<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

           (Mark One)
  [X]      Quarterly Report under Section 13 or 15(d) of the
           Securities Exchange Act of 1934
           For the quarter ended SEPTEMBER 30, 2002
                            or
  [  ]     Transition Report under Section 13 or 15(d) of the
           Securities Exchange Act of 1934
           For the transition period from _________ to _________

                                    000-13118
                              (Commission File No.)

                       ACTION PRODUCTS INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)


                  Florida                                59-2095427
(State or other jurisdiction of               (IRS Employer Identification No.)
 incorporation or organization)

             390 N. Orange Ave., Suite 2185, Orlando, Florida, 32801
               (Address of principal executive offices, Zip Code)


        Registrant's telephone number, including area code (407) 481-8007


         Check whether the registrant (1) has filed all reports required to be
         filed by section 13 or 15(d) of the Securities Exchange 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 [ ]


         State the number of shares outstanding of each of the issuer's classes
of common stock, as of last practicable date.


                  Class                  Outstanding at November 8, 2002
       Common Stock, $.001 par value                2,190,222




 Transitional Small Business Disclosure Format (check one): YES [ ]  NO [X]


                                  Page 1 of 14

<PAGE>


                                    I N D E X



 PART I.  FINANCIAL INFORMATION                                           PAGE
                                                                         NUMBER
 Item 1.    Financial Statements

 Condensed Consolidated Balance Sheet at September 30, 2002 (unaudited)       3

 Condensed Consolidated Statements of Operations - Three months and
     nine months ended September 30, 2002 and 2001 (unaudited)                4

 Condensed Consolidated Statements of Cash Flows - Nine months
       ended September 30, 2002 and 2001 (unaudited)                          5

 Notes to unaudited Condensed Consolidated Financial Statements               6

 Item 2.    Management's Discussion and Analysis or Plan of Operations        8

 Item 4.    Controls and Procedures                                          10


 PART II.  OTHER INFORMATION

 Item 5. Other Information                                                   11

 Item 6. Exhibits and Reports on Form 8-K                                    12

 SIGNATURE PAGE                                                              13


                                  Page 2 of 14

<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

               ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                SEPTEMBER 30,
                                                                                                    2002
                                                                                                -------------
                                     ASSETS
<S>                                                                                             <C>
CURRENT ASSETS
Cash and cash equivalents                                                                        $    80,900
Accounts receivable, net of an allowance for doubtful accounts of $63,900                          1,395,800
Inventories, net                                                                                   1,366,700
Prepaid expenses and other assets                                                                    287,100
                                                                                                 -----------
                                                                  TOTAL CURRENT ASSETS             3,130,500

PROPERTY, PLANT AND EQUIPMENT                                                                      2,129,300
Less accumulated depreciation and amortization                                                    (1,166,200)
                                                                                                 -----------
                                                      NET PROPERTY, PLANT AND EQUIPMENT              963,100
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET                                               782,400
OTHER ASSETS                                                                                         818,900
                                                                                                 -----------
                                                                           TOTAL ASSETS          $ 5,694,900
                                                                                                 ===========

                                   LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of installment notes payable and
   obligation under capital lease                                                                $    81,500
Accounts payable                                                                                     707,800
Accrued expenses, payroll and related expenses                                                       195,600
Borrowings under lines of credit                                                                   1,534,400
Other Current Liabilities                                                                             46,000
                                                                                                 -----------
                                                              TOTAL CURRENT LIABILITIES            2,565,300
                                                                                                 -----------

INSTALLMENT NOTES PAYABLE AND OBLIGATION
  UNDER CAPITAL LEASE                                                                                  7,100
MORTGAGE PAYABLE                                                                                     657,400
DEFERRED INCOME TAXES                                                                                  7,500
DEFERRED REVENUE                                                                                     106,300
                                                                                                 -----------
                                                                      TOTAL LIABILITIES            3,343,600
                                                                                                 -----------

