##### 



SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-QSB

QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

|                                 |                                   | 
|-------------------------------- | --------------------------------- | 
|For Quarter Ended March 31, 2002 | Commission File    Number 0-13118

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

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

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



|                                                                                                                        | 
|----------------------------------------------------------------------------------------------------------------------- | 
|Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of last practicable date.

|                                    |  |                                      
|----------------------------------- |  | -------------------------------------
|Class
Common Stock, $.001 par value |  | Outstanding at May 10, 2002
2,230,800

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

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I N D E X

|                                                                                                         |  |        |    | 
|-------------------------------------------------------------------------------------------------------- |  | ------ | -- | 
|PART I. FINANCIAL INFORMATION                                                                            |  | Page  
|                                                                                                         |  | Number
|                                                                                                         |  |       
|Item 1. Financial Statements                                                                             |  |        |    | 
|                                                                                                         |  |       
|Condensed Consolidated Balance Sheet at March 31, 2002 (unaudited)                                       |  |        | 3  | 
|                                                                                                         |  |       
|Condensed Consolidated Statements of Operations  Three months ended
March 31, 2002 and 2001 (unaudited) |  |        | 4  | 
|                                                                                                         |  |       
|Condensed Consolidated Statements of Cash Flows  Three months ended
March 31, 2002 and 2001 (unaudited) |  |        | 5  | 
|                                                                                                         |  |       
|Notes to unaudited Condensed Consolidated Financial Statements                                           |  |        | 6  | 
|                                                                                                         |  |       
|Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations            |  |        | 7  | 
|                                                                                                         |  |       
|PART II. OTHER INFORMATION                                                                               |  |        |    | 
|                                                                                                         |  |       
|Item 6. Exhibits and Reports on Form 8-K                                                                 |  |        | 9  | 
|                                                                                                         |  |       
|SIGNATURE PAGE                                                                                           |  |        | 10 | 

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

|                                                                                     |                                            |                                   |                            |                           |           |               |           | 
|------------------------------------------------------------------------------------ | ------------------------------------------ | --------------------------------- | -------------------------- | ------------------------- | --------- | ------------- | --------- | 
|                                                                                     |                                            |                                   |                            |                           |           | Mar. 31, 2002
|                                                                                     |                                            |                                   |                            |                           |           |              
|ASSETS                                                                               |                                            |                                   |                            |                          
|CURRENT ASSETS                                                                       |                                            |                                   |                            |                          
|Cash and cash equivalents                                                            |                                            | $                                 | 130,500                    |                          
|Accounts receivable, net of an allowance for doubtful accounts of $195,600           |                                            |                                   | 1,021,200                  |                          
|Inventories, net                                                                     |                                            |                                   | 1,733,900                  |                          
|Prepaid expenses and other assets                                                    |                                            |                                   | 551,800                    |                          
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     |                                            |                                   |                            | TOTAL CURRENT ASSETS      |           |               | 3,437,400 | 
|PROPERTY, PLANT AND EQUIPMENT                                                        |                                            |                                   | 2,131,800                  |                          
|Less accumulated depreciation and amortization                                       |                                            |                                   | (1,085,900                 | )                        
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     |                                            | NET PROPERTY, PLANT AND EQUIPMENT |                            |                           | 1,045,900 |              
|EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET                               |                                            |                                   | 782,400                    |                          
|OTHER ASSETS                                                                         |                                            |                                   | 616,000                    |                          
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     |                                            |                                   |                            | TOTAL ASSETS              |           | $             | 5,881,700 | 
|                                                                                     |                                            |                                   |                            |                          
|LIABILITIES AND SHAREHOLDERS EQUITY                                                 |                                            |                                   |                            |                          
|CURRENT LIABILITIES                                                                  |                                            |                                   |                            |                          
|Current portion of installment notes payable and
obligation under capital lease      |                                            | $                                 | 81,500                     |                          
|Borrowings under lines of credit                                                     |                                            |                                   | 1,610,200                  |                          
|Other Current Liabilities                                                            |                                            |                                   | 552,100                    |                          
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     |                                            |                                   |                            | TOTAL CURRENT LIABILITIES |           |               | 2,243,800 | 
|                                                                                     |                                            |                                   |                            |                          
|INSTALLMENT NOTES PAYABLE AND OBLIGATION
UNDER CAPITAL LEASE                         |                                            |                                   | 48,200                     |                          
|MORTGAGE PAYABLE                                                                     |                                            |                                   | 667,800                    |                          
|DEFERRED INCOME TAXES                                                                |                                            |                                   | 8,700                      |                          
|DEFERRED REVENUE                                                                     |                                            |                                   | 118,800                    |                          
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     |                                            |                                   |                            | TOTAL LIABILITIES         |           |               | 3,087,300 | 
|                                                                                     |                                            |                                   |                            |                          
|SHAREHOLDERS EQUITY                                                                 |                                            |                                   |                            |                          
|Preferred Stock - 10,000,000 shares authorized, zero shares issued and outstanding   |                                            |                                   | 0                          |                          
|Common stock  $.001 par value; 15,000,000 shares authorized;2,230,800 shares
issued |                                            |                                   | 2,200                      |                          
|Treasury Stock  $.001 par value; 39,200 shares                                      |                                            |                                   | 40                         |                          
|Additional paid-in capital                                                           |                                            |                                   | 3,829,960                  |                          
|Accumulated Deficit                                                                  |                                            |                                   | (517,300                   | )                        
|Stock subscriptions receivable                                                       |                                            |                                   | (520,500                   | )                        
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     |                                            |                                   | TOTAL SHAREHOLDERS EQUITY |                           |           | 2,794,400     |          
|                                                                                     |                                            |                                   |                            |                          
|                                                                                     | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                   | $                          | 5,881,700                 |          
|                                                                                     |                                            |                                   |                            |                          

