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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended July 31, 2002

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 1-8366

|POLYDEX PHARMACEUTICALS LIMITED(Exact Name of Registrant as Specified in Its Charter)
|-------------------------------------------------------------------------------------

|Commonwealth of the Bahamas(State or Other Jurisdiction of Incorporation or Organization) |  | None(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------------------------- |  | ----------------------------------------
|421 Comstock Road, Toronto, Ontario, Canada(Address of Principal Executive Offices)       |  | M1L 2H5(Zip Code)                       

Registrant's Telephone Number, Including Area Code(416) 755-2231

|Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
|--------------------------------------------------------------------------------

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes    ý    No o

Indicate
the number of shares outstanding of each of the issuer's classes of common shares, as of the latest practicable date.

|Common Shares, $.0167 Par Value(Title of Class) |  | 3,027,777 shares(Outstanding at September 6, 2002)
|----------------------------------------------- |  | --------------------------------------------------

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POLYDEX PHARMACEUTICALS LIMITED        TABLE OF CONTENTS

|        |  |                                                                                                                         |  | PAGE
|------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I  |  | FINANCIAL INFORMATION                                                                                                   |  |     
|Item 1  |  | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                                                                           |  |     
|        |  | Consolidated Balance Sheets
July 31, 2002 and January 31, 2002                                                          |  | 3   
|        |  | Consolidated Statements of Operations
Three months ended July 31, 2002 and 2001
Six months ended July 31, 2002 and 2001 |  | 5   
|        |  | Consolidated Statements of Shareholders' Equity
and Comprehensive Income
Six months ended July 31, 2002 and 2001        |  | 6   
|        |  | Consolidated Statements of Cash Flows
Six months ended July 31, 2002 and 2001                                           |  | 7   
|        |  | Segmented Information
Three months ended July 31, 2002 and 2001
Six months ended July 31, 2002 and 2001                 |  | 8   
|        |  | Notes to Consolidated Financial Statements (Unaudited)                                                                  |  | 9   
|Item 2  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                   |  | 10  
|Item 3  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK                                                              |  | 16  
|PART II |  | OTHER INFORMATION                                                                                                       |  |     
|Item 4  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS                                                                     |  | 17  
|Item 6  |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                        |  | 17  
|        |  | Signatures                                                                                                              |  | 18  

2

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PART I  FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements (unaudited).

POLYDEX PHARMACEUTICALS LIMITED

Consolidated Balance Sheets
(Expressed in United States dollars)

|                                     |                                           | (Unaudited)
July 31
2002 |           | January 31
2002
|------------------------------------ | ----------------------------------------- | ------------------------ | --------- | ---------------
|Assets                               |                                           |                          |           |                
|Current assets:                      |                                           |                          |           |                
|                                     | Cash                                      |                          | $         | 197,668        
|                                     | Trade accounts receivable                 |                          |           | 937,199        
|                                     | Inventories:                              |                          |           |                
|                                     |                                           | Finished goods           |           |                
|                                     |                                           | Work in process          |           |                
|                                     |                                           | Raw materials            |           |                
|                                     |                                           |                          |           |                
|                                     | Inventories                               |                          |           | 2,248,218      
|                                     | Prepaid expenses and other current assets |                          |           | 63,708         
|                                     |                                           |                          |           |                
|                                     |                                           |                          | 3,446,793 |                
|Property, plant and equipment, net   |                                           |                          | 4,615,421 |                
|Patents, net                         |                                           |                          | 98,154    |                
|Due from Sparhawk Laboratories, Inc. |                                           |                          | 134,189   |                
|Due from shareholder                 |                                           |                          | 1,075,829 |                
|Deferred tax assets                  |                                           |                          | 506,399   |                
|Other assets                         |                                           |                          | 31,784    |                
|                                     |                                           |                          |           |                
|                                     |                                           | $                        | 9,908,569 |                
|                                     |                                           |                          |           |                

