##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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Form 10-QSB



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(Mark One)

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

For the quarter ended June 30, 2006

or



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

For the transition period from  to

000-13118

(Commission File No.)



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ACTION PRODUCTS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



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

1101 North Keller Rd., Suite E, Orlando, Florida, 32810

(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 by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    YES ̈NO  x

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



|                              |  |                              
|----------------------------- |  | -----------------------------
|Class                         |  | Outstanding at August 1, 2006
|Common Stock, $.001 par value |  | 5,227,100                    

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



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##### Table of Contents

INDEX



|                                                                                                              |  |                                                                                       |  |           
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------
|                                                                                                              |  |                                                                                       |  | PageNumber
|PART I.
FINANCIAL INFORMATION                                                                                 |  |                                                                                      
|                                                                                                              |  |                                                                                      
|Item 1.                                                                                                       |  | Financial Statements                                                                  |  |           
|                                                                                                              | 
|Condensed Consolidated Balance Sheet at June 30, 2006 (unaudited)                                             |  | 3                                                                                    
|                                                                                                              | 
|Condensed Consolidated Statements of Operations Three and six months ended June 30, 2006 and 2005 (unaudited) |  | 4                                                                                    
|                                                                                                              | 
|Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2006 and 2005 (unaudited)         |  | 5                                                                                    
|                                                                                                              | 
|Notes to Unaudited Condensed Consolidated Financial Statements                                                |  | 6                                                                                    
|                                                                                                              |  |                                                                                      
|Item 2.                                                                                                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10        
|                                                                                                              |  |                                                                                      
|Item 3.                                                                                                       |  | Controls and Procedures                                                               |  | 14        
|                                                                                                              | 
|PART II.
OTHER INFORMATION                                                                                    |  |                                                                                      
|                                                                                                              |  |                                                                                      
|Item 2.                                                                                                       |  | Changes in Securities                                                                 |  | 14        
|                                                                                                              |  |                                                                                      
|Item 4.                                                                                                       |  | Submission of Matters to Vote of Shareholders                                         |  | 14        
|                                                                                                              |  |                                                                                      
|Item 5.                                                                                                       |  | Other Information                                                                     |  | 14        
|                                                                                                              |  |                                                                                      
|Item 6.                                                                                                       |  | Exhibits and Reports on Form 8-K                                                      |  | 15        
|                                                                                                              | 
|SIGNATURE PAGE                                                                                                |  | 16                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)