See Accompanying Notes

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ITEM 1. Financial Statements (cont.)

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



|                                                      |                          |   |                               |           |      |   |           |         | 
|----------------------------------------------------- | ------------------------ | - | ----------------------------- | --------- | ---- | - | --------- | ------- | 
|                                                      |                          |   | Three Months Ended March 31st
|                                                      |                          |   |                              
|                                                      |                          |   | 2002                          |           | 2001
|                                                      |                          |   |                              
|NET SALES                                             |                          | $ | 1,458,100                     |           |      | $ | 1,657,700 |        
|COST OF SALES                                         |                          |   | 846,200                       |           |      |   | 864,900   |        
|                                                      |                          |   |                               |           |      |   |           |        
|GROSS PROFIT                                          |                          |   | 611,900                       |           |      |   | 792,800   |        
|OPERATING EXPENSES                                    |                          |   |                               |           |      |   |           |        
|Selling                                               |                          |   | 771,100                       |           |      |   | 677,000   |        
|General and administrative                            |                          |   | 236,400                       |           |      |   | 260,300   |        
|                                                      |                          |   |                               |           |      |   |           |        
|                                                      | TOTAL OPERATING EXPENSES |   |                               | 1,007,500 |      |   |           | 937,300 | 
|                                                      |                          |   |                               |           |      |   |           |        
|LOSS FROM OPERATIONS                                  |                          |   | (395,600                      | )         |      |   | (144,500  | )      
|OTHER INCOME (EXPENSE)                                |                          |   |                               |           |      |   |           |        
|Interest expense                                      |                          |   | (38,200                       | )         |      |   | (33,200   | )      
|Other                                                 |                          |   | 2,600                         |           |      |   | (48,900   | )      
|                                                      |                          |   |                               |           |      |   |           |        
|                                                      |                          |   | (35,600                       | )         |      |   | (82,100   | )      
|                                                      |                          |   |                               |           |      |   |           |        
|LOSS BEFORE (PROVISION) BENEFIT FOR INCOME TAX        |                          |   | (431,200                      | )         |      |   | (226,600  | )      
|(PROVISION) BENEFIT FOR INCOME TAXES                  |                          |   | 58,800                        |           |      |   | (15,900   | )      
|                                                      |                          |   |                               |           |      |   |           |        
|NET LOSS                                              |                          |   | ($372,400                     | )         |      |   | ($242,500 | )      
|                                                      |                          |   |                               |           |      |   |           |        
|LOSS PER SHARE                                        |                          |   |                               |           |      |   |           |        
|Basic                                                 |                          |   | ($0.17                        | )         |      |   | ($0.11    | )      
|                                                      |                          |   |                               |           |      |   |           |        
|Diluted                                               |                          |   | ($0.17                        | )         |      |   | ($0.11    | )      
|                                                      |                          |   |                               |           |      |   |           |        
|Weighted average number of common shares outstanding: |                          |   |                               |           |      |   |           |        
|Basic                                                 |                          |   | 2,230,800                     |           |      |   | 2,117,700 |        
|Diluted                                               |                          |   | 2,230,800                     |           |      |   | 2,117,700 |        