3

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|                                     |                                              | July 31
2002            |                                                               | January 31
2002 |  
|------------------------------------ | -------------------------------------------- | ----------------------- | ------------------------------------------------------------- | --------------- | -
|Liabilities and Shareholders' Equity |                                              |                         |                                                               |                 |  
|Current liabilities:                 |                                              |                         |                                                               |                 |  
|                                     | Bank indebtedness                            |                         | $                                                             | 43,829          |  
|                                     | Accounts payable                             |                         |                                                               | 695,215         |  
|                                     | Accrued liabilities                          |                         |                                                               | 388,184         |  
|                                     | Due to Sparhawk Laboratories, Inc.           |                         |                                                               | 101,453         |  
|                                     | Customer deposits received                   |                         |                                                               | 103,204         |  
|                                     | Income taxes payable                         |                         |                                                               | 84,609          |  
|                                     | Current portion of long-term debt            |                         |                                                               | 447,253         |  
|                                     | Current portion of capital lease obligations |                         |                                                               | 102,521         |  
|                                     |                                              |                         |                                                               |                 |  
|                                     |                                              |                         | 1,966,268                                                     |                 |  
|Long-term debt                       |                                              |                         | 267,571                                                       |                 |  
|Capital lease obligations            |                                              |                         | 364,167                                                       |                 |  
|Due to shareholder                   |                                              |                         | 681,149                                                       |                 |  
|                                     |                                              |                         |                                                               |                 |  
|Total liabilities                    |                                              |                         | 3,279,155                                                     |                 |  
|Shareholders' equity:                |                                              |                         |                                                               |                 |  
|                                     | Capital stock                                |                         |                                                               |                 |  
|                                     |                                              | Authorized:             |                                                               |                 |  
|                                     |                                              |                         | 100,000 Class A preferred shares, par value $0.10 per share   |                 |  
|                                     |                                              |                         | 899,400 Class B preferred shares, par value $0.0167 per share |                 |  
|                                     |                                              |                         | 10,000,000 common shares, par value $0.0167 per share         |                 |  
|                                     |                                              | Issued and outstanding: |                                                               |                 |  
|                                     |                                              |                         | 899,400 Class B preferred shares                              |                 |  
|                                     |                                              |                         | 3,027,777 common shares (January 31, 2002 - 3,027,477)        |                 |  
|                                     | Contributed surplus                          |                         |                                                               | 23,224,128      |  
|                                     | Deficit                                      |                         |                                                               | (15,495,366     | )
|                                     | Accumulated other comprehensive loss         |                         |                                                               | (1,164,792      | )
|                                     |                                              |                         |                                                               |                 |  
|                                     |                                              |                         | 6,629,414                                                     |                 |  
|                                     |                                              |                         |                                                               |                 |  
|                                     |                                              | $                       | 9,908,569                                                     |                 | $
|                                     |                                              |                         |                                                               |                 |  

4

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POLYDEX PHARMACEUTICALS LIMITED

Consolidated Statements of Operations (Unaudited)
(Expressed in United States dollars)

|                                                                    |                                                  | Quarter Ended
July 31
2002 |           | Quarter Ended
July 31
2001 |       | Year to Date
July 31
2002 |         | Year to Date
July 31
2001 |          
|------------------------------------------------------------------- | ------------------------------------------------ | -------------------------- | --------- | -------------------------- | ----- | ------------------------- | ------- | ------------------------- | ---------
|Sales                                                               |                                                  | $                          | 2,647,400 |                            | $     | 2,884,189                 |         | $                         | 5,972,010
|Cost of products sold                                               |                                                  |                            | 1,946,153 |                            |       | 2,266,322                 |         |                           | 4,301,568
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|                                                                    |                                                  |                            | 701,247   |                            |       | 617,867                   |         |                           | 1,670,442
|Expenses:                                                           |                                                  |                            |           |                            |       |                           |         |                           |          
|                                                                    | General and administrative                       |                            |           | 411,556                    |       |                           | 428,477 |                           |          
|                                                                    | Depreciation                                     |                            |           | 138,431                    |       |                           | 131,445 |                           |          
|                                                                    | Research and development                         |                            |           | 57,216                     |       |                           | 109,368 |                           |          
|                                                                    | Interest expense                                 |                            |           | 38,712                     |       |                           | 53,972  |                           |          
|                                                                    | Selling and promotion                            |                            |           | 31,800                     |       |                           | 32,024  |                           |          
|                                                                    | Foreign exchange (gain) loss                     |                            |           | (377                       | )     |                           | 2,748   |                           |          
|                                                                    | Amortization                                     |                            |           | 5,545                      |       |                           | 5,545   |                           |          
|                                                                    | Write down of property, plant and equipment      |                            |           |                           |       |                           | (29,489 | )                         |          
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|                                                                    |                                                  |                            | 682,883   |                            |       | 734,090                   |         |                           | 1,358,137
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|Income (loss) from operations                                       |                                                  |                            | 18,364    |                            |       | (116,223                  | )       |                           | 312,305  
|Other income (loss):                                                |                                                  |                            |           |                            |       |                           |         |                           |          
|                                                                    | Gain (loss) on sale of equipment                 |                            |           |                           |       |                           | (27,631 | )                         |          
|                                                                    | Interest and other                               |                            |           | 2,434                      |       |                           | 52,885  |                           |          
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|                                                                    |                                                  |                            |           | 2,434                      |       |                           | 25,254  |                           |          
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|Income (loss) before the undernoted                                 |                                                  |                            | 20,798    |                            |       | (90,969                   | )       |                           | 317,169  
|Provision for income taxes                                          |                                                  |                            | 56,638    |                            |       | 58,575                    |         |                           | 208,007  
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|Net income (loss) for the period                                    |                                                  | $                          | (35,840   | )                          | $     | (149,544                  | )       | $                         | 109,162  
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|Per share information:                                              |                                                  |                            |           |                            |       |                           |         |                           |          
|                                                                    | Earnings (loss) per common share for the period: |                            |           |                            |       |                           |         |                           |          
|                                                                    |                                                  | Basic                      |           | $                          | (0.01 | )                         | $       | (0.05                     | )        
|                                                                    |                                                  | Diluted                    |           | $                          | (0.01 | )                         | $       | (0.05                     | )        
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          
|Weighted average number of common shares outstanding for the period |                                                  |                            | 3,027,777 |                            |       | 3,027,477                 |         |                           | 3,027,777
|                                                                    |                                                  |                            |           |                            |       |                           |         |                           |          

