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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended April 30, 2001

|/ / | 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

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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)                       

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

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

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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 /x/  No / /

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 |  | 3,027,477 shares               
|------------------------------- |  | -------------------------------
|(Title of Class)                |  | (Outstanding at April 30, 2001)

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POLYDEX PHARMACEUTICALS LIMITED    TABLE OF CONTENTS

|        |  |                                                                                                                     |  | Page
|------- |  | ------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I  |  | FINANCIAL INFORMATION                                                                                               |  |     
|Item 1  |  | CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)                                                                       |  |     
|        |  | Consolidated Balance Sheets
April 30, 2001 and January 31, 2001                                                     |  | 3   
|        |  | Consolidated Statements of Operations
Three months ended April 30, 2001 and 2000                                    |  | 5   
|        |  | Consolidated Statements of Shareholders' Equity
and Comprehensive Income
Three months ended April 30, 2001 and 2000 |  | 6   
|        |  | Consolidated Statements of Cash Flows
Three months ended April 30, 2001 and 2000                                    |  | 7   
|        |  | Notes to Consolidated Financial Statements
April 30, 2001                                                           |  | 8   
|        |  | Segmented Information
Three months ended April 30, 2001 and 2000                                                    |  | 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                                                          |  | 14  
|PART II |  | OTHER INFORMATION                                                                                                   |  |     
|Item 6  |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                    |  | 15  
|        |  | Signatures                                                                                                          |  | 16  

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)

|                                     |                                           | April 30
2001   |            | January 31
2001
|------------------------------------ | ----------------------------------------- | --------------- | ---------- | ---------------
|
|Assets                               |                                           |                 |            |                
|Current assets:                      |                                           |                 |            |                
|                                     | Cash                                      |                 | $          | 145,071        
|                                     | Trade accounts receivable                 |                 |            | 1,338,248      
|                                     | Inventories:                              |                 |            |                
|                                     |                                           | Finished goods  |            |                
|                                     |                                           | Work in process |            |                
|                                     |                                           | Raw materials   |            |                
|                                     |                                           |                 |            |                
|                                     | Inventories                               |                 |            | 2,181,237      
|                                     | Prepaid expenses and other current assets |                 |            | 88,217         
|                                     |                                           |                 |            |                
|                                     |                                           |                 | 3,752,773  |                
|Property, plant and equipment, net   |                                           |                 | 4,920,211  |                
|Patents, net                         |                                           |                 | 125,883    |                
|Due from Sparhawk Laboratories, Inc. |                                           |                 | 138,247    |                
|Due from shareholder                 |                                           |                 | 1,222,876  |                
|Deferred income taxes                |                                           |                 | 754,583    |                
|Other assets                         |                                           |                 | 18,800     |                
|                                     |                                           |                 |            |                
|                                     |                                           | $               | 10,933,373 |                
|                                     |                                           |                 |            |                

