**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q **

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

**March      31, 2008**

| o | Transition                Report under Section 13 or 15(d) of the Securities Exchange Act of                1934 |
|---|------------------------------------------------------------------------------------------------------------------|

**000-13118**

**ACTION      PRODUCTS INTERNATIONAL, INC.**

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

| Large                accelerated filer  o |   | Accelerated filer  o |   | Non-accelerated                filer  o |   | Smaller                reporting company  x |
|-----------------------------------------------------|--------|-------------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------------------|

| Class                                        | Outstanding                at May 08, 2008 |
|----------------------------------------------|--------------------------------------------|
| Common                Stock, $.001 par value | 5,441,300                                  |

----

**INDEX**

|                                                                                                                                     |                                                                                                                | **Page****Number**               |
|------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|----------------------------------|
| **PART                I. FINANCIAL INFORMATION**                                                                                         |                                                                                                                |
|                                                                                                                                     |                                                                                                                |
| Item                1.                                                                                                                   | Financial                Statements                                                                                 |                             |
|                                                                                                                                     |                                                                                                                |                             |
| Condensed                Balance Sheets at March 31, 2008 (unaudited) and December 31,                2007                               | 3                                                                                          |
|                                                                                                                                     |                                                                                                                |                             |
| Condensed                Statements of Operations - Three months ended March 31, 2008 and                2007                (unaudited) | 4                                                                                          |
|                                                                                                                                     |                                                                                                                |                             |
| Condensed                Statements of Cash Flows - Three months ended March 31, 2008 and                2007                (unaudited) | 5                                                                                          |
|                                                                                                                                     |                                                                                                                |                             |
| Notes                to Condensed Financial Statements (unaudited)                                                                       | 6                                                                                          |
|                                                                                                                                     |                                                                                                                |                             |
| Item                2.                                                                                                                   | Management's                Discussion and Analysis of Financial Condition and Results of                Operations | 10      |
|                                                                                                                                     |                                                                                                                |                             |
| Item                4.                                                                                                                   | Controls                and Procedures                                                                              | 12      |
|                                                                                                                                     |                                                                                                                |                             |
| **PART                II. OTHER INFORMATION**                                                                                            |                                                                                                                |
|                                                                                                                                     |                                                                                                                |                             |
| Item                2.                                                                                                                   | Unregistered                Sales of Securities and Use of Proceeds                                                 | 12      |
|                                                                                                                                     |                                                                                                                |                             |
| Item                5.                                                                                                                   | Other                Information                                                                                    | 13      |
|                                                                                                                                     |                                                                                                                |                             |
| Item                6.                                                                                                                   | Exhibits                                                                                                            | 13      |
|                                                                                                                                     |                                                                                                                |                             |
| **SIGNATURE                PAGE**                                                                                                        | 14                                                                                         |

