             
|Revenues                                              |  | $           | 10,710 |             |  | $          | 43  |              |  | $ | 804 |  |  | $ | 11,557 |  
|Operating costs and expenses                          |  |             | 8,853  |             |  |            | 77  |              |  |   | 755 |  |  |   | 9,685  |  
|                                                      |  |             |        |             |  |            |     |              |  |   |     |  |  |   |        |  
|Operating income before depreciation and
amortization |  |             | 1,857  |             |  |            | (34 | )            |  |   | 49  |  |  |   | 1,872  |  
|Depreciation and amortization  corporate             |  |             |        |             |  |            |     |              |  |   |     |  |  |   | (264   | )
|Interest income                                       |  |             |        |             |  |            |     |              |  |   |     |  |  |   | 43     |  
|                                                      |  |             |        |             |  |            |     |              |  |   |     |  |  |   |        |  
|Net income before taxes                               |  |             |        |             |  |            |     |              |  |   |     |  |  | $ | 1,651  |  
|                                                      |  |             |        |             |  |            |     |              |  |   |     |  |  |   |        |  
|Capital expenditures                                  |  | $           | 1,987  |             |  | $          | 571 |              |  | $ | 147 |  |  | $ | 2,705  |  

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  Nine Months Ended October 31, 2001

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 8,210 |            |  | $            | 999 |  |  | $ | 9,209 |  
|Operating costs and expenses                          |  |             | 6,395 |            |  |              | 845 |  |  |   | 7,240 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 1,815 |            |  |              | 154 |  |  |   | 1,969 |  
|Depreciation and amortization  corporate             |  |             |       |            |  |              |     |  |  |   | (171  | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 109   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 1,907 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital Expenditures                                  |  | $           | 81    |            |  | $            | 10  |  |  | $ | 91    |  

Business Segment Data  Three Months Ended October 31, 2002

|                                                      |  |             |       |             |  |            |     |              |  |   |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ----------- |  | ---------- | --- | ------------ |  | - | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Hydro-Mulch |  | Industrial |     | Consolidated
|                                                      |  |             |       |             |  |            |     |             
|Revenues                                              |  | $           | 4,005 |             |  |            | 43  |              |  | $ | 251 |  |  | $ | 4,299 |  
|Operating costs and expenses                          |  |             | 3,225 |             |  |            | 77  |              |  |   | 237 |  |  |   | 3,539 |  
|                                                      |  |             |       |             |  |            |     |              |  |   |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 780   |             |  |            | (34 | )            |  |   | 14  |  |  |   | 760   |  
|Depreciation and amortization  corporate             |  |             |       |             |  |            |     |              |  |   |     |  |  |   | (93   | )
|Interest income                                       |  |             |       |             |  |            |     |              |  |   |     |  |  |   | 13    |  
|                                                      |  |             |       |             |  |            |     |              |  |   |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |             |  |            |     |              |  |   |     |  |  | $ | 680   |  
|                                                      |  |             |       |             |  |            |     |              |  |   |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 1,564 |             |  |            | 166 |              |  | $ | 122 |  |  | $ | 1,852 |  

Business Segment Data  Three Months Ended October 31, 2001

|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|----------------------------------------------------- |  | ----------- | ----- | ---------- |  | ------------ | --- |  |  | - | ----- | -
|                                                      |  | Animal Care |       | Industrial |  | Consolidated
|                                                      |  |             |       |            |  |             
|Revenues                                              |  | $           | 3,147 |            |  | $            | 325 |  |  | $ | 3,472 |  
|Operating costs and expenses                          |  |             | 2,350 |            |  |              | 200 |  |  |   | 2,550 |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Operating income before depreciation and
amortization |  |             | 797   |            |  |              | 125 |  |  |   | 922   |  
|Depreciation and amortization  corporate             |  |             |       |            |  |              |     |  |  |   | (55   | )
|Interest income                                       |  |             |       |            |  |              |     |  |  |   | 31    |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Net income before taxes                               |  |             |       |            |  |              |     |  |  | $ | 898   |  
|                                                      |  |             |       |            |  |              |     |  |  |   |       |  
|Capital expenditures                                  |  | $           | 55    |            |  | $            | 7   |  |  | $ | 62    |  

Assets

|                    |  |             |       |             |  |            |     |              |  |   |       |  |  |   |       | 
|------------------- |  | ----------- | ----- | ----------- |  | ---------- | --- | ------------ |  | - | ----- |  |  | - | ----- | 
|                    |  | Animal Care |       | Hydro-Mulch |  | Industrial |     | Consolidated
|                    |  |             |       |             |  |            |     |             
|At October 31, 2002 |  | $           | 7,647 |             |  |            | 571 |              |  | $ | 1,358 |  |  | $ | 9,576 | 
|At January 31, 2002 |  | $           | 6,909 |             |  |            |     |              |  | $ | 1,348 |  |  | $ | 8,257 | 

Approximately 5% of our sales during the nine months ended October 31, 2002
were to foreign customers. Approximately 3% of our sales during the three
months ended October 31, 2002 and 2001 were to foreign customers.