3

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|                                     |                                              | April 30
2001           |                                                                                                                                                                                 | January 31
2001 |  
|------------------------------------ | -------------------------------------------- | ----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------- | -
|
|Liabilities and Shareholders' Equity |                                              |                         |                                                                                                                                                                                 |                 |  
|Current liabilities:                 |                                              |                         |                                                                                                                                                                                 |                 |  
|                                     | Bank indebtedness                            |                         | $                                                                                                                                                                               | 102,121         |  
|                                     | Accounts payable                             |                         |                                                                                                                                                                                 | 1,021,218       |  
|                                     | Accrued liabilities                          |                         |                                                                                                                                                                                 | 546,235         |  
|                                     | Customer deposits received                   |                         |                                                                                                                                                                                 | 83,252          |  
|                                     | Income taxes payable                         |                         |                                                                                                                                                                                 | 9,758           |  
|                                     | Current portion of long-term debt            |                         |                                                                                                                                                                                 | 273,037         |  
|                                     | Current portion of capital lease obligations |                         |                                                                                                                                                                                 | 117,582         |  
|                                     |                                              |                         |                                                                                                                                                                                 |                 |  
|                                     |                                              |                         | 2,153,203                                                                                                                                                                       |                 |  
|Long-term debt                       |                                              |                         | 820,304                                                                                                                                                                         |                 |  
|Capital lease obligations            |                                              |                         | 435,386                                                                                                                                                                         |                 |  
|Due to shareholder                   |                                              |                         | 696,223                                                                                                                                                                         |                 |  
|                                     |                                              |                         |                                                                                                                                                                                 |                 |  
|Total liabilities                    |                                              |                         | 4,105,116                                                                                                                                                                       |                 |  
|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                                                                                                                                                |                 |  
|                                     |                                              |                         | 3,027,477 common shares (20013,027,477)                                                                                                                                        |                 |  
|                                     | Contributed surplus                          |                         |                                                                                                                                                                                 | 23,221,104      |  
|                                     | Deficit                                      |                         |                                                                                                                                                                                 | (15,462,503     | )
|                                     | Accumulated other comprehensive income       |                         |                                                                                                                                                                                 | (995,788        | )
|                                     |                                              |                         |                                                                                                                                                                                 |                 |  
|                                     |                                              |                         | 6,828,257                                                                                                                                                                       |                 |  
|                                     |                                              |                         |                                                                                                                                                                                 |                 |  
|                                     |                                              | $                       | 10,933,373                                                                                                                                                                      |                 | $
|                                     |                                              |                         |                                                                                                                                                                                 |                 |  

4

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

|                                                                    |                                                  | Year to Date
April 30
2001 |           | Year to Date
April 30
2000
|------------------------------------------------------------------- | ------------------------------------------------ | -------------------------- | --------- | --------------------------
|Sales                                                               |                                                  | $                          | 3,061,191 |                           
|Cost of products sold                                               |                                                  |                            | 2,381,126 |                           
|                                                                    |                                                  |                            |           |                           
|                                                                    |                                                  |                            | 680,065   |                           
|Expenses:                                                           |                                                  |                            |           |                           
|                                                                    | General and administrative                       |                            |           | 393,396                   
|                                                                    | Depreciation                                     |                            |           | 128,768                   
|                                                                    | Research and development                         |                            |           | 97,750                    
|                                                                    | Interest expense                                 |                            |           | 58,314                    
|                                                                    | Selling and promotion                            |                            |           | 31,966                    
|                                                                    | Write down of property, plant and equipment      |                            |           | 29,489                    
|                                                                    | Amortization                                     |                            |           | 5,546                     
|                                                                    |                                                  |                            |           |                           
|                                                                    |                                                  |                            | 745,229   |                           
|                                                                    |                                                  |                            |           |                           
|Income (loss) from operations                                       |                                                  |                            | (65,164   | )                         
|Other income:                                                       |                                                  |                            |           |                           
|                                                                    | Interest and other                               |                            |           | 27,665                    
|                                                                    |                                                  |                            |           |                           
|Income (loss) before the undernoted                                 |                                                  |                            | (37,499   | )                         
|Provision for (recovery of) income taxes                            |                                                  |                            | 27,356    |                           
|                                                                    |                                                  |                            |           |                           
|Net income (loss) for the period                                    |                                                  | $                          | (64,855   | )                         
|                                                                    |                                                  |                            |           |                           
|Per share information:                                              |                                                  |                            |           |                           
|                                                                    | Earnings (loss) per common share for the period: |                            |           |                           
|                                                                    |                                                  | Basic                      |           | $                         
|                                                                    |                                                  | Diluted                    |           | $                         
|                                                                    |                                                  |                            |           |                           
|Weighted average number of common shares outstanding for the period |                                                  |                            | 3,027,477 |                           
|                                                                    |                                                  |                            |           |                           