----

**PART      I. FINANCIAL INFORMATION**

**ITEM      1. Financial Statements**

**ACTION      PRODUCTS INTERNATIONAL, INC. **

|                                                                                                             |   | March 31, 2008Unaudited |       | December 31,2007 |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|-----------------------|--------|
| ASSETS                                                                                                           |   |                              |       |                  |   |
| CURRENT                ASSETS                                                                                    |   |                              |       |                  |   |
| Cash                and cash equivalents                                                                         |   | $                                 | 875,700    |                  | $      | 44,400 |   |
| Investment                securities                                                                             |   |                              | 762,100    |                  |   | 475,000 |   |
| Accounts                receivable, net of allowance of $62,400 and $47,200                                      |   |                              | 933,000    |                  |   | 1,429,800 |   |
| Other                receivable                                                                                  |   |                              | -          |                  |   | 3,233,700 |   |
| Inventories,                net                                                                                  |   |                              | 1,872,500  |                  |   | 2,131,800 |   |
| Prepaid                expenses and other assets                                                                 |   |                              | 270,800    |                  |   | 197,700 |   |
| TOTAL                CURRENT ASSETS                                                                              |   |                              | 4,714,100  |                  |   | 7,512,400 |   |
|                                                                                                             |   |                              |       |                  |   |   |   |
| PROPERTY,                PLANT AND EQUIPMENT                                                                     |   |                              | 3,659,400  |                  |   | 3,650,400 |   |
| Less                accumulated depreciation and amortization                                                    |   |                              | (2,801,200 | )                     |   | (2,761,100 | ) |
| NET                PROPERTY, PLANT AND EQUIPMENT                                                                 |   |                              | 858,200    |                  |   | 889,300 |   |
|                                                                                                             |   |                              |       |                  |   |   |   |
| GOODWILL                                                                                                         |   |                              | 1,405,300  |                  |   | 1,405,300 |   |
| OTHER                ASSETS                                                                                      |   |                              | 398,800    |                  |   | 276,100 |   |
| TOTAL                ASSETS                                                                                      |   | $                                 | 7,376,400  |                  | $      | 10,083,100 |   |
|                                                                                                             |   |                              |       |                  |   |   |   |
| LIABILITIES                AND SHAREHOLDERS' EQUITY                                                              |   |                              |       |                  |   |   |   |
| CURRENT                LIABILITIES                                                                               |   |                              |       |                  |   |   |   |
| Accounts                payable                                                                                  |   | $                                 | 430,900    |                  | $      | 1,811,900 |   |
| Accrued                expenses, payroll and related expenses                                                    |   |                              | 653,600    |                  |   | 593,900 |   |
| Borrowings                under line of credit                                                                   |   |                              | 1,488,800  |                  |   | 1,960,400 |   |
| Borrowings                under investment account                                                               |   |                              | -          |                  |   | 141,800 |   |
| Other                current liabilities                                                                         |   |                              | 89,400     |                  |   | 89,600 |   |
| TOTAL                CURRENT LIABILITIES                                                                         |   |                              | 2,662,700  |                  |   | 4,597,600 |   |
|                                                                                                             |   |                              |       |                  |   |   |   |
| SHAREHOLDERS'                EQUITY                                                                              |   |                              |       |                  |   |   |   |
| Preferred                stock - 10,000,000 shares authorized, zero shares issued and                outstanding |   |                              |       |                  |   |   |   |
| Common                stock -$.001 par value; 15,000,000 authorized; 5,660,000 shares                issued      |   |                              | 5,700      |                  |   | 5,700 |   |
| Treasury                stock - 208,600 shares, at par                                                           |   |                              | (200       | )                     |   | (200 | ) |
| Additional                paid-in capital                                                                        |   |                              | 9,326,300  |                  |   | 9,260,200 |   |
| Unearned                share based compensation cost                                                            |   |                              | (188,600   | )                     |   | (256,300 | ) |
| Accumulated                deficit                                                                               |   |                              | (4,429,500 | )                     |   | (3,523,900 | ) |
| TOTAL                SHAREHOLDERS' EQUITY                                                                        |   |                              | 4,713,700  |                  |   | 5,485,500 |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS' EQUITY                                                        |   | $                                 | 7,376,400  |                  | $      | 10,083,100 |   |