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

6



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##### 



4.   Property, Plant and Equipment

During the nine months ended October 31, 2002,
the company acquired land at a cost of $1.5 million (for development of a new production facility), $571,000 spent for the
installation and purchase of equipment for the new hydro-mulch production
facility, $377,000 for new bagging and dryer equipment, and $282,000 spent on
office and other equipment.

5.   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 date of this report, there has been
no change in the status of this allowance.

Item 2.

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

Our net sales for the nine month period ending October 31, 2002 were
$11,557,000, representing a 25% increase over the $9,209,000 sold during
the same period in the previous year. Net sales for the quarter ended October
31, 2002 were $4,299,000 compared to $3,472,000, for the same period in 2001,
representing an increase of 24%. This increase was achieved primarily through
an increase in sales of the Animal Care divisions flagship product, CareFRESH®
small animal bedding. Also, sales of other Animal Care product lines, such as
Supreme small animal pet foods and Healthy Pet/Critter Care small animal
bedding increased over the same periods. 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 nine months of fiscal 2003 were
$4,959,000, a gross margin of 43%. In the first nine months of fiscal 2002
gross profits on net sales were $4,284,000, or 47%. During the third quarter
of the current fiscal year, our gross profits were $1,837,000 (43%), versus
$1,786,000 (51%) for the third quarter of the previous year. Gross margins
(gross profit divided by sales revenue) decreased mainly

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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##### 



because of start-up costs related to our new hydro-mulch production facility,
the need to increase our warehousing space, increased labor expenses,
utilities, and increased materials expenses. The new warehouse spaces, which
we are leasing, are 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 gross
margin results.

Other Expenses and Income

During the first nine months of fiscal year 2003, we spent $1,639,000 on
marketing and sales expenses compared to $1,265,000 in the same period last
year, resulting in a 30% increase. In the third quarter of fiscal 2003, we
spent $549,000 on marketing and sales compared to $529,000 in the same period
last year, representing a 4% 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 these significant investments will
continue to be made in marketing, advertising and promoting products launched
over the past two years.

General and
administrative expenses were $1,712,000 for the first nine
months of fiscal 2003, representing a 40% increase over the general and
administrative expenses for the first nine months of fiscal 2002 of $1,221,000.
Comparing the third quarter of fiscal 2002 to that of fiscal 2003, general and
administrative expenses increased by 59% from $390,000 to $621,000. 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.

Interest income has dropped due to significantly lower interest rates
during fiscal year 2003. In the first nine months of fiscal 2003, $43,000 in
interest income was earned as compared to $109,000 in the same period the
previous year. During the third quarter of fiscal 2003, $13,000 in interest
income was earned as compared to $31,000 in the same period the previous year.

Net Income

Our net income before taxes decreased by 13% to $1,651,000 for the nine
months ended October 31, 2002 compared to $1,907,000 in the same period last
year. During the third quarter of fiscal 2003 we had a net income before taxes
of $680,000, versus $898,000 for the third quarter of fiscal 2002, representing
a 24% decrease. We recognized income tax provision of $596,000 during the
first nine months of fiscal 2003, and $275,000 in the third quarter of fiscal
2003, as compared with income tax provision of $696,000 in the first nine
months of fiscal 2002 and $326,000 in the third quarter of fiscal 2002.
Profits after taxes decreased by 13% from $1,211,000 for the first nine months
of fiscal 2002 to $1,055,000 during the same period in fiscal 2003. During the
third quarter of fiscal 2003, profits after taxes decreased to $405,000 as
compared to $572,000 for the same quarter in the previous year, representing a
decrease of 29%. The amount of the deferred income tax provision is determined
in accordance with United States generally accepted accounting principles.
Net income before taxes decreased as a result of lower gross profits and an
increase in marketing and general and administrative expenses. These increases
in expenses are part of our existing operating plan to improve our
infrastructure so that it can support our projected growth. We anticipate that
we will continue to make large non-capital investments 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 nine months of fiscal 2003
were to foreign customers. Of the foreign sales, 23% 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 third 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

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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##### 



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 nine months of fiscal 2003, our capital structure
was comprised of $1,165,000 in short-term liabilities, $56,000 of long-term
deferred tax liability and $8,355,000 of stockholders equity. The ratio of
total assets to total liabilities at October 31, 2002 was 7.84:1 compared to
7.50:1 at January 31, 2002. Our total liabilities have increased by $120,000
during the first nine months of fiscal 2003. Total stockholders equity has
increased by $1,199,000 to $8,355,000 in the first nine 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 new
production facilities are designed and other new sites are selected. The
estimated cost of facility construction on the newly purchased property is in
the process of being determined. 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 $1,723,000 during the
first nine months of fiscal 2003 from $1,944,000 at the end of the same period
in fiscal 2002. This was substantially due to reduced gross profits during the
first nine months of 2003 and an increase in accounts receivable and inventory
at October 31, 2002. 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
October 31, 2002 was $4,215,000, 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, decreased to 4.62:1 compared to 5.65:1 at the end
of fiscal 2002. The decrease of working capital is a result of our $1,500,000
cash purchase of property for our new manufacturing facility located in
Washington State.