|                                                                                                                                                                         |  |               |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- | -
|                                                                                                                                                                         |  | June 30, 2006 |           
|ASSETS                                                                                                                                                                   |  |               |            |  
|CURRENT ASSETS                                                                                                                                                           |  |               |            |  
|Cash and cash equivalents                                                                                                                                                |  | $             | 720,600    |  
|Investment securities                                                                                                                                                    |  |               | 557,000    |  
|Accounts receivable, net of an allowance for doubtful accounts of $369,600                                                                                               |  |               | 1,621,600  |  
|Inventories, net                                                                                                                                                         |  |               | 2,153,900  |  
|Prepaid expenses and other assets                                                                                                                                        |  |               | 579,800    |  
|                                                                                                                                                                         |  |               |            |  
|TOTAL CURRENT ASSETS                                                                                                                                                     |  |               | 5,632,900  |  
|                                                                                                                                                                         | 
|PROPERTY, PLANT AND EQUIPMENT                                                                                                                                            |  |               | 3,508,900  |  
|Less accumulated depreciation and amortization                                                                                                                           |  |               | (2,427,900 | )
|                                                                                                                                                                         |  |               |            |  
|NET PROPERTY, PLANT AND EQUIPMENT                                                                                                                                        |  |               | 1,081,000  |  
|GOODWILL                                                                                                                                                                 |  |               | 1,405,300  |  
|OTHER ASSETS                                                                                                                                                             |  |               | 127,900    |  
|                                                                                                                                                                         |  |               |            |  
|TOTAL ASSETS                                                                                                                                                             |  | $             | 8,247,100  |  
|                                                                                                                                                                         |  |               |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                     |  |               |            |  
|CURRENT LIABILITIES                                                                                                                                                      |  |               |            |  
|Accounts payable                                                                                                                                                         |  | $             | 305,100    |  
|Accrued expenses, payroll and related expenses                                                                                                                           |  |               | 825,200    |  
|Current portion of mortgage payable                                                                                                                                      |  |               | 69,700     |  
|Borrowings under line of credit                                                                                                                                          |  |               | 779,500    |  
|Other current liabilities                                                                                                                                                |  |               | 739,600    |  
|                                                                                                                                                                         |  |               |            |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                |  |               | 2,719,100  |  
|                                                                                                                                                                         |  |               |            |  
|MORTGAGE PAYABLE                                                                                                                                                         |  |               | 5,700      |  
|DEFERRED REVENUE                                                                                                                                                         |  |               | 12,500     |  
|                                                                                                                                                                         |  |               |            |  
|TOTAL LIABILITIES                                                                                                                                                        |  |               | 2,737,300  |  
|                                                                                                                                                                         |  |               |            |  
|COMMITMENTS & CONTINGENCIES                                                                                                                                              |  |               |            |  
|                                                                                                                                                                         | 
|SHAREHOLDERS EQUITY                                                                                                                                                     |  |               |            |  
|Preferred stock - 10,000,000 shares authorized, zero shares issued and outstanding Common stock - $.001 par value; 15,000,000 shares
authorized; 5,430,100 shares issued |  |               | 5,400      |  
|Treasury stock - $.001 par value; 203,000 shares                                                                                                                         |  |               | (200       | )
|Additional paid-in capital                                                                                                                                               |  |               | 9,742,100  |  
|Unearned compensation costs                                                                                                                                              |  |               | (789,200   | )
|Accumulated deficit                                                                                                                                                      |  |               | (3,448,300 | )
|                                                                                                                                                                         |  |               |            |  
|TOTAL SHAREHOLDERS EQUITY                                                                                                                                               |  |               | 5,509,800  |  
|                                                                                                                                                                         |  |               |            |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                               |  | $             | 8,247,100  |  
|                                                                                                                                                                         |  |               |            |  

See Accompanying Notes



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##### Table of Contents

ITEM 1. Financial Statements (cont.)

ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)



|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|----------------------------------------------------- |  | ---------------------------- | --------- | - | -------------------------- | - | --------- | ---- |  | - | ---------- | - |  | - | --------- | -
|                                                      |  | Three Months Ended June 30th |           |   | Six Months Ended June 30th |  
|                                                      |  | 2006                         |           |   | 2005                       |   |           | 2006 |  |   | 2005       |  
|NET SALES                                             |  | $                            | 1,635,000 |   |                            | $ | 1,911,200 |      |  | $ | 3,270,700  |   |  | $ | 3,866,800 |  
|                                                      |  |                              |           |  
|COST OF SALES                                         |  |                              | 812,200   |   |                            |   | 846,100   |      |  |   | 1,660,400  |   |  |   | 1,714,700 |  
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|GROSS PROFIT                                          |  |                              | 822,800   |   |                            |   | 1,065,100 |      |  |   | 1,610,300  |   |  |   | 2,152,100 |  
|                                                      |  |                              |           |  
|OPERATING EXPENSES                                    |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|Selling                                               |  |                              | 731,900   |   |                            |   | 494,700   |      |  |   | 1,345,300  |   |  |   | 987,000   |  
|General and administrative                            |  |                              | 877,600   |   |                            |   | 631,500   |      |  |   | 1,685,600  |   |  |   | 1,255,900 |  
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|TOTAL OPERATING EXPENSES                              |  |                              | 1,609,500 |   |                            |   | 1,126,200 |      |  |   | 3,030,900  |   |  |   | 2,242,900 |  
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|LOSS FROM OPERATIONS                                  |  |                              | (786,700  | ) |                            |   | (61,100   | )    |  |   | (1,420,600 | ) |  |   | (90,800   | )
|                                                      |  |                              |           |  
|OTHER INCOME (EXPENSE)                                |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|Interest expense                                      |  |                              | (15,200   | ) |                            |   | (18,100   | )    |  |   | (24,400    | ) |  |   | (33,700   | )
|Other, net                                            |  |                              | 2,600     |   |                            |   | 1,200     |      |  |   | 59,900     |   |  |   | 33,500    |  
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|                                                      |  |                              | (12,600   | ) |                            |   | (16,900   | )    |  |   | 35,500     |   |  |   | (200      | )
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|LOSS BEFORE INCOME TAXES                              |  |                              | (799,300  | ) |                            |   | (78,000   | )    |  |   | (1,385,100 | ) |  |   | (91,000   | )
|                                                      |  |                              |           |  
|BENEFIT FROM INCOME TAXES                             |  |                              |          |   |                            |   |          |      |  |   |           |   |  |   |          |  
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|NET LOSS                                              |  | $                            | (799,300  | ) |                            | $ | (78,000   | )    |  | $ | (1,385,100 | ) |  | $ | (91,000   | )
|                                                      |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|LOSS PER SHARE                                        |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|Basic and Diluted                                     |  | $                            | (0.15     | ) |                            | $ | (0.02     | )    |  | $ | (0.27      | ) |  | $ | (0.02     | )
|                                                      |  |                              |           |  
|Weighted average number of common shares outstanding: |  |                              |           |   |                            |   |           |      |  |   |            |   |  |   |           |  
|Basic and Diluted                                     |  |                              | 5,205,028 |   |                            |   | 4,883,630 |      |  |   | 5,201,153  |   |  |   | 4,791,919 |  