----

**ITEM      1. Financial Statements (cont.)**

|                                                                 |   | Three Months Ended March 31 |      |
|----------------------------------------------------------------------|--------|-------------------------------------------------|-----------|
|                                                                 |   | 2008                                            |      | 2007 |   |
|                                                                 |   |                                            |      |   |   |
| GROSS                SALES                                           |   | $                                               | 1,258,300 |   | $ | 1,443,500 |   |
| SALES                RETURNS AND ALLOWANCES                          |   |                                            | 34,600    |   |   | 74,300 |   |
| NET                SALES                                             |   |                                            | 1,223,700 |   |   | 1,369,200 |   |
|                                                                 |   |                                            |      |   |   |   |   |
| COST                OF SALES                                         |   |                                            | 790,800   |   |   | 778,000 |   |
| GROSS                PROFIT                                          |   |                                            | 432,900   |   |   | 591,200 |   |
|                                                                 |   |                                            |      |   |   |   |   |
| OPERATING                EXPENSES                                    |   |                                            |      |   |   |   |   |
| Selling                                                              |   |                                            | 393,300   |   |   | 478,100 |   |
| General                and administrative                            |   |                                            | 942,500   |   |   | 678,900 |   |
| TOTAL                OPERATING EXPENSES                              |   |                                            | 1,335,800 |   |   | 1,157,000 |   |
|                                                                 |   |                                            |      |   |   |   |   |
| LOSS                FROM OPERATIONS                                  |   |                                            | (902,900  | ) |   | (565,800 | ) |
|                                                                 |   |                                            |      |   |   |   |   |
| OTHER                INCOME (EXPENSE)                                |   |                                            |      |   |   |   |   |
| Interest                expense                                      |   |                                            | (35,700   | ) |   | (22,400 | ) |
| Other                                                                |   |                                            | 32,800    |   |   | 39,400 |   |
| TOTAL                OTHER INCOME (EXPENSE)                          |   |                                            | (2,900    | ) |   | 17,000 |   |
|                                                                 |   |                                            |      |   |   |   |   |
| LOSS                BEFORE INCOME TAX PROVISION                      |   |                                            | (905,800  | ) |   | (548,800 | ) |
| INCOME                TAX PROVISION                                  |   |                                            | -         |   |   | - |   |
|                                                                 |   |                                            |      |   |   |   |   |
| NET                LOSS                                              |   | $                                               | (905,800  | ) | $ | (548,800 | ) |
|                                                                 |   |                                            |      |   |   |   |   |
| LOSS                PER SHARE                                        |   |                                            |      |   |   |   |   |
| Basic                and Diluted                                     |   | $                                               | (0.17     | ) | $ | (0.10 | ) |
|                                                                 |   |                                            |      |   |   |   |   |
| Weighted                average number of common shares outstanding: |   |                                            |      |   |   |   |   |
| Basic                and Diluted                                     |   |                                            | 5,451,500 |   |   | 5,231,500 |   |