5

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POLYDEX PHARMACEUTICALS LIMITED

Consolidated Statements of Shareholders' Equity and Comprehensive Income (Unaudited)
(Expressed in United States dollars)

|                                      |                                                   | Year to Date
July 31
2002 |         | Year to Date
July 31
2001 |  
|------------------------------------- | ------------------------------------------------- | ------------------------- | ------- | ------------------------- | -
|Preferred Shares:                     |                                                   |                           |         |                           |  
|                                      | Balance, beginning of period                      |                           | $       | 15,010                    |  
|                                      | Private placement of preferred shares             |                           |         |                          |  
|                                      |                                                   |                           |         |                           |  
|                                      | Balance, end of period                            |                           | $       | 15,010                    |  
|                                      |                                                   |                           |         |                           |  
|Common Shares:                        |                                                   |                           |         |                           |  
|                                      | Balance, beginning of period                      |                           | $       | 50,434                    |  
|                                      | Common share options exercised                    |                           |         |                          |  
|                                      |                                                   |                           |         |                           |  
|                                      | Balance, end of period                            |                           | $       | 50,434                    |  
|                                      |                                                   |                           |         |                           |  
|Contributed Surplus:                  |                                                   |                           |         |                           |  
|                                      | Balance, beginning of period                      |                           | $       | 23,224,128                |  
|                                      | Common share options issued for services provided |                           |         |                          |  
|                                      |                                                   |                           |         |                           |  
|                                      | Balance, end of period                            |                           | $       | 23,224,128                |  
|                                      |                                                   |                           |         |                           |  
|Deficit:                              |                                                   |                           |         |                           |  
|                                      | Balance, beginning of period                      |                           | $       | (15,604,528               | )
|                                      | Net income (loss) for the period                  |                           |         | 109,162                   |  
|                                      |                                                   |                           |         |                           |  
|                                      | Balance, end of period                            |                           | $       | (15,495,366               | )
|                                      |                                                   |                           |         |                           |  
|Accumulated Other Comprehensive Loss: |                                                   |                           |         |                           |  
|                                      | Balance, beginning of period                      |                           | $       | (1,199,627                | )
|                                      | Currency translation adjustment for the period    |                           |         | 34,835                    |  
|                                      |                                                   |                           |         |                           |  
|                                      | Balance, end of period                            |                           | $       | (1,164,792                | )
|                                      |                                                   |                           |         |                           |  
|Comprehensive Income for the period:  |                                                   |                           |         |                           |  
|                                      | Net income (loss) for the period                  |                           | $       | 109,162                   |  
|                                      | Currency translation adjustment for the period    |                           |         | 34,835                    |  
|                                      |                                                   |                           |         |                           |  
|                                      |                                                   | $                         | 143,997 |                           | $
|                                      |                                                   |                           |         |                           |  

6

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POLYDEX PHARMACEUTICALS LIMITED

Consolidated Statements of Cash Flows (Unaudited)
(Expressed in United States dollars)

|                                     |                                                                       | Year to Date
July 31
2002                        |          | Year to Date
July 31
2001 |        
|------------------------------------ | --------------------------------------------------------------------- | ------------------------------------------------ | -------- | ------------------------- | -------
|Cash provided by (used in):          |                                                                       |                                                  |          |                           |        
|Operating activities:                |                                                                       |                                                  |          |                           |        
|                                     | Net income (loss) for the period                                      |                                                  | $        | 109,162                   |        
|                                     | Add (deduct) items not affecting cash:                                |                                                  |          |                           |        
|                                     |                                                                       | Depreciation and amortization                    |          |                           | 284,722
|                                     |                                                                       | Imputed interest on long-term debt               |          |                           | 17,872 
|                                     |                                                                       | Deferred tax provision                           |          |                           | 127,730
|                                     |                                                                       | Loss on sale of equipment                        |          |                           |       
|                                     |                                                                       | Options issued in exchange for services provided |          |                           |       
|                                     | Net change in non-cash working capital balances related to operations |                                                  |          | (19,089                   | )      
|                                     |                                                                       |                                                  |          |                           |        
|                                     |                                                                       |                                                  | 520,397  |                           |        
|                                     |                                                                       |                                                  |          |                           |        
|Investing activities:                |                                                                       |                                                  |          |                           |        
|                                     | Additions to property, plant and equipment and patents                |                                                  |          | (136,146                  | )      
|                                     | Repayment of due from shareholder, net                                |                                                  |          | 22,313                    |        
|                                     | Repayment from (advance to) Sparhawk Laboratories, Inc.               |                                                  |          | (1,575                    | )      
|                                     | Proceeds from sale of equipment                                       |                                                  |          |                          |        
|                                     |                                                                       |                                                  |          |                           |        
|                                     |                                                                       |                                                  | (115,408 | )                         |        
|                                     |                                                                       |                                                  |          |                           |        
|Financing activities:                |                                                                       |                                                  |          |                           |        
|                                     | Repayment of long-term debt                                           |                                                  |          | (147,957                  | )      
|                                     | Repayment of capital lease obligations                                |                                                  |          | (48,509                   | )      
|                                     | Decrease in due to shareholder                                        |                                                  |          | (814                      | )      
|                                     | Increase (decrease) in bank indebtedness                              |                                                  |          | (135,457                  | )      
|                                     |                                                                       |                                                  |          |                           |        
|                                     |                                                                       |                                                  | (332,737 | )                         |        
|                                     | Effect of exchange rate changes on cash                               |                                                  |          | 1,998                     |        
|                                     |                                                                       |                                                  |          |                           |        
|Increase (decrease) in cash position |                                                                       |                                                  | 74,250   |                           |        
|Cash, beginning of period            |                                                                       |                                                  | 123,418  |                           |        
|                                     |                                                                       |                                                  |          |                           |        
|Cash, end of period                  |                                                                       | $                                                | 197,668  |                           | $      
|                                     |                                                                       |                                                  |          |                           |        