See Accompanying Notes



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##### Table of Contents

ITEM 1. Financial Statements (cont.)

ACTION PRODUCTS INTERNATIONAL INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                                         |  |                            |            |   |      |   |           |  
|---------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | --------- | -
|                                                                                         |  | Six Months Ended June 30th |           
|                                                                                         |  | 2006                       |            |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                     |  |                            |            |   |      |   |           |  
|Net Loss                                                                                 |  | $                          | (1,385,100 | ) |      | $ | (91,000   | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities |  |                            |            |   |      |   |           |  
|Depreciation                                                                             |  |                            | 137,100    |   |      |   | 138,200   |  
|Amortization                                                                             |  |                            | 46,700     |   |      |   | 32,700    |  
|Unrealized (gains) losses on investment securities                                       |  |                            | 32,100     |   |      |   | (14,200   | )
|Stock based compensation expense                                                         |  |                            | 125,600    |   |      |   |          |  
|Provision for bad debts                                                                  |  |                            | 257,300    |   |      |   |          |  
|Provision for inventory reserves                                                         |  |                            | 8,400      |   |      |   |          |  
|                                                                                         |  |                           
|Changes in:                                                                              |  |                            |            |   |      |   |           |  
|Accounts receivable                                                                      |  |                            | 874,200    |   |      |   | 121,600   |  
|Investment securities                                                                    |  |                            | (151,900   | ) |      |   | (165,400  | )
|Inventories                                                                              |  |                            | (70,500    | ) |      |   | (733,600  | )
|Prepaid expenses                                                                         |  |                            | (140,100   | ) |      |   | (278,500  | )
|Other assets                                                                             |  |                            | 8,100      |   |      |   | (19,200   | )
|Accounts payable                                                                         |  |                            | 135,800    |   |      |   | 301,100   |  
|Accrued expenses, payroll and related expenses                                           |  |                            | 777,700    |   |      |   | 56,000    |  
|Deferred revenue                                                                         |  |                            | (12,500    | ) |      |   | (12,500   | )
|                                                                                         |  |                            |            |   |      |   |           |  
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                      |  |                            | 642,900    |   |      |   | (664,800  | )
|                                                                                         |  |                            |            |   |      |   |           |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |  |                            |            |   |      |   |           |  
|Acquisition of property, plant and equipment                                             |  |                            | (22,600    | ) |      |   | (139,700  | )
|                                                                                         |  |                            |            |   |      |   |           |  
|NET CASH USED IN INVESTING ACTIVITIES                                                    |  |                            | (22,600    | ) |      |   | (139,700  | )
|                                                                                         |  |                            |            |   |      |   |           |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                     |  |                            |            |   |      |   |           |  
|Purchase of treasury stock                                                               |  |                            |           |   |      |   | (16,700   | )
|Proceeds from common stock options and warrants                                          |  |                            | 33,200     |   |      |   | 1,128,200 |  
|Repayment of mortgage principal                                                          |  |                            | (32,900    | ) |      |   | (175,900  | )
|Net change in borrowings under line of credit                                            |  |                            | (123,400   | ) |      |   | (929,500  | )
|                                                                                         |  |                            |            |   |      |   |           |  
|NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                      |  |                            | (123,100   | ) |      |   | 6,100     |  
|                                                                                         |  |                            |            |   |      |   |           |  
|NET INCREASE (DECREASE) IN CASH                                                          |  |                            | 497,200    |   |      |   | (798,400  | )
|                                                                                         |  |                           
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         |  |                            | 223,400    |   |      |   | 895,600   |  
|                                                                                         |  |                            |            |   |      |   |           |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                               |  | $                          | 720,600    |   |      | $ | 97,200    |  
|                                                                                         |  |                            |            |   |      |   |           |  
|Supplemental disclosures - cash paid for:                                                |  |                            |            |   |      |   |           |  
|Interest                                                                                 |  | $                          | 23,600     |   |      | $ | 28,800    |  
|Income taxes                                                                             |  | $                          |           |   |      | $ |          |  