SHAREHOLDERS' EQUITY
Preferred Stock - 10,000,000 shares authorized, zero shares issued and outstanding                        --
Common stock - $.001 par value; 15,000,000 shares authorized; 2,230,800 shares issued                  2,200
Treasury Stock - $.001 par value; 40,600 shares                                                          (41)
Additional paid-in capital                                                                         3,850,441
Accumulated Deficit                                                                                 (980,800)
Stock subscriptions receivable                                                                      (520,500)
                                                                                                 -----------
                                                             TOTAL SHAREHOLDERS' EQUITY            2,351,300
                                                                                                 -----------
                                             TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          $ 5,694,900
                                                                                                 ===========
</TABLE>
                             See Accompanying Notes

                                  Page 3 of 14

<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONT.)

                  ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Three Months Ended Sept 30             Nine Months Ended Sept 30
                                                             -------------------------------         ------------------------------
                                                                 2002               2001                2002                2001
                                                             -----------         -----------         -----------         ----------
<S>                                                          <C>                 <C>                 <C>                 <C>
NET SALES                                                    $ 1,944,900         $ 2,218,400         $ 4,882,700         $5,489,400

COST OF SALES                                                  1,181,800           1,208,500           2,931,400          2,996,900
                                                             -----------         -----------         -----------         ----------

GROSS PROFIT                                                     763,100           1,009,900           1,951,300          2,492,500

OPERATING EXPENSES
Selling                                                          266,200             436,700             978,600          1,112,300
General and administrative                                       544,300             606,200           1,751,800          1,839,900
                                                             -----------         -----------         -----------         ----------
       TOTAL OPERATING EXPENSES                                  810,500           1,042,900           2,730,400          2,952,200
                                                             -----------         -----------         -----------         ----------

LOSS FROM OPERATIONS                                             (47,400)            (33,000)           (779,100)          (459,700)

OTHER INCOME (EXPENSE)
Interest expense                                                 (33,500)            (36,200)           (107,400)          (121,900)
Other                                                             (2,800)            (17,300)             13,000             82,900
                                                             -----------         -----------         -----------         ----------
                                                                 (36,300)            (53,500)            (94,400)           (39,000)
                                                             -----------         -----------         -----------         ----------
LOSS BEFORE (PROVISION) BENEFIT FOR INCOME TAX                   (83,700)            (86,500)           (873,500)          (498,700)

(PROVISION) BENEFIT FOR INCOME TAXES                                   0               9,800              37,700            111,800
                                                             -----------         -----------         -----------         ----------

NET LOSS                                                     $   (83,700)        $   (76,700)        $  (835,800)        $ (386,900)
                                                             ===========         ===========         ===========         ==========

LOSS PER SHARE
Basic                                                        $     (0.04)        $     (0.03)        $     (0.38)        $    (0.18)
                                                             ===========         ===========         ===========         ==========
Diluted                                                      $     (0.04)        $     (0.03)        $     (0.38)        $    (0.18)
                                                             ===========         ===========         ===========         ==========

Weighted average number of common shares outstanding:
Basic
                                                               2,190,200           2,230,900           2,194,600          2,193,400
Diluted
                                                               2,190,200           2,230,900           2,194,600          2,193,400
</TABLE>
                            See Accompanying Notes


                                  Page 4 of 14

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (CONT.)

               ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                          Nine Months         Nine Months
                                                                                         Ended Sept 30       Ended Sept 30
                                                                                             2002                 2001
                                                                                         -------------       -------------
<S>                                                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss                                                                                  $(835,800)          $(386,900)
Adjustments to reconcile net loss to net cash used in operating activities
   Depreciation                                                                             123,400             132,200
   Amortization                                                                             146,800             281,500
   Loss on disposal of asset                                                                 58,500               6,300
   Provision for bad debts                                                                   (9,800)            115,400
   Deferred income tax provision                                                            (37,700)             19,000
Changes in:
   Accounts receivable                                                                      (89,100)           (231,400)
   Inventories                                                                              380,300            (768,000)
   Prepaid expenses                                                                        (100,100)            (84,100)
   Other assets                                                                            (425,800)           (273,800)
   Accounts payable                                                                         620,700              90,200
   Accrued expenses                                                                         (87,000)            421,600
   Income taxes receivable/(payable)                                                        159,400             (87,300)
   Deferred revenue                                                                         (18,700)            (12,500)
                                                                                          ---------           ---------
                                           NET CASH USED IN OPERATING ACTIVITIES           (114,900)          (777,800)
                                                                                          ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment                                                (10,900)            (77,900)
                                                                                          ---------           ---------
                                           NET CASH USED IN INVESTING ACTIVITIES            (10,900)            (77,900)
                                                                                          ---------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Treasury Stock                                                                  (42,000)                 --
Proceeds from Common Stock Options and warrants                                              22,500                  --
Collection of stock subscriptions receivable                                                     --             203,000
Repayment of mortgage and capital lease principal                                           (98,300)            (48,700)
Repayment of notes payable to related parties                                                    --             (18,600)
Proceeds (repayment) from borrowings (net)                                                 (158,300)            666,400
                                                                                          ---------           ---------
                             NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES           (276,100)            802,100
                                                                                          ---------           ---------

                                       NET DECREASE IN CASH AND CASH EQUIVALENTS           (401,900)            (53,600)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                            482,800             614,900
                                                                                          ---------           ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                $  80,900           $ 561,300
                                                                                          =========           =========

Supplemental disclosures - cash paid for:
    Interest                                                                              $ 107,400           $ 110,100
    Income Taxes                                                                          $       0           $  66,000

</TABLE>
                             See Accompanying Notes


                                  Page 5 of 14

<PAGE>



               ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED):

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements contain
all normal recurring adjustments necessary to present fairly the financial
position of Action Products International, Inc. and its subsidiary, Action
Products Canada Ltd. (collectively, the "Company"), at September 30, 2002 and
the results of its (i) operations for the three and nine month periods ended
September 30, 2002 and 2001 and (ii) cash flows for the nine month periods ended
September 30, 2002 and 2001. The financial information included herein is taken
from the books and records of the Company and is unaudited.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-KSB and Form 10-KSB/A for the
year ended December 31, 2001. The results of operations for the nine month
period ended September 30, 2002 are not necessarily indicative of the operating
results for the full year. Through September 30, 2002, the Company has been
able to meet its obligations as they come due, however, it is at least
reasonably possible that if the Company continues to incur losses and negative
cash flows, it will have to obtain additional sources of debt or equity
financing to maintain its liquidity. There can be no assurance that such
financing will be available or available on terms acceptable to the Company if
needed.

2. LINE OF CREDIT. As of March 22, 2001, the Company entered into an agreement
with Citrus Bank, pursuant to which Citrus Bank provides a revolving line of
credit (the "Revolver") for up to $2 million at the "Prime" lending rate. The
borrowings under the Revolver are utilized by the Company to finance accounts
receivable, inventory and other operating and capital requirements. The Revolver
matures June 30, 2003 and contains covenants relating to the financial condition
of the Company. If the Company fails to maintain compliance with the financial
covenants contained in the Revolver, the maturity date could be accelerated. The
Company is currently non-compliant with one of the covenants related to current
assets and liabilities. However, we have received a waiver of non-compliance on
this issue through October 2002.

3. MORTGAGE PAYABLE. In November 1998, the Company borrowed $750,000 in the form
of a mortgage payable. The mortgage is collateralized by real estate and
improvements and contains certain restrictive covenants, which provide that,
among other things, the Company maintain a minimum working capital, net worth,
debt service coverage and a maximum debt to net worth ratio. If the Company
fails to maintain compliance with the financial covenants contained in the note,
the maturity date could be accelerated. At December 31, 2001, the Company was
not in compliance with the debt service coverage and debt to net worth
covenants. However, the Company has obtained a waiver of non-compliance from the
financial institution for the twelve month period ending December 31, 2002.