As fiscal 2003 continues, we expect working capital will not grow due to
additional investments 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 nine months of fiscal 2003, we used $2,730,000 in cash
for investing activities, which involved the purchase of property for
$1,500,000, plant, equipment and intangible assets for $1,230,000. This is
compared to $570,000 being used in investing activities and $155,000 received
from financing activities in the first nine 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. The estimated cost of
facility construction on the newly purchased property is in the process of
being determined.

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 $5,000 for the property on which the plant stands, $88,000 for warehouse
space, and $22,000 for office space. The current lease agreement on property
expires in fiscal year 2006 for the property on which the plant is located,
fiscal 2003 for the warehouse space and in fiscal year 2003 for the new office
space.

We are subject to receive guaranteed payments for hydro-mulch produced
under our contract with Mat, Inc. We receive $43,000 under the contract
during the third quarter of fiscal year 2003.

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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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 $52,000 to be fully collectible at October 31, 2002. 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 generally 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.

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 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

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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##### 



recorded under Emerging Issues Task Force Issue 94-3. The Company adopted the
provisions of SFAS No. 146 and it had no material effect on its results of
operations or financial position.

In October 2002, the FASB issued SFAS No. 147, Acquisition of Certain
Financial Institution  an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9. Adoption of SFAS No. 147
will not have a material impact on the company's financial position or 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, Washington State and Oregon 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.                                                                                                                                                                                                                                                                                                                                  
| 
| |  | With
respect to facilities, we have signed a number of lease agreements for
manufacturing, warehousing and office facilities. We will likely seek
mortgage financing or raise additional capital in the future to
finance construction. To the extent the Company needs to borrow for
future construction, we will be subject to risk inasmuch as the amount
of funds available may not be adequate to meet our needs, or the terms
and/or interest rates associated with the financing may not be
favorable to the Company.                                                                                                                                                  
| 
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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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| |  | 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.

Item 3.     Controls and Procedures

Within the 90 days prior to the date of filing this Quarterly Report on Form
10-QSB, we carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer and the
chief financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.
Based upon that evaluation, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures are effective in
timely alerting them to material information relating to us (including our
consolidated subsidiaries) required to be included in the our periodic SEC
filings. Subsequent to the date of that evaluation, there have been no
significant changes in our internal controls or in other factors that could
significantly affect internal controls, nor were any corrective actions
required with regard to significant deficiencies and material weaknesses.

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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##### 



PART II  OTHER INFORMATION

Item 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 was $2.35, which was
the average closing price over the program period. The offer expired on
September 9, 2002 and we repurchased 3,199 shares of common stock at an
aggregate purchase price of $7,511 as a result of this program.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 6.     Exhibits and Reports on Form 8-K



| | a) |  | List of Exhibits
| | -- |  | ----------------

| |                |  |                                                                                                                                                        
| | -------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit Number |  | Exhibit Description                                                                                                                                    
| |                |  |                                                                                                                                                        
| | 99.1           |  | Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section § 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
| | 99.2           |  | Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section § 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.



| | b) |  | Reports on Form 8-K:                                                                                                                                                                                                            
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 1) |  | On October 18, 2002 a report on Form 8-K was filed with the
Securities and Exchange Commission announcing the Companys purchase
of land in Bellingham, Washington for a total purchase price of
$1,500,000, plus closing costs.
|
| | 2) |  | On November 4, 2002 a report on Form 8-K was filed with the
Securities and Exchange Commission announcing that the Board of
Directors had appointed Lionel G. Dodd as a new independent director.                               

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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##### 



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: December 9, 2002 |  | /s/ Gordon L. Ellis                                
|                       |  |                                                    
|                       |  | Gordon L. Ellis
President & Chief Executive Officer

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

14



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##### 



CERTIFICATION PURSUANT TO
EXCHANGE ACT RULE 13a-14

I, Gordon Ellis, President and Chief Executive 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 this
quarterly report;

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

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



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



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                                                      
|----- |  | -----------------------------------------------------
|Date: |  | December 9, 2002                                     
|      |  |                                                      
|      |  | /s/ Gordon L. Ellis                                  
|      |  |                                                      
|      |  | Gordon L. Ellis
President and Chief Executive Officer

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

15



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##### 



CERTIFICATION PURSUANT TO
EXCHANGE ACT RULE 13a-14

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 this
quarterly report;

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

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



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



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                                          
|----- |  | -----------------------------------------
|Date: |  | December 9, 2002                         
|      |  |                                          
|      |  | /s/ David H. Thompson                    
|      |  |                                          
|      |  | David H. Thompson
Chief Financial Officer

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

16