See Accompanying Notes



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##### Table of Contents

ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS



|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 June 30, 2006 and the results of its
(i) operations for the three month and six month periods ended June 30, 2006 and 2005 and (ii) cash flows for the six month periods ended June 30, 2006 and 2005. 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 for the year ended December 31, 2005. The results of operations for the six month period ended June 30, 2006 are not necessarily indicative of the operating results for the full year. Through
June 30, 2006, the Company has been able to meet its obligations as they come due; however, it is at least reasonably possible that if the Company continues to incur losses and negative cash flows, it will have to obtain additional sources of
debt or equity financing to maintain its liquidity. There can be no assurance that such financing will be available or available on terms acceptable to the Company, if needed.



|2. | Line of credit.The Company maintains a working capital line of credit with a financial institution. The agreement stipulates, among other things, a borrowing limit of the
lesser of $2,500,000 or the sum of 85% of eligible accounts receivable and 50% of eligible inventory, as further defined in the agreement. Borrowings are collateralized by all accounts receivable and inventories. Interest is payable at the financial
institutions prime rate (institutions prime rate was 8.00% at June 30, 2006). The agreement also requires, among other things, that the Company maintain certain financial ratios. The current term of the agreement expires
August 30, 2006. The Company is negotiating an extension to its revolving line of credit (the Revolver) and reviewing options with other financial institutions. At June 30, 2006, the Company was in compliance with all covenants
measured on an annual basis and had $779,500 of borrowings outstanding under the line of credit. If losses continue, the Company will be in breach of one or more of these covenants at the renewal time on August 30, 2006.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | Mortgage Payable.In November 1998, the Company borrowed $750,000 in the form of a mortgage payable. The mortgage is collateralized by real estate and improvements and
contains certain restrictive covenants, which provide that, among other things, the Company maintain a minimum working capital, net worth, debt service coverage and a maximum debt to net worth ratio. If the Company fails to maintain compliance with
the financial covenants contained in the note, the maturity date could be accelerated. At June 30, 2006, the Company was in compliance with all covenants and the balance outstanding is $75,400.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | Earnings (loss) per share. Common stock equivalents were not included in the computation of diluted earnings (loss) per share for the three month and six month periods ending
June 30, 2006 and 2005, as their effect would have been anti-dilutive.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. | Common Stock and Equity Securities.On March 30, 2005, the Company announced that the Board of Directors had authorized a program for repurchases of up to 150,000 shares
of common stock. The repurchased shares will be held in the treasury. The Company did not repurchase any shares of its common stock during the second quarter of 2006.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

Common Stock and Equity Securities (cont.)