4. EARNINGS PER SHARE. Common stock equivalents were not included in the
computation of diluted earnings per share for the three and nine month periods
ending September 30, 2002 and 2001, as their effect would have been
anti-dilutive.

5. NEW ACCOUNTING PRONOUNCEMENTS. On July 20, 2001, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No. 141
(SFAS 141), "Business Combinations," and No. 142 (SFAS 142), "Goodwill and Other
Intangible Assets." SFAS 141 addresses financial accounting and reporting for
goodwill and other intangible assets acquired in a business combination at
acquisition. SFAS 141 requires the purchase method of accounting to be used for
all business combinations initiated after September 30, 2001; establishes
specific criteria for the recognition of intangible assets separately from
goodwill; and requires unallocated negative goodwill to be written off
immediately as an extraordinary gain (instead of being deferred and amortized).
SFAS 142 addresses financial accounting and reporting for intangible assets
acquired individually or with a group of other assets (but not those acquired in
a business combination) at acquisition. SFAS 142 also addresses financial
accounting and reporting for goodwill and other intangible assets subsequent to
their acquisition. SFAS 142 provides that goodwill and intangible assets which
have indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. It also provides that

                                  Page 6 of 14

<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

5. NEW ACCOUNTING PRONOUNCEMENTS (CONT.)
intangible assets that have finite useful lives will continue to be amortized
over their useful lives, but those lives will no longer be limited to forty
years. SFAS 141 is effective for all business combinations initiated after June
30, 2001 and for all business combinations accounted for by the purchase method
for which the date of acquisition is after June 30, 2001. The Company has not
transacted any business combinations subsequent to June 30, 2001 and therefore
has reported no impact to its financial statements from the provisions of SFAS
141. The provisions of SFAS 142 are effective for fiscal years beginning after
December 15, 2001. The Company adopted SFAS 142 beginning January 1, 2002, has
ceased the amortization of goodwill, properly tested for impairment and
determined no impairment exists as of this report. If these rules had applied to
goodwill during the nine months ended September 30, 2001, the Company believes
amortization expense would have decreased by $29,600. Hereafter all goodwill and
any indefinite-lived intangible assets must be tested at least annually for
impairment but is being reviewed quarterly.

6. COMMON STOCK AND EQUITY SECURITIES.  During the nine month period ended
September 30, 2002, the Company repurchased approximately 40,600 of its common
shares for the treasury and issued approximately 377,800 employee stock options.
The employee stock options generally are exercisable over the five year terms
between $1.25 to $3.50 per share. Because none of these employee stock options
were issued with intrinsic value, no compensation charge was recorded in
connection with their issuance. In addition, the Company issued 350,000 options
and warrants to non-employees in connection with the acquisition of services, at
an exercise price of $1.50 per share.

7. SUBSEQUENT EVENT FOOTNOTE.  On November 5, 2002 the Company received
payments of stock subscription receivable from related parties totaling $80,000.
Total Subscriptions as of September 30, 2002 were $520,500.

                                  Page 7 of 14

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

FORWARD-LOOKING STATEMENTS:
Forward-looking statements in this Form 10-QSB including, without limitation,
statements relating to our plans, strategies, objectives, expectations,
intentions and adequacy of resources, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
statements made in this report, other than statements of historical fact, are
forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. The following factors, among others, could cause actual results to
differ materially from those set forth in the forward-looking statements: our
ability to successfully develop our brands and proprietary products through
internal development, licensing and/or mergers and acquisitions. Additional
factors include, but are not limited to the following: the size and growth of
the market for our products, competition, pricing pressures, market acceptance
of our products, the effect of economic conditions, intellectual property
rights, the results of financing efforts, risks in product development, other
risks identified in this report and our other periodic filings with the
Securities Exchange Commission.