7

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POLYDEX PHARMACEUTICALS LIMITED

Segmented Information (Unaudited)
(Expressed in United States dollars)

All operations are carried out through Dextran Products Limited ("Dextran") in Canada and through Chemdex, Inc. ("Chemdex") in the United States. The operations
of Chemdex represent the veterinary products business and the operations are carried out through its wholly-owned subsidiary, Veterinary Laboratories, Inc. Each of Dextran and Chemdex operates as a
strategic business unit offering different products. Each subsidiary comprises a reportable segment as follows:

| |  | Dextran             |  | manufactures and sells bulk quantities of Dextran and several of its derivatives to large pharmaceutical companies throughout the world.                                                                                
| |  | -------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Veterinary products |  | manufactures and sells veterinary pharmaceutical products and specialty chemicals in the United States. The primary customers are distributors and private labelers, who in turn sell to the end-user of these
products.

|                               |                                                  | Quarter Ended
July 31
2002 |   | Quarter Ended
July 31
2001 |   | Year to Date
July 31
2002 |           | Year to Date
July 31
2001 |  
|------------------------------ | ------------------------------------------------ | -------------------------- | - | -------------------------- | - | ------------------------- | --------- | ------------------------- | -
|Sales:                         |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Dextran                                          |                            | $ | 1,107,167                  |   | $                         | 1,245,033 |                           | $
|                               | Veterinary products                              |                            |   | 1,668,373                  |   |                           | 1,725,658 |                           |  
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Total segment sales                              |                            |   | 2,775,540                  |   |                           | 2,970,691 |                           |  
|                               | Less: intercompany sales elimination             |                            |   | 128,140                    |   |                           | 86,502    |                           |  
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Total consolidated sales                         |                            | $ | 2,647,400                  |   | $                         | 2,884,189 |                           | $
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|Income (loss) from operations: |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Dextran                                          |                            | $ | 177,510                    |   | $                         | 184,138   |                           | $
|                               | Veterinary products                              |                            |   | (1,791                     | ) |                           | (124,321  | )                         |  
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Total income from operations from segments       |                            |   | 175,719                    |   |                           | 59,817    |                           |  
|                               | Less: Unallocated corporate expenses             |                            |   | 157,355                    |   |                           | 176,040   |                           |  
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Total consolidated income (loss) from operations |                            | $ | 18,364                     |   | $                         | (116,223  | )                         | $
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|Assets:                        |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Dextran                                          |                            |   |                            |   |                           |           |                           | $
|                               | Veterinary products                              |                            |   |                            |   |                           |           |                           |  
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Total assets from segments                       |                            |   |                            |   |                           |           |                           |  
|                               | Corporate assets                                 |                            |   |                            |   |                           |           |                           |  
|                               |                                                  |                            |   |                            |   |                           |           |                           |  
|                               | Total consolidated assets                        |                            |   |                            |   |                           |           |                           | $
|                               |                                                  |                            |   |                            |   |                           |           |                           |  

8

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Notes to Consolidated Financial Statements (unaudited)

1.    Basis of Presentation:

The information contained in the interim consolidated financial statements is condensed from that which would appear in the annual consolidated financial
statements. Accordingly, the interim consolidated financial statements included herein should be read in conjunction with the January 31, 2002 Annual Report on Form 10-K
filed by Polydex Pharmaceuticals Limited (the "Company"). The unaudited interim consolidated financial statements as of July 31, 2002 and 2001 include all normal recurring adjustments which
management considers necessary for a fair presentation. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year.
The interim consolidated financial statements include the accounts and transactions of the Company and its majority owned subsidiaries in which the Company has more than a 50% ownership interest and
exercises control.

2.    Critical Accounting Policies









3.    Veterinary Laboratories, Inc.

Sparhawk has an option to purchase 40% of the assets held by Vet Labs. The purchase price will be 40% of the fair market value of the land, building and equipment
owned by Vet Labs plus $1,000,000. The Company is currently in negotiations with Sparhawk regarding the future of the Joint Venture. If the Company continues to control the Board of Directors of the
Joint Venture after the exercise of the Sparhawk option, it will continue to consolidate the operations of the Joint Venture in the Company's books. If the Company does not control the Joint Venture
after the exercise of the option, the Company will cease to consolidate the operations of the Joint Venture. This option and the Joint Venture Agreement expire on December 1, 2002.