----

**ITEM      1. Financial Statements (cont.)**

**ACTION      PRODUCTS INTERNATIONAL, INC.**

|                                                                                                                   |   | Three Months Ended March 31 |       |
|------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                   |   | 2008                                            |       | 2007 |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                                    |   |                                            |       |   |   |
| Net                Loss                                                                                                |   | $                                               | (905,800   | ) | $ | (548,800 | ) |
| Adjustments                to reconcile net loss to net cash provided by/(used in) operating                activities |   |                                            |       |   |   |   |   |
| Depreciation                                                                                                           |   |                                            | 40,000     |   |   | 44,600 |   |
| Amortization                                                                                                           |   |                                            | 13,800     |   |   | 5,900 |   |
| Unrealized                (gain)/loss on investment securities                                                         |   |                                            | (9,500     | ) |   | 17,800 |   |
| Stock                based compensation expense                                                                        |   |                                            | 133,800    |   |   | 12,500 |   |
| Provision                for bad debts                                                                                 |   |                                            | 24,200     |   |   | (8,300 | ) |
| Loss                on disposal of other assets                                                                        |   |                                            | -          |   |   | 52,400 |   |
| Changes                in:                                                                                             |   |                                            |       |   |   |   |   |
| Litigation                settlement receivable                                                                        |   |                                            | 3,233,700  |   |   | - |   |
| Accounts                receivable                                                                                     |   |                                            | 472,500    |   |   | 740,100 |   |
| Investment                securities                                                                                   |   |                                            | (277,600   | ) |   | (585,800 | ) |
| Inventories                                                                                                            |   |                                            | 259,300    |   |   | 77,400 |   |
| Prepaid                expenses                                                                                        |   |                                            | (73,000    | ) |   | 23,500 |   |
| Other                assets                                                                                            |   |                                            | (136,500   | ) |   | (39,600 | ) |
| Accounts                payable                                                                                        |   |                                            | (1,381,000 | ) |   | (78,900 | ) |
| Accrued                expenses, payroll and related expenses                                                          |   |                                            | 59,800     |   |   | (36,200 | ) |
| Deferred                revenue                                                                                        |   |                                            | -          |   |   | (6,200 | ) |
| NET                CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                     |   |                                            | 1,453,700  |   |   | (329,600 | ) |
|                                                                                                                   |   |                                            |       |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                                    |   |                                            |       |   |   |   |   |
| Acquisition                of property, plant and equipment                                                            |   |                                            | (9,000     | ) |   | (41,500 | ) |
| NET                CASH USED IN INVESTING ACTIVITIES                                                                   |   |                                            | (9,000     | ) |   | (41,500 | ) |
|                                                                                                                   |   |                                            |       |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                                                    |   |                                            |       |   |   |   |   |
| Repayment                of mortgage principal                                                                         |   |                                            | -          |   |   | (20,300 | ) |
| Common                stock options and warrants issuance costs                                                        |   |                                            | -          |   |   | (800 | ) |
| Net                change in borrowings under line of credit                                                           |   |                                            | (471,600   | ) |   | 244,000 |   |
| Net                change in borrowings under investment account                                                       |   |                                            | (141,800   | ) |   | 251,400 |   |
| NET                CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                                     |   |                                            | (613,400   | ) |   | 474,300 |   |
|                                                                                                                   |   |                                            |       |   |   |   |   |
| NET                INCREASE IN CASH AND CASH EQUIVALENTS                                                               |   |                                            | 831,300    |   |   | 103,200 |   |
| CASH                AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                        |   |                                            | 44,400     |   |   | 369,900 |   |
| CASH                AND CASH EQUIVALENTS AT END OF PERIOD                                                              |   | $                                               | 875,700    |   | $ | 473,100 |   |
|                                                                                                                   |   |                                            |       |   |   |   |   |
| Supplemental                disclosures - cash paid for:                                                               |   |                                            |       |   |   |   |   |
| Interest                                                                                                               |   | $                                               | 35,700     |   | $ | 22,400 |   |
| Income                Taxes                                                                                            |   | $                                               | -          |   | $ | - |   |

----

**ACTION      PRODUCTS INTERNATIONAL, INC.**

**NOTES      TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**

|  | **1.** | **Condensed                financial statements.**In                the opinion of management, the accompanying unaudited condensed financial                statements contain all normal recurring adjustments necessary to                present                fairly the financial position of Action Products International, Inc.                (the                “Company”), at March 31, 2008 and December 31, 2007, the results of its                (i) operations for the three month periods ended March 31, 2008 and                2007                and (ii) cash flows for the three month periods ended March 31, 2008                and                2007. The financial information included herein is taken from the                books                and records of the Company and is unaudited. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **2.** | **Operations**.                The Company incurred significant losses in the current quarter. In                its                effort to eliminate these losses, the Company has recently changed                certain                key members of management, has focused efforts on increasing sales                and is                evaluating its product lines for profitable margin contributions.                Management believes that it will be successful in its plans to return                the                Company to profitability: accordingly, no adjustments have been made                to                the accompanying financials that might be necessary if the Company                were                unable to return to profitable                operations. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **3.** | **Line                of credit.** The                Company maintains a working capital line of credit with a financial                institution. The agreement, as amended, stipulates, among other things,                a                borrowing limit of the lesser of $2,000,000 or the sum of 85% of                eligible                accounts receivable and 50% of eligible inventory, as further defined                in                the agreement. Borrowings are currently collateralized by all accounts                receivable, inventories and the warehouse property in Ocala, Florida.                Interest is payable monthly based on a variable rate equal to the                financial institution’s prime rate (institution’s prime rate was 5.25% at                March 31, 2008) plus 150 basis points. The agreement also requires,                among other things, that the Company maintain certain financial ratios                measured on an annual basis. The original term of the agreement expired                August 30, 2006. The Company has received various extensions under                the                agreement and the term of the current extension ends May 31, 2008.                The                Company is reviewing alternative financing opportunities with other                financial institutions. At December 31, 2007 the Company was in compliance                with the covenants specified in the agreement. The Company had $1,488,800                and $1,960,400 of borrowings outstanding under the line of credit                as of                March 31, 2008 and December 31, 2007, respectively. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **4.** | **Borrowings                under Investment Account.**As                part of the normal arrangement with the broker handling our marketable                securities investments, the Company has the opportunity to borrow                under a                margin arrangement, for investment, when appropriate. The balance                on the                borrowing is secured by the securities in the portfolio and interest                is                charged at a variable rate on the average balance. The rate at March                31,                2008 ranged from 4.24 percent to 7.24 percent based on the balance                borrowed. Borrowings under this account were zero and $141,800 as                of March                31, 2008 and December 31, 2007,                respectively. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NOTES      TO CONDENSED FINANCIAL STATEMENTS (Continued)**