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
April 30
2001 |          | Year to Date
April 30
2000 |  
|--------------------------------------- | ---------------------------------------------- | -------------------------- | -------- | -------------------------- | -
|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                   |                            | $        | 23,221,104                 |  
|                                        | Common share options exercised                 |                            |          |                           |  
|                                        |                                                |                            |          |                            |  
|                                        | Balance, end of period                         |                            | $        | 23,221,104                 |  
|                                        |                                                |                            |          |                            |  
|Deficit:                                |                                                |                            |          |                            |  
|                                        | Balance, beginning of period                   |                            | $        | (15,397,648                | )
|                                        | Net income (loss) for the period               |                            |          | (64,855                    | )
|                                        |                                                |                            |          |                            |  
|                                        | Balance, end of period                         |                            | $        | (15,462,503                | )
|                                        |                                                |                            |          |                            |  
|Accumulated Other Comprehensive Income: |                                                |                            |          |                            |  
|                                        | Balance, beginning of period                   |                            | $        | (895,265                   | )
|                                        | Currency translation adjustment for the period |                            |          | (100,523                   | )
|                                        |                                                |                            |          |                            |  
|                                        | Balance, end of period                         |                            | $        | (995,788                   | )
|                                        |                                                |                            |          |                            |  
|Comprehensive Income for the period:    |                                                |                            |          |                            |  
|                                        | Net income (loss) for the period               |                            | $        | (64,855                    | )
|                                        | Currency translation adjustment for the period |                            |          | (100,523                   | )
|                                        |                                                |                            |          |                            |  
|                                        |                                                | $                          | (165,378 | )                          | $
|                                        |                                                |                            |          |                            |  

6

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

|                                     |                                                        | April 30
2001                              |          | April 30
2000 |        
|------------------------------------ | ------------------------------------------------------ | ------------------------------------------ | -------- | ------------- | -------
|Cash provided by (used in):          |                                                        |                                            |          |               |        
|Operating activities:                |                                                        |                                            |          |               |        
|                                     | Net income (loss) for the period                       |                                            | $        | (64,855       | )      
|                                     | Add (deduct) items not affecting cash:                 |                                            |          |               |        
|                                     |                                                        | Depreciation and amortization              |          |               | 134,314
|                                     |                                                        | Imputed interest on long-term debt         |          |               | 16,624 
|                                     |                                                        | Writedown of property, plant and equipment |          |               | 29,489 
|                                     |                                                        | Deferred income taxes                      |          |               | 15,626 
|                                     | Change in non-cash operating working capital           |                                            |          | (208,888      | )      
|                                     |                                                        |                                            |          |               |        
|                                     |                                                        |                                            | (77,690  | )             |        
|                                     |                                                        |                                            |          |               |        
|Investing activities:                |                                                        |                                            |          |               |        
|                                     | Additions to property, plant and equipment and patents |                                            |          | (89,233       | )      
|                                     | Repayment of due from shareholder, net                 |                                            |          | 28,324        |        
|                                     |                                                        |                                            |          |               |        
|                                     |                                                        |                                            | (60,909  | )             |        
|                                     |                                                        |                                            |          |               |        
|Financing activities:                |                                                        |                                            |          |               |        
|                                     | Proceeds from long-term debt                           |                                            |          |              |        
|                                     | Repayment of long-term debt                            |                                            |          | (155,331      | )      
|                                     | Repayment of capital lease obligations                 |                                            |          | (29,222       | )      
|                                     | Increase (decrease) in due to shareholder              |                                            |          | (25,999       | )      
|                                     | Increase (decrease) in bank indebtedness               |                                            |          | 102,121       |        
|                                     | Exercise of common share options                       |                                            |          |              |        
|                                     |                                                        |                                            |          |               |        
|                                     |                                                        |                                            | (108,431 | )             |        
|                                     | Effect of exchange rate changes on cash                |                                            |          | (11,102       | )      
|                                     |                                                        |                                            |          |               |        
|Increase (decrease) in cash position |                                                        |                                            | (258,132 | )             |        
|Cash, beginning of period            |                                                        |                                            | 403,203  |               |        
|                                     |                                                        |                                            |          |               |        
|Cash, end of period                  |                                                        | $                                          | 145,071  |               | $      
|                                     |                                                        |                                            |          |               |        