4.    Comparative Interim Consolidated Financial Statements

The comparative interim consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the 2003
interim consolidated financial statements.

9

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The Company's fiscal year ends on January 31st therefore fiscal year 2003 refers to the Company's year ended January 31, 2003. The following
discussion should be read in conjunction with the July 31, 2002 consolidated financial statements and notes thereto included elsewhere in this report. All amounts are in United States dollars
unless otherwise denoted.

(a)  Results of Operations

The operations of the Company are carried on through Dextran Products Limited ("Dextran Products") in Canada and through Chemdex, Inc. ("Chemdex") in the
United States. The operations of Chemdex are carried on through its wholly-owned subsidiary, Veterinary Laboratories, Inc. ("Vet Labs"). Each of Dextran Products and Vet Labs operates as a
strategic business unit. Dextran Products manufactures and sells bulk quantities of Dextran and several of its derivatives to large pharmaceutical companies throughout the world. Vet Labs manufactures
and sells veterinary pharmaceutical products and specialty chemicals in the United States. The primary customers are distributors and private labelers, who in turn sell to the end-user of
these products.

Net
loss for the second quarter ended July 31, 2002 amounted to $35,840 or $0.01 per share as compared to a net loss of $149,544 or $0.05 per share for the second quarter ended
July 31, 2001. This improvement in results is attributable to the increase in gross margins and the reduction in operating losses at Vet Labs during the quarter.

During
the second quarter ended July 31, 2002, the Company's income from operations amounted to $18,364 or $0.01 per share, as compared to loss from operations of $116,223 or
$0.04 per share for the second quarter of fiscal 2002, ending July 31, 2001. This improvement in results is primarily due to a reduction in operating losses at Vet Labs of $122,530. The
increase in operating results at Vet Labs is primarily attributable to the increase in margins as compared to the same quarter last year.

Sales
volume for the second quarter of fiscal 2003 decreased from $2,884,189 in the second quarter of fiscal 2002 to $2,647,400, representing a decrease of $236,789 or 8%. Sales at
Dextran Products decreased by $137,866 or 11% as compared to the same quarter in fiscal 2002. This decrease in sales at Dextran Products is primarily due to certain customers taking their normal
shipments earlier in the year. Year-to-date sales at Dextran Products, at July 31, 2002, have increased by $165,127 or 7% as compared to the same period in fiscal 2002.
Sales at Vet Labs during the second quarter decreased by $57,285 or 3% as compared to the same quarter in fiscal 2002. Year-to-date sales at Vet Labs, at July 31, 2002,
have decreased by $40,128 or 1% as compared to the same period in fiscal 2002.

The
summer months are typically slower sales months for Vet Labs as large animals are put outdoors to pasture and therefore have less need for vitamins and other supplements. As
expected, second quarter sales were less than first quarter sales in fiscal 2003 at Vet Labs. Management is forecasting higher sales levels for the third quarter of fiscal 2003 than were
achieved in the second quarter of fiscal 2003 at Vet Labs. Management is expecting sales levels in the third quarter of fiscal 2003, at Dextran Products to be consistent with sales levels
achieved in the second quarter of fiscal 2003.

Gross
margins increased from 21% in the second quarter of fiscal 2002 to 27% in the second quarter of fiscal 2003. Dextran Products' gross margin increased from 36% in the second quarter
of fiscal 2002 to 38% during the second quarter of fiscal 2003. Vet Labs' gross margin increased from 10% in the second quarter of fiscal 2002 to 17% in the second quarter of fiscal 2003. The margin
increase at Dextran Products is primarily a result of a product mix variance. There was an increase in sales volume in one of the highest margin products during the quarter as compared to the same
quarter last year. Management expects margins at Dextran Products to return to previous levels in the second half of fiscal 2003.

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The
margin increase at Vet Labs is a result of a product mix variance. Vet Labs experienced increased sales in the injectables product line, the higher margin product line, and decreased
sales in one of the lower margin product lines.

General
and administrative expenses in the second quarter of fiscal 2003 decreased by $16,921 or 4% from the second quarter of fiscal 2002 due primarily to cost control measures at
Dextran Products. For the year-to-date at July 31, 2002, general and administrative expenses have decreased $34,372 or 4% from the same period in fiscal 2002.

Depreciation
and amortization in the second quarter of fiscal 2003 increased by $6,986 or 5% from the second quarter of fiscal 2002 due to the installation of new equipment at Dextran
Products during the fourth quarter of fiscal 2002.

Selling
and promotion expenses in the second quarter of fiscal 2003 and for the year-to-date at July 31, 2002 were consistent with the same periods in
fiscal 2002.

Due
to continued funding by research and development partners, research and development costs in the second quarter of fiscal 2003 decreased by $52,152 or 48% to $57,216 as compared to
the second quarter of fiscal 2002. Funding from all current sources for existing research and development projects is expected to continue for the remainder of the year. The Company's portion of these
costs is expected to continue at slightly higher levels for the remainder of the year.