RESULTS OF OPERATIONS:

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2001

NET SALES during the three months ended September 30, 2002 were $1,944,900,
compared with net sales of $2,218,400 during the three months ended September
30, 2001. Management attributes the $273,500 or 12% decrease in net sales to the
continued weakness in the retail market. Our sales decreased principally in the
museum and theme park channels, where we experienced a significant decrease in
sales of our Climb@tron product line. Climb@tron sales for the three month
period ended September 30, 2002 decreased approximately $300,000 compared to the
three month period ended September 30, 2001. Product purchases of Climb@tron
have been tightly controlled to maintain a balance between sales and inventory
levels. Present inventory levels represent approximately 120 days sales volume.
Another contributing factor was the delay in the September launch of JAY JAY THE
JET PLANE (TM) due to the delay in our receipt of merchandise resulting from a
prolonged work stoppage at 28 West-coast shipping ports. The interruption
postponed approximately $150,000 of JAY JAY THE JET PLANE (TM) sales into the
fourth quarter of 2002. JAY JAY THE JET PLANE (TM), our new Wooden Adventure
System(TM), is based on characters from the children's show which airs on PBS or
PBS Kids nationwide. This line received very favorable reviews at the February
2002 New York Toy Fair and pre-orders received to date, exceeding $275,000,
indicate strong market interest.

GROSS PROFIT decreased by $246,800 to $763,100 during the three months ended
September 30, 2002, compared with $1,009,900 during the three months ended
September 30, 2001. The gross profit percentage was 39% and 46% during the three
month periods ended September 30, 2002 and 2001 respectively. The decrease in
gross profit is mainly attributable to the decrease in sales discussed above.
The decrease in gross profit percentage compared to the same period in 2001, was
mainly attributable to a higher proportion of sales to chain and discount
retailers with special pricing terms.


                                  Page 8 of 14

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES decreased by $232,400 to
$810,500 for the three month period ended September 30, 2002 from $1,042,900 for
the three month period ended September 30, 2001. This 22% decrease in SG&A
expenses is due primarily to the following:

         -        Advertising and Promotion decrease of $45,000 resulting from
                  lower tradeshow and advertising expenses

         -        Telephone expense decrease of $9,000 due to reduced usage
                  rates from new vendor service agreements

         -        Compensation decrease of $46,000 due to reductions in staffing

         -        Facility cost decrease of $12,000 resulting from the
                  outsourcing of EarthLore production and shutdown of the
                  Canadian facility

         -        Estimated doubtful accounts decrease of $105,000 due to credit
                  insurance coverage and improved credit and collections
                  procedures

INTEREST EXPENSE related to current and long-term debt was $33,500 and $36,200
for the three month periods ended September 30, 2002 and 2001, respectively. The
decrease of $2,700 is due to lower borrowings under our line of credit, combined
with a lower rate of interest.

OTHER INCOME AND (EXPENSE) are netted for financial statement presentation.
During the three month periods ended September 30, 2002 and 2001, other income
and (expense) was ($2,800) and ($17,300), respectively. The $14,500 change was
mainly attributable to increased miscellaneous income and a decrease in
unrealized losses on currency exchange.

INCOME BEFORE PROVISION FOR INCOME TAXES AND NET INCOME. As a result of the
foregoing, we had a net loss before taxes of $83,700 and a net loss after taxes
of $83,700 for the three months ended September 30, 2002, compared with a net
loss before taxes of $86,500 and net loss after taxes of $76,700 for the three
months ended September 30, 2001.


NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2001

NET SALES during the nine months ended September 30, 2002 were $4,882,700,
compared with net sales of $5,489,400 during the nine months ended
September 30, 2001. Management attributes the $606,700 or 11% decrease in net
sales to continued weakness in the retail market, principally in the museum and
theme park channels. These two channels, which are outside of our core specialty
toy retailer market, have been heavily affected by the decline in tourism
activity that began in the fourth quarter of 2001. Another contributing factor
was the delay into October of the launch of JAY JAY THE JET PLANE (TM) and
$150,000 sales, due to the aforementioned west coast shipping port work
stoppage.