See Accompanying Notes

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ITEM 1. Financial Statements (cont.)

ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |          |         |          |          |  
|-------------------------------------------------------------------------- | ----------------------------- | --------------------------------------------------- | ----------------------------------------- | ------------------------------------- | -------- | ----------------------------- | --------- | -------- | ------- | -------- | -------- | -
|                                                                           |                               |                                                     |                                           |                                       |          | Three months ended March 31st
|                                                                           |                               |                                                     |                                           |                                       |          | 2002                          |           | 2001    
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|CASH FLOWS FROM OPERATING ACTIVITIES                                      
|Net Loss                                                                   |                               |                                                     | ($372,400                                 | )                                     |          |                               | ($242,500 | )       
|Adjustments to reconcile net loss to net cash used in operating activities |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           | Depreciation                  |                                                     |                                           | 43,200                                |          |                               |           | 36,600   |        
|                                                                           | Amortization                  |                                                     |                                           | 41,500                                |          |                               |           | 90,700   |        
|                                                                           | Loss on disposal of asset     |                                                     |                                           | 56,000                                |          |                               |           | (6,300   | )      
|                                                                           | Provision for bad debts       |                                                     |                                           | 23,900                                |          |                               |           | 16,000   |        
|                                                                           | Deferred income tax provision |                                                     |                                           | (58,800                               | )        |                               |           | 23,500   |        
|Changes in:                                                                |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           | Accounts receivable           |                                                     |                                           | 254,700                               |          |                               |           | (26,700  | )      
|                                                                           | Inventories                   |                                                     |                                           | 13,100                                |          |                               |           | 30,800   |        
|                                                                           | Prepaid expenses              |                                                     |                                           | (66,100                               | )        |                               |           | (122,700 | )      
|                                                                           | Other assets                  |                                                     |                                           | (139,400                              | )        |                               |           | (84,000  | )      
|                                                                           | Accounts payable              |                                                     |                                           | 216,800                               |          |                               |           | (110,500 | )      
|                                                                           | Accrued expenses              |                                                     |                                           | (178,400                              | )        |                               |           | 208,900  |        
|                                                                           | Income taxes payable          |                                                     |                                           | 0                                     |          |                               |           | (67,300  | )      
|                                                                           | Deferred revenue              |                                                     |                                           | (6,200                                | )        |                               |           | (6,200   | )      
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           |                               |                                                     |                                           | NET CASH USED IN OPERATING ACTIVITIES |          |                               | (172,100  | )        |         |          | (259,700 | )
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|CASH FLOWS FROM INVESTING ACTIVITIES                                       |                               |                                                     |                                           |                                       |          |                               |           |         
|Acquisition of property, plant and equipment                               |                               |                                                     | (10,900                                   | )                                     |          |                               | (53,000   | )       
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           |                               |                                                     |                                           | NET CASH USED IN INVESTING ACTIVITIES |          |                               | (10,900   | )        |         |          | (53,000  | )
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|CASH FLOWS FROM FINANCING ACTIVITIES                                       |                               |                                                     |                                           |                                       |          |                               |           |         
|Purchase of Treasury Stock                                                 |                               |                                                     | (39,900                                   | )                                     |          |                               | 0         |         
|Collection of stock subscriptions receivable                               |                               |                                                     | 0                                         |                                       |          |                               | 3,000     |         
|Repayment of mortgage and capital lease principal                          |                               |                                                     | (46,900                                   | )                                     |          |                               | (20,700   | )       
|Repayment of notes payable to related parties                              |                               |                                                     | 0                                         |                                       |          |                               | (13,100   | )       
|Proceeds/repayments from borrowings (net)                                  |                               |                                                     | (82,500                                   | )                                     |          |                               | 169,300   |         
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           |                               | NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |                                           |                                       | (169,300 | )                             |           |          | 138,500 |         
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           |                               |                                                     | NET DECREASE IN CASH AND CASH EQUIVALENTS |                                       |          | (352,300                      | )         |          |         | (174,200 | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                           |                               |                                                     | 482,800                                   |                                       |          |                               | 614,700   |         
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 |                               | $                                                   | 130,500                                   |                                       |          | $                             | 440,500   |         
|                                                                           |                               |                                                     |                                           |                                       |          |                               |           |         
|Supplemental disclosures  cash paid for:                                  |                               |                                                     |                                           |                                       |          |                               |           |         
|                                                                           | Interest                      |                                                     | $                                         | 38,200                                |          |                               | $         | 33,200   |        
|                                                                           | Income Taxes                  |                                                     | $                                         | 0                                     |          |                               | $         | 64,500   |        