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POLYDEX PHARMACEUTICALS LIMITED

Notes to Consolidated Financial Statements
(Unaudited)
Quarter ended April 30, 2001

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, 2001 Annual Report on Form 10-K filed by Polydex
Pharmaceuticals Limited (the "Company"). The unaudited interim consolidated financial statements as of April 30, 2001 and 2000 include all normal recurring adjustments which management considers
necessary for a fair presentation. The results of operations for the interim period 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.

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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.


|                               |                                            | Year to Date
April 30
2001 |   | Year to Date
April 30
2000
|------------------------------ | ------------------------------------------ | -------------------------- | - | --------------------------
|Sales:                         |                                            |                            |   |                           
|                               | Dextran                                    |                            | $ | 1,069,326                 
|                               | Veterinary products                        |                            |   | 2,106,475                 
|                               |                                            |                            |   |                           
|                               | Total segment sales                        |                            |   | 3,175,801                 
|                               | Less: intercompany sales elimination       |                            |   | 114,610                   
|                               |                                            |                            |   |                           
|                               | Total consolidated sales                   |                            | $ | 3,061,191                 
|                               |                                            |                            |   |                           
|Income (loss) from operations: |                                            |                            |   |                           
|                               | Dextran                                    |                            | $ | 77,342                    
|                               | Veterinary products                        |                            |   | 80,953                    
|                               |                                            |                            |   |                           
|                               | Total income from operations from segments |                            |   | 158,295                   
|                               | Less: Unallocated corporate expenses       |                            |   | 223,459                   
|                               |                                            |                            |   |                           
|                               | Total consolidated income from operations  |                            | $ | (65,164                   
|                               |                                            |                            |   |                           
|Assets:                        |                                            |                            |   |                           
|                               | Dextran                                    |                            | $ | 5,262,069                 
|                               | Veterinary products                        |                            |   | 4,380,493                 
|                               |                                            |                            |   |                           
|                               | Total assets from segments                 |                            |   | 9,642,562                 
|                               | Corporate assets                           |                            |   | 1,290,811                 
|                               |                                            |                            |   |                           
|                               | Total consolidated assets                  |                            | $ | 10,933,373                
|                               |                                            |                            |   |                           

9

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

During
the fiscal quarter ended April 30, 2001, the Registrant's pre-tax loss from operations amounted to $65,164 or $0.02 per share, as compared to
pre-tax income from operations of $189,601 or $0.06 per share for the first quarter of fiscal 2001, ending April 30, 2000. This decrease in results is primarily due to a decrease in
operating profits at Dextran Products of $165,306 and a decrease in operating profits at Vet Labs of $79,681. The decrease in operating profits at both operating subsidiaries is primarily attributable
to a decrease in sales and margins during the quarter as compared to the same quarter last year.

Sales
volume for the first quarter of fiscal 2002 decreased from $3,392,829 to $3,061,191, representing a decrease of $331,638 or 10%. Vet Labs experienced a quarter over quarter
decrease in sales of $167,731 or 7% due to significantly decreased sales in the injectable product line. The decrease in sales in the injectable product line was partially offset by an increase in
sales in the other product lines. Sales at Dextran decreased by $153,448 or 13% as compared to the same quarter in fiscal 2001. This decrease in sales at Dextran Products is primarily due to problems
experienced in producing a certain Iron Dextran solution. Demand for this product remained strong, however equipment breakdown and product quality issues limited the amount of product that could be
shipped during the quarter. Management expects strong demand to continue at Dextran Products. Management expects that this demand will be met since the equipment problems have been resolved and the
product quality issues are currently being addressed and are expected to be resolved shortly.