Research
and development, in conjunction with the Consortium for Industrial Collaboration in Contraceptive Research (CICCR) and the Rush Medical Center in Chicago, relating to Cellulose
Sulphate gel is progressing. Pre-IND tests have indicated that this gel holds great promise as a topical prophylactic for sexually transmitted diseases, including AIDS, and as a
contraceptive. Two Phase I human clinical trials funded by CICCR testing the safety and tolerance of this gel were successfully completed. The project team is currently developing the supply chain for
long-term toxicology studies and further clinical trials. Management expects funding to continue from CICCR for this project.

The
Company licensed its cystic fibrosis product, Usherdex, to BCY Lifesciences of Vancouver, British Columbia. Under this license agreement, BCY Lifesciences will provide funding for
research and development and will pay a royalty to the Company based on sales and sublicensing revenue in return for the exclusive right to sublicense, manufacture, distribute and sell any commercial
products developed from Usherdex. BCY Lifesciences filed an Investigative New Drug application in Canada to seek approval to conduct a Phase I clinical trial during the second quarter of fiscal 2002.
BCY Lifesciences is completing preparations for the Phase I clinical trial. In anticipation of successful Phase I human clinical testing, BCY Lifesciences is already planning to commence Phase II
clinical trials in the second half of fiscal 2003.

Interest
expense in the second quarter of fiscal 2003 decreased by $15,260 or 28% as compared to the second quarter in fiscal 2002 due to the repayment of long-term debt and
capital lease obligations.

Interest
and other income decreased by $50,451 in the second quarter of fiscal 2003, as compared to the same period in fiscal 2002. In the second quarter of fiscal 2002, Vet Labs
received a final payout from the national vitamin anti-trust lawsuit, resulting in the fiscal 2003 decrease.

In
1992, Vet Labs entered into a joint venture (the "Joint Venture") for the manufacture and sale of veterinary pharmaceutical products with Sparhawk Laboratories, Inc.
("Sparhawk"). Vet Labs owns 50% of the Joint Venture and controls its Board of Directors. The Company consolidates the assets, liabilities, revenue and expenses of the Joint Venture in its financial
statements. The Joint Venture Agreement expires by its terms on December 1, 2002. Sparhawk has an option to purchase 40% of the assets held by Vet Labs for a price equal to 40% of the fair
market value of the land, building and equipment owned by Vet Labs plus $1,000,000. The Company is currently in negotiations with Sparhawk regarding the future of the Joint Venture.

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Operating
results for the second fiscal quarter ended July 31, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ended January 31,
2003. For further information, refer to the consolidated statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended
January 31, 2002.

(b)  Liquidity and Capital Resources

In the second quarter of fiscal 2003, the Company generated cash flow from operations of $90,463, compared to $28,233 in the second quarter of fiscal 2002. This
increase of $62,230 or 220% is primarily attributable to the reduced loss during the quarter.

At
July 31, 2002, the Company had trade accounts receivable of $937,199 and $2,248,218 in inventory compared to $1,067,709 and $2,112,854, respectively, at January 31,
2002. The decrease in trade accounts receivable during fiscal 2003 was due to increased collections at Vet Labs. The increase in inventory levels during fiscal 2003 is primarily due to increased stock
at Dextran Products in anticipation of the maintenance shutdown at the end of the quarter.

There
were no significant changes in financing or investing activities and there were no significant capital expenditures during the first two quarters of 2003.

The
reduction in the accumulated other comprehensive loss of $34,835 during the first two quarters of fiscal 2003 is entirely attributable to the currency translation adjustment of
Dextran Products. Dextran Products' functional currency is the Canadian dollar. This currency translation adjustment arises from the translation of Dextran Products' financial statements to U.S.
dollars.

Dextran
Products has a CDN$750,000 (US$475,000) line of credit, of which none was utilized at July 31, 2002. Management anticipates using the credit line for the purposes of
funding a portion of the costs associated with the refurbishment of the Toronto facility. The Joint Venture has a $175,000 line of credit to fund operations, of which $43,829 was utilized at
July 31, 2002. Vet Labs has a loan commitment for $400,000 to be used for building construction. Management is not planning any construction at Vet Labs during fiscal 2003, and therefore does
not expect to borrow any funds under this loan commitment in the current fiscal year.

The
amount due from shareholder decreased from $1,098,142 at January 31, 2002 to $1,075,829 at July 31, 2002 due to monthly payments from the shareholder. The amount due to
a different shareholder also decreased to $681,149 at July 31, 2002 from $681,963 at January 31, 2002 due to monthly payments by the Company.

Management
expects the primary source of its future capital needs to be a combination of Company earnings and borrowings. The Company, at present, does not have any material commitments
for capital expenditures, although management intends to continue the plant refurbishment at Dextran Products.

No
changes in accounting principles or their application have been implemented in the reporting period that would have a material effect on reported income. Changes in the relative
values of the Canadian dollar and the U.S. dollar occur from time to time and may, in certain instances, materially affect the Company's results of operations.