See Accompanying Notes

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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 March 31, 2002 and the results of its (i) operations for the three
month periods ended March 31, 2002 and 2001 and (ii) cash flows for the
three month periods ended March 31, 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 three month period ended March 31,
2002 are not necessarily indicative of the operating results for the full
year.

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 in compliance with all of the covenants. The
Companys previous line of credit with another financial institution
expired during the first quarter of 2001.

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. 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 month periods
ending March 31, 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 June 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

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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 and has ceased the amortization of goodwill. If these rules had
applied to goodwill during the three months ended March 31, 2001, the
Company believes amortization expense would have decreased by $9,000.
Hereafter all goodwill and any indefinite-lived intangible assets must be
tested at least annually for impairment.

ITEM 2. Managements Discussion and Analysis of
Financial Condition and Results 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 (i) develop our brands and proprietary products
through internal development, licensing and/or mergers and acquisitions,
(ii) access the mass market by entering into licensing agreements with
major retailers and (iii) develop our E-commerce strategy.

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 the our products, the effect of economic conditions,
intellectual property rights, the results of financing efforts, risks in
product development, the ability to identify and consummate acquisition
opportunities, other risks identified in this report and our other
periodic filings with the Securities Exchange Commission.

Results of Operations:

Three Months Ended March 31, 2002 Compared With Three Months Ended March
31, 2001

Net salesduring the first quarter ended March 31, 2002 were $1,458,100,
compared with net sales of $1,657,700 during the first quarter of March
31, 2001. Management attributes the $199,600 decrease in net sales to the
continuing weakness in the retail sector of the economy. The customer
segments principally responsible for this decrease are theme
parks/attractions and museum stores, two of our non-traditional toy
channels. These have been heavily affected by the decline in tourism
activity that began during the fourth quarter of 2001.

Gross profitdecreased by $180,900 to $611,900 during the first quarter
ended March 31, 2002, compared with $792,800 during the first quarter
ended March 31, 2001. The gross profit percentage was 42% and 48% during
the first quarter of 2002 and 2001 respectively. The majority of the
decrease in gross profit is attributable to the previously noted decrease
in net sales and lower gross profit percentage. 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. This facility was completely

Page 7 of 10



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ITEM 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations (Continued)

Gross profit (cont.)
decommissioned on March 31, 2002. We expect the reduction in overhead and
product costs to start being reflected in our financial results as early
as the second quarter of 2002. Additional items impacting the gross profit
percentage were higher net shipping costs related to our first quarter
2002 sales incentive program which provided free freight for customer
orders above certain dollar amounts and royalty fees for the Thomas and
Friends product line which was introduced in the third quarter of 2001.