|   | **5.** | **Earnings                (loss) per share.**Common                stock equivalents were not included in the computation of diluted                earnings                (loss) per share for the three-month periods ended March 31, 2008                and                2007, as their effect would have been anti-dilutive. Common share                equivalents excluded from the diluted earnings per share computations                were                6,986,300 and 7,137,600 for the three months ended March 31, 2008                and                March 31, 2007 respectively. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **6.** | **Common                Stock and Equity Securities.**                On                May                17, 2007,                the Board of Directors authorized effective immediately, a program                to                repurchase up to 150,000 of the outstanding common shares. Repurchases                may                be made by the Company from time to time in the open market at prevailing                prices, in either block purchases or in privately negotiated transactions.                The share repurchase program does                not have a fixed expiration date. However, the Board may discontinue                or                suspend the program at any time. As of December 31, 2007, the Company                had                repurchased 2,900                common shares and                147,100 remain available under                the plan.                The                Company did not repurchase                any shares of its common stock during the first quarter of                2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Share-Based      Compensation**

----

**NOTES      TO CONDENSED FINANCIAL STATEMENTS (Continued)**

**Common      Stock and Equity Securities (**
***cont***
**.)**

|                                                     |   |           |     |                |   | Weighted-             |   | Weighted-                       |   |
|----------------------------------------------------------|--------|----------------|----------|---------------------|--------|-----------------------|--------|---------------------------------|--------|
|                                                     |   |           |     | Weighted-           |   | Average               |   | Average                         |   |
|                                                     |   | Number of |     | Average             |   | Remaining             |   | Grant Date Fair  |   |
| Options                                                  |   | Options        |     | Exercise Price |   | Contractual Term |   | Value                           |   |
|                                                     |   |           |     |                |   |                  |   |                            |   |
| Outstanding                at January 1, 2008       |   |           | 204,000  |                |   | $3.13                 |   |                            | 1.2    |   |   | $1.84 |   |
| Grants                                                   |   |           | 70,000   |                |   | $1.20                 |   |                            | 4.3    |   |   | $0.59 |   |
| Exercises                                                |   |           | -        |                |   | $-                    |   |                            | -      |   |   | - |   |
| Cancellations                                            |   |           | (10,000) |                |   | $3.04                 |   |                            | -      |   |   | $1.36 |   |
|                                                     |   |           |     |                |   |                  |   |                            |   |   |   |   |   |
| Outstanding                at March 31, 2008        |   |           | 264,000  |                |   | $2.62                 |   |                            | 1.9    |   |   | $1.57 |   |
|                                                     |   |           |     |                |   |                  |   |                            |   |   |   |   |   |
|                                                     |   |           |     |                |   |                  |   |                            |   |   |   |   |   |
| Shares                exercisable at March 31, 2008 |   |           | 244,000  |                |   | $2.74                 |   |                            | 2.3    |   |   | $1.65 |   |