GROSS PROFIT during the nine months ended September 30, 2002 decreased $541,200
to $1,951,300, compared with $2,492,500 during the nine months ended September
30, 2001. The gross profit percentage was 40% and 45% during the nine month
periods ending September 30, 2002 and September 30, 2001 respectively. The
majority of the decrease in gross profit is attributable to the decrease in
sales discussed above. The decrease in gross profit percentage was attributable
to: one time costs associated with the consolidation and outsourcing of our
Canadian production and warehousing operations for the EarthLore brand; sales
promotions using free and discounted freight incentives to stimulate specialty
retailer orders; royalties for licensed products and a higher proportion of
sales to chain and discount retailers with special pricing terms.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES for the nine month period
ended September 30, 2002 decreased by $221,800 to $2,730,400 from $2,952,200 for
the nine month period ended September 30, 2001. This 8% decrease in SG&A
expenses is due to the following:

         -        Advertising and Promotion decrease of $55,000 due to lower
                  catalog printing costs and lower tradeshow and advertising
                  expenses

         -        Estimated doubtful accounts decrease of $125,000 due to credit
                  insurance coverage and improved credit and collections
                  procedures

         -        Facility cost decrease of $40,000 resulting from the shutdown
                  of our Canadian facility.

                                  Page 9 of 14

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

INTEREST EXPENSE related to current and long-term debt was $107,400 and $121,900
during the nine month period ended September 30, 2002 and 2001, respectively.
The decrease of $14,500 is due to lower borrowings under our line of credit,
combined with the lower rate of interest.

OTHER INCOME AND (EXPENSE) are netted for financial statement presentation.
During the nine month period ended September 30 of 2002 and 2001, other income
and (expense) were $13,000 and $82,900, respectively. The $69,900 change was
mainly attributable to lower finance charges related to late customer payments.

INCOME BEFORE PROVISION FOR INCOME TAXES AND NET INCOME. As a result of the
foregoing, we had a net loss before taxes of $873,500 and a net loss after taxes
of $835,800 during the nine month period ended September 30, 2002, compared with
a net loss before taxes of $498,700 and net loss after taxes of $386,900 during
the nine month period ended September 30, 2001.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES:
As of September 30, 2002, the Company had cash and cash equivalents of $80,900,
representing a decrease of $401,900 compared to December 31, 2001.

Principal sources of liquidity from Operating activities for the nine months
ended September 30, 2002 were; a refund of prior year federal income tax
payments resulting from allowable NOL carry backs of $150,300; decrease in
inventory balances of $380,300 due to prudent inventory purchase practices; and
increase in accounts payable $620,700 due to seasonality. Principal uses of cash
from Operating activities in the first nine months of fiscal 2002 were: an
increase of $425,700 in other assets due mainly to product development costs
associated with the launch of JAY JAY THE JET PLANE (TM) which should be
decreasing in future periods due to scaled down product development activities;
increase in accounts receivable of $89,100 due to seasonality; and a reduction
of $87,000 in accrued expenses reflecting payment of costs associated with the
decommissioning of the Canadian production facility.

Principal uses of cash from Investing and Financing activities in the first nine
months of fiscal 2002 were: $256,600 for repayment of line of credit borrowings,
mortgage and capital lease principal and $42,000 for the repurchase of common
stock.

At September 30, 2002, we had $1,534,400 of borrowings under our line of credit,
a decrease of $30,100 from $1,564,500 as of September 30, 2001. Our line of
credit provides for borrowings up to $2,000,000 at the prime rate and matures
June 30, 2003. Under the agreement for our line of credit, we are subject to
financial covenants relating to certain asset balances and financial ratios. As
of September 30, 2002 we were eligible to borrow $1,563,798 under our line of
credit and were not in compliance with one of our financial covenants. However,
we have received a waiver of non-compliance through October 2002.