Selling, general and administrative (SG&A) expensesincreased by $70,200
to $1,007,500 for the three month period ended March 31, 2002 from
$937,300 for the period ended March 31, 2001. This 7% increase in SG&A
expenses is due to compensation costs related to the hiring of marketing
staff that is more experienced in implementing our marketing and product
development strategies and expenditures made in connection with new
product design and sourcing activities for the Kidz Workshop and JAY JAY
THE JET PLANE  product lines. JAY JAY THE JET PLANE , is based on
characters from the childrens show which airs on PBS or PBS Kids
nationwide. Its major components are a Wooden Adventure System with Tarry
Town Sound and Sky Track and a companion die-cast metal collection. The
JAY JAY THE JET PLANE  brand is a major portion of our current product
development activities; during the first quarter March 31, 2002 we have
invested over $200,000 in product and packaging design and manufacturing
tooling. This line, which is expected to contribute to sales in the
second half of 2002, received very favorable reviews at the February 2002
New York Toy Fair.

Interest expenserelated to current and long-term debt was $38,200 and
$33,200 during the first quarter of 2002 and 2001, respectively. The
increase of $5,000 is due to higher average balances drawn under our line
of credit with Citrus Bank, partially offset by the lower prime rate of
interest.

Other income and (expense)are netted for financial statement
presentation. During the first quarter of 2002 and 2001, other income and
(expense) were $2,600 and ($48,900), respectively. The $51,500 change was
mainly attributable to a decrease in unrealized losses on investments.

Income before provision for income taxes and net income. As a result of
the foregoing, we had a net loss before taxes of $431,200 and a net loss
after taxes of $ 372,400 during the first quarter of 2002, compared with
a net loss before taxes of $226,600 and net loss after taxes of $242,500
during the first quarter of 2001.

Financial Condition, Liquidity, and Capital Resources:
As of March 31, 2002, the Company had cash and cash equivalents of
$130,500, representing a decrease of $352,300 compared to December 31,
2001. Principal sources of liquidity for the first three months of fiscal
2002 were cash flows from collections of accounts receivable of $254,700,
increased accounts payable of $216,800 and cash balances. Principal uses
of cash in the first three months of fiscal 2002 were an increase of
$139,400 in other assets which reflects investments in product development
for our new JAY JAY THE JET PLANE brand, a reduction of $178,400 in
accrued expenses, $129,400 for repayment of the line of credit, mortgage
and capital lease principal and $39,900 for the repurchase of common
stock.

At March 31, 2002, we had $1,610,200 of borrowings under our line of
credit, an increase of $538,100 from $1,027,100 as of March 31, 2001. The
increased borrowings were used for inventory purchases, product
development and liabilities assumed in association with the acquisition of
assets from Earth Lore Ltd. Our line of credit provides for borrowings up
to $2,000,000 at the prime rate and matures June 30, 2003. Under the
credit agreement for our line of credit, we are subject to financial
covenants relating to certain asset balances and financial ratios. As of
March 31, 2002 we were eligible to borrow $1,700,000 under our line of
credit and are in compliance with all financial covenants thereunder.

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PART II. OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K

A. Exhibits



| |                         |                                                                                                                                                                                                                    
| | ----------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit No. Description
| | 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-
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.                                            

B.     Reports on Form 8-K
         None.

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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.

ACTION PRODUCTS INTERNATIONAL, INC.

|                   |  |                                                                                                     
|------------------ |  | ----------------------------------------------------------------------------------------------------
|Date: May 14, 2002 |  | By:   /s/ Ronald  KaplanRonald  Kaplan
Chief Executive Officer (Principal Executive Officer)        
|                  
|Date: May 14, 2002 |  | By:   /s/ Robert L.
Burrows
Robert L. Burrows
Chief Financial Officer (Principal Accounting Officer)

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