|                                             |   | Three months endedMarch 31, 2008 |   |
|--------------------------------------------------|--------|------------------------------------------------------|--------|
| Risk-free                rate                    |   |                                                 | 3.6%   |   |
| Expected                option life (in years)   |   |                                                 | 4.4    |   |
| Expected                stock price volatility   |   |                                                 | 63%    |   |
| Dividend                yield                    |   |                                                 | 0.0%   |   |
| Weighted                average grant date value |   |                                                 | $0.59  |   |

| Date                             |   | Number of Shares |    |
|----------------------------------|--------|----------------------------|---------|
| April                1, 2008     |   |                       | 31,250  |   |
| June                1, 2008      |   |                       | 31,250  |   |
| September                1, 2008 |   |                       | 31,250  |   |
| January                1, 2009   |   |                       | 31,250  |   |
| April                1, 2009     |   |                       | 25,000  |   |
| June                1, 2009      |   |                       | 25,000  |   |
| September                1, 2009 |   |                       | 25,000  |   |
| January                1, 2010   |   |                       | 25,000  |   |
| Total                            |   |                       | 225,000 |   |

----

**NOTES      TO CONDENSED FINANCIAL STATEMENTS (Continued)**

**Common      Stock and Equity Securities (**
***cont***
**.)**

| Nine                months ended December 31, 2008 |   | $ | 144,300 |   |
|----------------------------------------------------|--------|---|---------|--------|
| Year                ended December 31, 2009        |   | $ | 44,300  |   |
|                                               |   | $ | 188,600 |   |

|   | **7.** | **Investment                Securities**.                Investment                securities are categorized as trading securities and stated at market                value. Market value is determined using the quoted closing or latest                bid                prices. Realized gains and losses on investment transactions are                determined by specific identification and are recognized as incurred                in                the statement of operations. Net unrealized gains and losses are                reported                in the statement of operations and represent the change in market                value of                investment holdings during the period. At March 31, 2008 marketable                securities consisted of the                following: |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | Value At March 31, 2008 |      |          Cumulative Unrealized         Gain(Loss) At March 31, 2008 |   |
|----------------------------------|--------|---------------------------------------------|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                Securities |   |                                        | $762,100  |                                                                                                                                                                                   |   | $(68,300) |   |
| Stock                Options     |   |                                        | $(87,200) |                                                                                                                                                                              |   | $3,000 |   |
| Total                            |   |                                        | $674,900  |                                                                                                                                                                                   |   | $(65,300) |   |

|   | **8.** | **Related                Party Transactions**.                During the three months ended March 31, 2008 and 2007, the Company                paid                $24,300 and $11,300, respectively, to Warren Kaplan and $2,100 and                $28,700, respectively, to Ronel Management Company, wholly owned                by Warren                Kaplan, former Chairperson of the Board and Judith Kaplan, former                Board                member, for consulting services. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **9.** | **Other                Commitments.**In                January 2006, the Company renewed its License Agreement (the “Agreement”)                with Porchlight Entertainment, Inc., for the rights to market certain                toy                lines including a wooden adventure system and die cast metal collection                under the Jay Jay The Jet PlaneTM name. The term of the Agreement is for                two years expiring on December 31, 2008, subject to the Company meeting                certain minimum sales objectives and royalty requirements. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NOTES      TO CONDENSED FINANCIAL STATEMENTS (Continued)**

|   | **10.** | **Subsequent                Event.**On                May 5, 2008, the Company received notice from the Nasdaq Listing                Qualifications Department (the “Staff”) stating that for 30 consecutive                business days the bid price for the Company’s common stock has closed                below the minimum $1.00 per share requirement for continued inclusion                under Marketplace Rule 4310(c)(4) (the "Rule").  |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**Forward-looking      Statements:**