We are updating our brand development plans for the next 12 to 18 months,
encompassing product development, tooling and initial inventory investments. In
order to support the product development, tooling and inventory investments
needed to expand existing and new product lines, we anticipated the need for
additional financing over our current working capital line and are pursuing
other financing alternatives.

ITEM 4. CONTROLS AND PROCEDURES

Action Products management, including the Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.


                                 Page 10 of 14


<PAGE>

PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

The NASDAQ Listing Qualifications Department ("the Staff") has notified the
Company that it is not in compliance with the requirements of NASD Marketplace
Rule 4310(c)(2)(B) for continued listing of its securities on Nasdaq's SmallCap
Market. This rule requires the Company to have a minimum of $2,000,000 in net
tangible assets or $2,500,000 in stockholders' equity or a market value of
listed securities of $35,000,000 or $500,000 of net income from continuing
operations for the most recent completed fiscal year (or two of the three most
recently completed fiscal years). The Company has historically satisfied its
requirements under this rule by meeting the minimum value for net tangible
assets or stockholders' equity. Based on the Company's last filed quarterly
report on Form 10-QSB for the period ended June 30, 2002, the Company's net
tangible assets and stockholders equity were $1,630,400 and $2,412,800,
respectively. Consequently, Action Products' common stock is subject to
delisting from The NASDAQ SmallCap Market. Pursuant to NASD Marketplace Rules,
the Company intends to appeal the Staff's determination before a NASDAQ Listing
Qualifications Panel ("the Panel"). The hearing before the Panel has been
scheduled for November 22, 2002. The Company's hearing request automatically
delays the delisting pending the Panel's final review and determination of the
appeal. Until the Panel's ultimate determination, Action Products' common shares
will continue to be traded on the NASDAQ SmallCap Market. While there are no
guarantees that the Company's appeal will be successful, the Company believes
that based upon the reductions in its operating costs that have been implemented
this year, the financing options it is currently pursuing and the favorable
sales impact of new product introductions in the fourth quarter, that the
Company will be able to set forth a satisfactory plan to the Panel to come back
into compliance with the NASD Marketplace Rules and to maintain its listing on
Nasdaq's SmallCap Market.

If the Panel determines that the foregoing is not sufficient to permit the
Company to maintain its continued listing requirements, the inclusion of the
Company in the Nasdaq SmallCap Market will be terminated and trading in the
Company's securities would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, the Company's
shareholders could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities. For the Company
to be re-listed on the Nasdaq SmallCap Market, it will be required to meet that
market's initial listing requirements, among which are the following: (a) $4
million in net tangible assets, or $50 million market capitalization, or
$750,000 of net income in latest fiscal year or 2 of last 3 fiscal years); (b)
a public float of at least 1,000,000 shares (exclusive of officers, directors
and 10% holders) with a market value of at least $5 million; (c) minimum bid
price of $4 per share; (d) a minimum of three market makers; (e) a minimum of
300 shareholders.

If the Company's common stock is delisted from Nasdaq, its common stock may
become subject to the penny stock rules. Broker-dealer practices in connection
with transactions in "penny stocks" are regulated by certain rules adopted by
the Securities and Exchange Commission. Penny stocks generally are equity
securities with a price of less than $5.00 other than securities registered on
certain national securities exchanges or quoted on Nasdaq provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system. The rules require that, prior to a
transaction in a penny stock not otherwise exempt from the rules, the
broker-dealer must

         -   Deliver a standardized risk disclosure document that provides
             information about penny stocks and the risks in the penny stock
             market,
         -   Provide the customer with current bid and offer quotations for the
             penny stock,
         -   Disclose the compensation of the broker-dealer and its salesperson
             in connection with the transaction,
         -   Provide the customer monthly account statements showing the market
             value of each penny stock held in the customer's account, and
         -   Make a special written determination that the penny stock is a
             suitable investment for the customer and receive the customer's
             written agreement to the transaction.