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.
Management is therefore forecasting lower sales levels in the second quarter of fiscal 2002 than were achieved in the first quarter of fiscal 2002 at Vet Labs. Margins are expected to remain steady,
but the expected lower sales volume may reduce operating profits for the second quarter of fiscal 2002. Management expects sales levels for the second quarter of fiscal 2002 to equal sales levels
achieved in the second quarter of fiscal 2001 at Vet Labs.

Gross
margins decreased from 28% in the first quarter of fiscal 2001 to 22% in the first quarter of fiscal 2002. Dextran Products' quarter over quarter gross margin decreased from 43%
to 35% while Vet Labs' gross margin decreased from 18% to 15% as compared to the first quarter of fiscal 2001. The margin decrease at Dextran Products is due to the production problems noted above.
The lower than normal sales resulted in higher average costs for fixed manufacturing overheads, as the fixed costs did not change. The margin decrease at Vet Labs is a result of the decreased sales in
the injectables product line, a higher margin product line.

Research
and development costs in the first quarter of fiscal 2002 increased by $3,999 or 4% as compared to the first quarter of fiscal 2001. Development costs for various projects
are expected to continue, but at a reduced level for the remainder of the year because of funding from various research partners.

10

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Research and development, in conjunction with the Rush Medical Center in Chicago, relating to Cellulose Sulfate 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 to test the safety and tolerance of this
gel were successfully completed. These trials were funded by the Consortium for Industrial Collaboration in Contraceptive Research (CICCR). The project team is moving ahead to prepare clinical
supplies for long-term toxicology and further clinical trials. Management expects funding to continue from CICCR for this project.

The
Company licensed the cystic fibrosis product, Usherdex, to BCY Lifesciences Inc. ("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 the product or products developed. The Company has been informed that BCY Lifesciences has since raised funds to continue the research and development of the product.
BCY Lifesciences successfully completed an animal toxicology study during fiscal 2001 and expects to begin a phase I clinical trial in the next one to two years.

General
and administrative expenses in the first quarter of fiscal 2002 decreased by $15,009 or 4% from the first quarter of fiscal 2001. Depreciation and amortization in the first
quarter of fiscal 2002 decreased by $9,375 or 7% from the first quarter of fiscal 2001 due primarily to the reduced capital expenditures and certain equipment becoming fully depreciated.

Interest
expense in the first quarter of fiscal 2002 decreased by $16,332 or 22% as compared to the first quarter in fiscal 2001 due to the repayment of long-term debt and
capital lease obligations. In addition, interest expense includes imputed interest on both the share value guarantee payable, resulting from the acquisition of Vet Labs in 1992, and the lawsuit
settlement payable, totaling $16,624.

Selling
and promotion expenses in the first quarter of fiscal 2002 decreased by $11,080 or 26% as compared to the first quarter of fiscal 2001 due to reduced costs incurred by the
operating subsidiaries.

Interest
and other income in the first quarter of fiscal 2002 increased by $16,260 or 143% as compared to the first quarter of fiscal 2001 due to foreign exchange gain realized at
Dextran Products.

The
Foot and Mouth disease problem in Europe, following so closely on the heels of the Bovine Spongiform Encephalopathy outbreak, may be of concern. Dextran Products has been in
contact with its agents overseas and to date the problem seems to be more related to sheep and cattle. The modern practice of isolating pig units for health reasons and taking the animals directly to
slaughter has limited the impact on this sector. The Iron Dextran sold by Dextran Products is mainly for treatment of pigs. The situation is, however, very fluid and the Company continues to be in
contact with its distributors. Feedback from Asia, Europe and the United States shows limited effect to date. The impact of the Foot and Mouth disease problem has had minimal impact on Vet Labs.