During the six months ended June 30, 2006, changes in shareholders equity were as follows:



| |  |  | The Company issued 29,800 shares of common stock in connection with the exercise of warrants and received proceeds of approximately $48,600.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company recorded amortization of share based compensation of $125,600.
| | - |  | --------------------------------------------------------------------------

On April 24, 2003 the Company announced a warrant distribution to all shareholders of record as of June 12, 2003. Shareholders were issued one warrant for each share of common stock owned as of the record
date. The warrant entitles the holder to purchase common stock at an exercise price of $2.00 per share. On June 6, 2006, the Companys Board of Directors extended the expiration date of the warrants from June 9, 2006 to
December 31, 2010. All other terms of the warrants remain the same. As of June 30, 2006 approximately 3,272,100 warrants had been issued and 1,561,700 had been exercised.

In January 2005, the Company made a distribution to its shareholders of one warrant for each share of common stock owned on January 7, 2006. The
warrants entitled the holder to purchase one common share at an exercise price of $3.00 per share until July 8, 2005. The exercise price of these warrants increased to $3.50 per share on July 9, 2005. The warrants expired on
January 6, 2006. As of the expiration date there were 4,636,900 issued and 466,800 exercised.

On October 28, 2005 the Company
announced a warrant distribution to all shareholders of record as of January 18, 2006. Shareholders were issued one warrant for each share of common stock owned as of the record date. Each warrant entitles the holder to purchase one common
share at exercise prices of $3.25 and $3.75 and expires January 31, 2007. Approximately 5,197,200 warrants were distributed upon effectiveness of a registration statement filed on July 20, 2006.

Share-Based Compensation

The company
has a stock-based employee compensation plan (the Plan) that provides incentives through the grant of stock options. The exercise price of stock options granted under the Plan shall not be less than the fair market value of the shares on
the date of grant. As of June 30, 2006, 1,400,000 shares of common stock are reserved for issuance under the Plan.

On January 1,
2006, the Company adopted the provisions of Financial Accounting Standards Board Statement No. 123R, Share-Based Payment (SFAS 123R). SFAS 123R revised SFAS 123, Accounting for Stock Based Compensation and supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires companies to measure and recognize compensation expense for all employee stock-based payments at fair value over the service period underlying the
arrangement. Therefore, the Company is now required to record the grant-date fair value of its graded vesting employee stock-based payments (i.e., stock options and other equity-based compensation) in the statement of operations. The Company adopted
FAS 123R using the modified prospective method, whereby fair value of all previously-granted employee stock-based arrangements that remained unvested at January 1, 2006 and all grants made on or after January 1, 2006 will be
included in the Companys determination of stock-based compensation expense over the remaining vesting period of the underlying options. In accordance with the modified prospective method, the Company has not restated its operating results for
the quarter ended June 30, 2005 to reflect charges for the fair value of stock-based arrangements.

As a result of adopting SFAS 123R,
on January 1, 2006, the Company recorded approximately $914,800 unearned compensation cost related to previously issued stock options to its employees.

The fair value of each employee and director grant of options to purchase common stock is estimated on the date of the grant using the Black-Scholes option-pricing model. The fair value of restricted common stock
grants is measured based upon the quoted market price of the Companys common stock on the date of grant. On June 30, 2006 we had one share-based compensation plan. The compensation costs charged as operating expense for grants under the
plan were approximately $125,600 for the six months ended June 30, 2006. No tax benefit was recognized related to share-based compensation expense since we have



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##### Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

Common Stock and Equity Securities (cont.)

never reported taxable income related to options and we have established a full valuation allowance to offset all of the potential tax benefits associated with our deferred tax assets. In addition, no amounts of
share-based compensation cost were capitalized as part of fixed assets or inventory for the periods presented.