**Results      of Operations:**

***Three      Months Ended March 31, 2008 Compared With Three Months Ended March 31,      2007***

----

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

|                                                  |   | **Quarter Ended March****31,                2008** |            | **Quarter Ended March****31,                2007** |   |
|-------------------------------------------------------|--------|--------------------------------------------------------------|-----------------|--------------------------------------------------------------|--------|
| **Net                Sales**                          |   |                                                         | **100.0%**      |                                                         |   | **100.0%** |   |
| **Cost                of Sales**                      |   |                                                         | **64.6%**       |                                                         |   | **56.8%** |   |
| **Gross                Profit**                       |   |                                                         | **35.4%**       |                                                         |   | **43.2%** |   |
| **Selling                Expense**                    |   |                                                         | **32.1%**       |                                                         |   | **34.9%** |   |
| **General                and Administrative Expense** |   |                                                         | **77.1%**       |                                                         |   | **49.6%** |   |
| **Total                Operating Expense**            |   |                                                         | **109.2%**      |                                                         |   | **84.5%** |   |
| **Loss                from Operations**               |   |                                                         | **(73.8)%**     |                                                         |   | **(41.3)%** |   |
| **Other                Income (Expense)**             |   |                                                         | **(0.2)%**      |                                                         |   | **1.2%** |   |
| **Loss                before income taxes**           |   |                                                         | **(74.0)%**     |                                                         |   | **(40.1)%** |   |
| **Taxes**                                             |   |                                                         | **-**           |                                                         |   | **-** |   |
| **Net                Loss**                           |   |                                                         | **(74.0**)%**** |                                                         |   | **(40.1)%** |   |

**Net      sales **

**Gross      profit **

|   | · | An                increase in compensation and related benefit costs of $196,300 principally                as the result of an increase in stock based compensation; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                increase in professional services of $101,100 primarily resulting                from                Sarbanes-Oxley compliance consulting services, legal and investor                relations services; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                increase in bad debt expense of $                24,200. |
|--------|--------|----------------------------------------------------------------------------|

|   | · | A                decrease in brand licensing expense of $68,600;                and |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | A                decrease in advertising and promotion of                $67,600. |
|--------|--------|-----------------------------------------------------------------------------------|

**Interest      expense**

**Other      income and (expense), net**

**Net      loss,**

----

**Financial      Condition, Liquidity, and Capital Resources:**

**ITEM      4.**
**Controls      and Procedures Evaluation of Disclosure Controls and      Procedures.**

**PART      II. OTHER INFORMATION**

**ITEM      2.**
**Unregistered      Sales of Securities and Use of Proceeds**

** **

----

**Repurchase      of Securities**

**ITEM      5.**
**Other      Information**

|   | (a) | None. |
|--------|-----|-------|
|   | (b) | None.  |
|--------|-----|-------------|

**ITEM      6.  Exhibits**

**A.**

| Exhibit No. |   | Description                                                                                           |
|------------------|--------|-------------------------------------------------------------------------------------------------------|
| 31.1             |   | Chief                Executive Officer - Sarbanes-Oxley Act Section 302                Certification* |
| 31.2             |   | Chief                Financial Officer - Sarbanes-Oxley Act Section 302                Certification* |
| 32.1             |   | Chief                Executive Officer - Sarbanes-Oxley Act Section 906                Certification* |
| 32.2             |   | Chief                Financial Officer - Sarbanes-Oxley Act Section 906                Certification* |

----

**ACTION      PRODUCTS INTERNATIONAL, INC.**

| Date:                May                09, 2008 | By:    | /s/                RONALD S. KAPLAN                                  |
|--------------------------------------------------|--------|----------------------------------------------------------------------|
|                                             |   | Ronald                S. Kaplan                                      |
|                                             |   | Chief                Executive Officer (Principal Executive Officer) |
|                                             |   |                                                                 |
|                                             |   |                                                                 |
| Date:                May                09, 2008 | By:    | /s/                ROBERT BURROWS                                    |
|                                             |   | Robert                Burrows                                        |
|                                             |   | Chief                Financial Officer (Principal Financial and      |
|                                             |   | Accounting                Officer)                                   |

----