The
Company does not believe that the impact of inflation and changing prices on its operations are material.

(c)  Long-term Objectives

At the beginning of the fiscal year, two critical long-term objectives were identified.

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(d)  Controls and Procedures

The Company's chief executive officer and its chief financial officer after evaluating the effectiveness of the Company's disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14(c) and 15-d-14(c)) as of a date within 90 days of the filing date of the quarterly report (the "Evaluation Date")
have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its
consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.

There
were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's disclosure controls and procedures subsequent to
the Evaluation
Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions. As a result, no corrective actions were taken.

(e)  Critical Accounting Policies

Inventories
of raw materials are stated at the lower of cost and net realizable value, cost being determined on a first-in, first-out basis.
Work-in-process and finished goods are valued at the lower of cost and net realizable value, and include the cost of raw materials, direct labour and overhead expenses. At
Dextran Products, all inventories are counted every month. At Vet Labs, all inventories are counted on a cycle basis and reconciled to accounting records. Any inventory for products in the development
stage is expensed to research and development.

All
revenue is from sales of manufactured products and is recognized upon shipment to customers. Product sold in bulk quantities is tested, prior to release for shipment, to ensure that
it meets customer specifications, and in many cases, customers receive samples for their own testing. Approval is obtained from the customer prior to shipping. Further purchases by a customer of a
bulk product with the same specifications do not require approvals. Returns of bulk product are rare and generally are not accepted. No testing and approval by the customer is required for finished
dosage product because of its nature. Returns of finished dosage product are rare and generally not accepted.

Research
and development costs are expensed as incurred and are stated net of investment tax credits earned.

(f)    Risk Factors

The risks, uncertainties and other factors described below could materially and adversely affect the Company's business, financial condition, operating results
and prospects.

The Company's product development efforts may be reduced or discontinued due to difficulties or delays in clinical trials.

13

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To
achieve sustained profitability, the Company must, alone or with corporate partners and collaborators, successfully research, develop and commercialize identified technologies or
product candidates. Current developmental product candidates are in various stages of clinical and pre-clinical development and will require significant further funding, research,
development, preclinical and/or clinical testing, regulatory approval and commercialization testing, and are subject to the risks of failure inherent in the development of products based on innovative
or novel technologies. They are also rigorously regulated by the federal government, particularly the FDA, and by comparable agencies in state and local jurisdictions and in foreign countries.
Specifically, each of the following is possible with respect to any one of the Company's developmental product candidates:



If
any of the risks set forth above occurs, the Company may not be able to successfully develop its identified developmental product candidates.

The Company's developmental product commercialization efforts may not be successful.

It
is possible that, for reasons including, but not limited to those set forth below, the Company may be unable to commercialize or receive royalties from the sale of any given
developmental product, even if it is shown to be effective, if:



The Company depends on partnerships with third parties for the development and commercialization of its products.

The
Company's strategy for development and commercialization of its products is to rely on licensing agreements with third party partners. As a result, the ability of the Company to
commercialize

14

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future products is dependent upon the success of third parties in performing clinical trials, obtaining regulatory approvals, manufacturing and successfully marketing its products. There can be no
assurance that such third party collaborations will be successful. If any of the Company's current research and development partnerships are discontinued, it may not be able to find others to develop
and commercialize its current product candidates.

The Company does not currently have agreements with third parties to market many of its developmental products.

The
commercialization of any of the Company's developmental products that receive FDA approval will depend upon the Company's ability to enter into agreements with companies that have
sales and marketing capabilities. The Company currently intend to sell its products in the United States and internationally in collaboration with one or more marketing partners. No assurance can be
given that the Company will be able to enter into any such collaboration to market its developmental products in a timely manner or on commercially reasonable terms, if at all.

(g)  Forward-Looking Statements

This Form 10-Q, including the Management's Discussion and Analysis of Financial Condition and Results of Operations, contains various
"forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future
events, including, but not limited to statements regarding management's expectations of regulatory approval and the commencement of sales. In addition, statements containing expressions such as
"believes", "anticipates", "plans" or "expects" used in this Form 10-Q, the Company's Annual Report, and the Company's periodic reports on Forms 10-K and
10-Q previously filed with the Securities and Exchange Commission are intended to identify forward-looking statements. The Company cautions that these and similar statements in this
Form 10-Q, the Company's Annual Report, and in previously filed periodic reports including reports filed on Forms 10-K and 10-Q are further qualified by
important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, changing market conditions, the progress
of clinical trials, and the results obtained, the establishment of new corporate alliances, the impact of competitive products and pricing, and the timely development, FDA approval and market
acceptance of the Company's products, none of which can be assured.

The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normally recurring accruals) considered necessary
for a fair presentation have been included.

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

POLYDEX PHARMACEUTICALS LIMITED
July 31, 2002
Exchange Rate Sensitivity

The table below provides information about the Company's financial instruments that are sensitive to changes in foreign currency exchange rates. All financial
instruments are held for other than trading purposes. The Company's major exposure to exchange rate risk is that the Canadian dollar rises dramatically in relation to the U.S. dollar and that this
significantly reduces the gross margin experienced at Dextran Products. Management monitors the margin at Dextran to ensure that an acceptable margin level is maintained. Management has the ability,
to some extent, to adjust sales prices to maintain an acceptable margin level.