During the six month period
ended June 30, 2006 we did not grant any shares of restricted common stock and we did not grant any options to purchase common stock, to employees and directors of the Company. A summary of option activity under the plan as of June 30,
2006, and changes during the Six months then ended are presented below:



|                                    |  |                  |   |  |                                |      |                                           |     |                                      |   |     
|----------------------------------- |  | ---------------- | - |  | ------------------------------ | ---- | ----------------------------------------- | --- | ------------------------------------ | - | ----
|Options                             |  | Number ofOptions |   |  | Weighted-AverageExercise Price |      | Weighted-AverageRemainingContractual Term |     | Weighted-AverageGrant Date FairValue
|Outstanding at January 1, 2006      |  | 740,700          |   |  | $                              | 3.33 |                                           | 6.2 |                                      | $ | 1.95
|Grants                              |  |                 |   |  | $                              |     |                                           |     |                                      |   |     
|Exercises                           |  |                 |   |  | $                              |     |                                           |     |                                      |   |     
|Cancellations                       |  | (57,800          | ) |  | $                              | 3.68 |                                           |     |                                      |   |     
|                                    |  |                  |   |  |                                |      |                                           |     |                                      |   |     
|Outstanding at March 31, 2006       |  | 682,900          |   |  | $                              | 3.30 |                                           | 5.4 |                                      | $ | 2.02
|Grants                              |  |                 |   |  | $                              |     |                                           |     |                                      |   |     
|Exercises                           |  |                 |   |  | $                              |     |                                           |     |                                      |   |     
|Cancellations                       |  | (30,400          | ) |  | $                              | 3.73 |                                           |     |                                      |   |     
|                                    |  |                  |   |  |                                |      |                                           |     |                                      |   |     
|Outstanding at June 30, 2006        |  | 652,500          |   |  | $                              | 3.28 |                                           | 5.6 |                                      | $ | 2.06
|                                    |  |                  |   |  |                                |      |                                           |     |                                      |   |     
|Shares exercisable at June 30, 2006 |  | 260,500          |   |  | $                              | 3.32 |                                           | 1.1 |                                      | $ | 1.85
|                                    |  |                  |   |  |                                |      |                                           |     |                                      |   |     

As of June 30, 2006 there was approximately $789,200 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements (options) granted under the plan. That cost is expected to be recognized over a weighted-average period of 5.6 years. In July 2006, the Companys President, Lawrence Bernstein,
resigned. According to the terms of the Companys stock option plan, all of Mr. Bernsteins 250,000 options terminated as of that date. The impact to the Companys financial statements in the third quarter of 2006 as a result of
the termination of the options will be the reversal of $476,700 of unearned compensation cost and the recapture of $49,000 compensation cost charged to expense in the first six months of 2006.

Prior to January 1, 2006, the Company accounted for employee stock-based grants under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees and related Interpretations. The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation for the three and six months ended June 30, 2005:



|                                                                                                                                            |  |               |          |   |            |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---------- | - | -------- | -
|                                                                                                                                            |  | June 30, 2005 |         
|                                                                                                                                            |  | Three Months  |          |   | Six Months |  
|Net Loss (Before Stock Based Compensation Expense)                                                                                          |  | $             | (78,000  | ) |            | $ | (91,000  | )
|                                                                                                                                            |  |              
|Deduct: Total stock-based employee Compensation expense determined under fair value based method for all awards, net of related tax
effects |  |               | 36,700   |   |            |   | 53,300   |  
|Net Loss (After Stock Based Compensation Expense)                                                                                           |  | $             | (114,700 | ) |            | $ | (144,300 | )
|                                                                                                                                            |  |              
|Net loss per common share (basic and diluted):                                                                                              |  |               |          |   |            |   |          |  
|As                                                                                                                                          |  |               |          |   |            |   |          |  
|Net Loss (Before Stock Based Compensation Expense)                                                                                          |  | $             | (0.02    | ) |            | $ | (0.02    | )
|Net Loss (After Stock Based Compensation Expense)                                                                                           |  | $             | (0.02    | ) |            | $ | (0.03    | )



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##### Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

Common Stock and Equity Securities (cont.)