These disclosure requirements may have the effect of reducing the liquidity of
penny stocks. If the Company's securities are subject to the penny stock rules,
holders of the Company's securities may find it more difficult to sell their
shares of the Company's common stock.

                                 Page 11 of 14

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A.       EXHIBITS

<TABLE>
<CAPTION>
Exhibit
  No.    Description
<S>      <C>
3.1      Amended Articles of Incorporation, incorporated by reference to an
         Exhibit to Definitive Proxy Statement filed May 22, 1998.

3.2      Amended By-laws, incorporated by reference to an Exhibit to the
         Definitive Proxy Statement filed May 22, 1999.

10.1     Employee Stock Ownership Plan, incorporated by reference to an Exhibit
         to the Company's Registration Statement on Form S-18, dated April 23,
         1984, at pages 154-208.

10.2     Incentive Stock Option Plan, incorporated by reference to an Exhibit to
         the Company's Registration Statement on Form S-18 dated September 25,
         1984, at pages 210-220.

10.3     401(k) Plan dated October 3, 1986, incorporated by reference to an
         Exhibit to Form 10-Q filed August 15, 1987.

10.4     Amendment to Employee Stock Ownership Plan dated February 8, 1988,
         incorporated by reference to an Exhibit to Form 10-K filed March 31,
         1989.

10.5.1   Amendment to Employee Stock Ownership Plan dated March 10, 1989,
         incorporated by reference to an Exhibit to Form 10-K filed March 31,
         1989.

10.6     Company's 1996 Stock Option Plan incorporated by reference to an
         Exhibit to the Company's Registration Statement on Form S-8 filed on
         April 20, 1999.

10.7     Asset Purchase Agreement between the Company and American Outdoor
         Products, Inc. dated December 31, 1997, incorporated by reference to
         Exhibit in the Company's Current Report on Form 8-K filed February 26,
         1998.

10.8     Asset Purchase Agreement between the Company and Earth Lore Ltd., dated
         October 15, 2000, incorporated by reference to Exhibit in the Company's
         Current Report on Form 8-K filed November 6, 2000.

10.9     Common Stock Repurchase Authorization, dated October 10, 2001,
         incorporated by reference to Exhibit in the Company's Current Report on
         Form 8-K filed October 17, 2001.

10.10    Appeal of Nasdaq Delisting notification, dated October 21, 2002,
         incorporated by reference of Exhibit in the Company's current report on
         Form 8-K filed November 14, 2002.

99.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

B.       REPORTS ON FORM 8-K
         None.

                                 Page 12 of 14

<PAGE>

                                   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.


                       ACTION PRODUCTS INTERNATIONAL, INC.


Date: November 14, 2002                         By: /s/ RONALD S. KAPLAN
      -----------------                             ----------------------------
                                                  Ronald Kaplan
                                                  Chief Executive Officer
                                                  (Principal Executive Officer)



Date: November 14, 2002                         By:  /s/ ROBERT L. BURROWS
      -----------------                             ---------------------------
                                                  Robert L. Burrows
                                                  Chief Financial Officer
                                                  (Principal Accounting Officer)

                                 Page 13 of 14

<PAGE>

                                 CERTIFICATIONS

I, Ronald S. Kaplan, Chief Executive Officer of Action Products International,
Inc., certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Action Products
         International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statements of material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

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

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

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

         b.       Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

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

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

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

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


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

Date: November 14, 2002                            By: /s/ RONALD S. KAPLAN
-----------------------                                -------------------------
                                                   Ronald Kaplan Chief
                                                   Executive Officer


                                 Page 14 of 14
<PAGE>
I, Robert L. Burrows, Chief Financial Officer of Action Products International,
Inc, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Action Products
         International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statements of material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

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

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

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

         b.       Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

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

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

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

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

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


Date: November 14, 2002             By: /s/ ROBERT L. BURROWS
                                        -----------------------------------
                                    Robert L. Burrows
                                    Chief Financial Officer


                                 Page 15 of 15