Vet
Labs has a raw material supplier that continues to have regulatory problems with their production of Pentobarbital used in euthanasia product. Consequently, this has limited the
production and related sale of euthanasia products by Vet Labs during the first quarter of fiscal 2002. During fiscal 2001, the United States Food and Drug Administration ("FDA") granted an emergency
release of raw materials by the supplier, which allowed Vet Labs to produce and sell some euthanasia products last year. The release by the FDA was granted because of the short supply of euthanasia
products in the field. Management expects future sales of these products to remain limited until the supplier resolves their regulatory problems or until another manufacturer is approved. There were
no sales of euthanasia products in the first quarter of fiscal 2002, as compared to sales of $5,885 in the first quarter of fiscal 2001.

Operating
results for the first quarter ended April 30, 2001 are not necessarily indicative of the results that may be expected for the year ended January 31, 2002. For
further information, refer to the

11

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consolidated statements and footnotes thereto included in the Registrant's annual report on Form 10-K for the year ended January 31, 2001.



The Registrant in the first quarter of fiscal 2002 generated negative cash flow from operations of $77,690 compared to positive cash flow from operations of
$65,170 in the first quarter of fiscal 2001. This decrease of $142,860 or 219% is primarily attributable to the decrease in profits during the quarter. There were no significant changes in working
capital levels at either Dextran Products or Vet Labs during the first quarter of 2002. There were no significant changes in financing or investing activities during the first quarter of 2002.

At
April 30, 2001, the Company had accounts receivable of $1,338,248 and $2,181,237 in inventory compared to $1,138,872 and $2,206,637, respectively, at January 31,
2001. The increase in accounts receivable was due to timing of sales and collections at quarter-end. The inventory levels were steady during the first quarter of fiscal 2002.

There
were no significant capital expenditures during the first quarter of fiscal 2002.

The
change in the accumulated other comprehensive income 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$500,000) line of credit. Management anticipates using the credit line for the purposes of funding a portion of the costs associated with the
refurbishment of the Toronto facility. On April 30, 2001, CDN$100,000 (US$65,121) is outstanding under this line of credit. The Vet LabsSparhawk Joint Venture has a $75,000 line of
credit to fund operations, on which $37,000 was outstanding as of April 30, 2001. Vet Labs has a loan commitment for $400,000 to be used for building construction, but has not yet borrowed
under this commitment. Management is not planning any construction at Vet Labs during fiscal 2002.

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.



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

1.Bring new products to market.During the first quarter, development work has continued on the cellulose sulfate
project and a raw material for a human injectable product. Vet Labs is continuing development of new veterinary products.

2.Upgrade and refurbish existing production facilities to increase capacity and efficiency.Refurbishment of the
Dextran plant is continuing and planning for the next two phases is nearing completion.

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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 27A of the Securities Act of 1933, as amended, and 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 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
April 30, 2001
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 ($US) |                        | 10,465  |      | 11,407  |     
|                  |                     | Average interest rate  |         | 9.00 | %       | 9.00
|Liabilities:      |                     |                        |         |      |         |     
|Long-term debt:   |                     |                        |         |      |         |     
|                  | Fixed rate ($US)    |                        | 49,817  |      | 327,667 |     
|                  |                     | Average interest rate  |         | 9.31 | %       | 9.07
|                  | Fixed rate ($CDN)   |                        | 183,768 |      | 85,263  |     
|                  |                     | Average interest rate  |         | 9.03 | %       | 9.23
|                  | Variable rate ($US) |                        | (57,998 | )    | (55,416 | )   
|                  |                     | Average interest rate  |         | 9.00 | %       | 9.00

POLYDEX PHARMACEUTICALS LIMITED
April 30, 2001
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) |                        | 183,768 |      | 85,263 |     
|                |                   | Average interest rate  |         | 9.03 | %      | 9.23

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PART II  OTHER INFORMATION

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

|(a) |  | Exhibits           
|--- |  | -------------------
|    |  | 3.1                
|    |  | 3.2                
|(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:
June 11, 2001

| |  | POLYDEX PHARMACEUTICALS LIMITED
(Registrant)
| |  | --------------------------------------------
| |  | By                                          
| |  |                                             
| |  | By                                          
| |  |                                             

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