The
table presents principal cash flows and related weighted average interest rates by expected maturity dates.

|                |                   | Expected Maturity Date |         |      |         |     
|--------------- | ----------------- | ---------------------- | ------- | ---- | ------- | ----
|
|
|
|Liabilities:    |                   |                        |         |      |         |     
|Long-term debt: |                   |                        |         |      |         |     
|                | Fixed rate ($CDN) |                        | 105,388 |      | 107,793 |     
|                |                   | Average interest rate  |         | 8.65 | %       | 8.45

POLYDEX PHARMACEUTICALS LIMITED
July 31, 2002
Interest Rate Sensitivity

The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. All financial instruments are held
for other than trading purposes. The Company does not have a material exposure to interest rate risk.

The
table presents principal cash flows and related weighted average interest rates by expected maturity dates.

|                    |                       | Expected Maturity Date |        |         |         |        
|------------------- | --------------------- | ---------------------- | ------ | ------- | ------- | -------
|
|
|
|Assets:             |                       |                        |        |         |         |        
|Notes receivable:   |                       |                        |        |         |         |        
|                    | (Variable rate ($US)  |                        | 13,165 |         | 12,048  |        
|                    |                       | Average interest rate  |        | 6.00    | %       | 6.00   
|Liabilities:        |                       |                        |        |         |         |        
|Long-term debt:     |                       |                        |        |         |         |        
|                    | Fixed rate ($US)      |                        | 52,655 |         | 280,381 |        
|                    |                       | Average interest rate  |        | 8.21    | %       | 8.11   
|Fixed rate ($CDN)   |                       | 105,388                |        | 107,793 |         | 114,937
|                    | Average interest rate |                        | 8.65   | %       | 8.45    | %      
|Variable rate ($US) |                       | (1,917                 | )      | (2,032  | )       | (2,154 
|                    | Average interest rate |                        | 6.00   | %       | 6.00    | %      

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PART II  OTHER INFORMATION

Item 4.    Submission of Matters to a Vote of Security Holders.



|                |  | Class                    |  | Votes For |     | Votes Withheld |  | Abstentions and
Non-Votes
|--------------- |  | ------------------------ |  | --------- | --- | -------------- |  | -------------------------
|Derek John      |  | Common Shares            |  | 121,580   |     | 74,362         |  | 1,107,044                
|Michael Lederer |  | Class B Preferred Shares |  | 1,798,800 | (1) |               |  |                         
|Ruth L. Usher   |  | Common Shares            |  | 119,820   |     | 76,122         |  | 1,032,732                
|                |  | Class B Preferred Shares |  | 1,798,800 | (1) |               |  |                         

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Item 6.    Exhibits and Reports on Form 8-K.

| |  | (a)             |  | Exhibits           
| |  | --------------- |  | -------------------
| |  |                 |  | 3.1                
| |  |                 |  | 3.2                
| |  |                 |  | 99.1               
| |  |                 |  | 99.2               
| |  | (b)             |  | Reports on Form 8-K
| |  | Not applicable.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                            |  |                                             |  |                                                                                                                                     
|--------------------------- |  | ------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------
|Date:    September 13, 2002 |  |                                             |  |                                                                                                                                     
|                            |  | POLYDEX PHARMACEUTICALS LIMITED(Registrant)
|                            |  | By                                          |  | /s/GEORGE G. USHERGeorge G. Usher, Chairman, President and
Chief Executive Officer
(Principal Executive Officer)                    
|                            |  | By                                          |  | /s/SHARON L. WARDLAWSharon L. Wardlaw, Treasurer, Secretary and
Chief Financial and Accounting Officer
(Principal Financial Officer)

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CHIEF EXECUTIVE OFFICER CERTIFICATION

I, George G. Usher, Chief Executive Officer of Polydex Pharmaceuticals Limited (the "Company") do hereby certify that:

(1)  I
have reviewed this quarterly report on Form 10-Q of the Company for the quarterly period ended July 31, 2002;

(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 in order 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; and

(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 Company as of, and for, the period presented in this quarterly report.

|Dated:    September 13, 2002 |  | /s/GEORGE G. USHERChief Executive Officer
Polydex Pharmaceuticals Limited
|---------------------------- |  | -------------------------------------------------------------------------

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CHIEF FINANCIAL OFFICER CERTIFICATION

I, Sharon L. Wardlaw, Chief Financial Officer of Polydex Pharmaceuticals Limited (the "Company") do hereby certify that:

(1)  I
have reviewed this quarterly report on Form 10-Q of the Company for the quarterly period ended July 31, 2002;

(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 in order 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; and

(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 Company as of, and for, the period presented in this quarterly report.

|Dated:    September 13, 2002 |  | /s/SHARON L. WARDLAWChief Financial Officer
Polydex Pharmaceuticals Limited
|---------------------------- |  | ---------------------------------------------------------------------------

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Exhibit Index

|99.1 |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|---- |  | --------------------------------------------------------------------------------------------------
|99.2 |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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