|6. | Marketable Securities. Marketable securities are categorized as trading securities and stated at market value. Included in trading liabilities are securities that the company
has sold but did not own and will therefore be obligated to purchase at a future date (short positions). 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 income. Net unrealized gains and losses are reported in the statement of income and represent the change in market value of investment holdings during the
period. At June 30, 2006 marketable securities consisted of the following:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |  |                       |          |   |                                                |   |         |  
|----------------- |  | --------------------- | -------- | - | ---------------------------------------------- | - | ------- | -
|                  |  | Value AtJune 30, 2006 |          |   | CumulativeUnrealizedGain(Loss) AtJune 30, 2006 |  
|Equity Securities |  | $                     | 564,000  |   |                                                | $ | (42,000 | )
|Stock Options     |  | $                     | (7,000   | ) |                                                | $ | (7,000  | )
|                  |  |                       |          |   |                                                |   |         |  
|Total             |  | $                     | 557,000  |   |                                                | $ | (49,000 | )
|                  |  |                       |          |   |                                                |   |         |  
|                  |  |                      
|Short Positions   |  | $                     | (712,900 | ) |                                                | $ | (61,600 | )

Marketable securities can experience extreme price and volume fluctuations that could particularly
affect market values. These market fluctuations, as well as general economic, political and market conditions such as recessions, interest rates or international currency fluctuations may adversely affect the market value of our portfolio.



|7. | Related Party Transactions. During the three months ended June 31, 2006 and 2005, the Company paid $9,700 and $8,100, respectively, to Warren Kaplan and $28,400 and
$15,000, respectively, to Ronel Management Company, wholly owned by Warren Kaplan, former Chairperson of the Board and Judith Kaplan, the Company founder and former Board member for consulting services.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the six months ended June 31, 2006 and 2005, the Company paid $20,900 and $18,100, respectively, to Warren Kaplan and $57,100 and $34,500,
respectively, to Ronel Management Company, wholly owned by Warren Kaplan, former Chairperson of the Board and Judith Kaplan, the Company founder and former Board member for consulting services.



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##### Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

Related Party Transactions (cont.)



|8. | Reclassifications.Certain amounts from the prior period have been reclassified to conform to the current period presentation.
|-- | -----------------------------------------------------------------------------------------------------------------------------

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 develop our brands and proprietary products through internal development, licensing and/or mergers and acquisitions. Additional factors include, but are not limited to the following: the size and growth of the market for our
products, competition, pricing pressures, market acceptance of our products, the effect of economic conditions, intellectual property rights, the results of financing efforts, risks in product development, other risks identified in this report and
our other periodic filings with the Securities and Exchange Commission.

Results of Operations:

Three Months Ended June 30, 2006 Compared With Three Months Ended June 30, 2005

The following should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere herein. The
following table sets forth, as a percentage of sales, certain items appearing in our condensed consolidated statements of operations.



|                                   |  |                                 |    |  |                                 |   
|---------------------------------- |  | ------------------------------- | -- |  | ------------------------------- | --
|                                   |  | Three Months EndedJune 30, 2006 |    |  | Three Months EndedJune 30, 2005 |   
|Net Sales                          |  | 100                             | %  |  | 100                             | % 
|Cost of Sales                      |  | 50                              | %  |  | 44                              | % 
|Gross Profit                       |  | 50                              | %  |  | 56                              | % 
|Selling Expense                    |  | 45                              | %  |  | 26                              | % 
|General and Administrative Expense |  | 53                              | %  |  | 33                              | % 
|Total Operating Expense            |  | 98                              | %  |  | 59                              | % 
|Income (Loss) from Operations      |  | (48                             | )% |  | (3                              | )%
|Other Income (Expense)             |  | (1                              | )% |  | (1                              | )%
|Income (Loss) before income taxes  |  | (49                             | )% |  | (4                              | )%
|Taxes                              |  |                                |    |  |                                |   
|Net Income (Loss)                  |  | (49                             | )% |  | (4                              | )%

Net salesfor the three months ended June 30, 2006 were $1,635,000, compared with net sales of
$1,911,200 for the three months ended June 30, 2005. Management attributes the $276,200 or 14% decrease to a decline in sales to selected mass market, gift and craft store accounts; reduced sales of our Jay Jay line due to a supplier change and
reduced demand for our Curiosity Kits products.

Gross profitdecreased by $242,300 to $822,800 for the three months ended June 30,
2006, compared with $1,065,100 for the three months ended June 30, 2005. The gross profit percentage decreased from 56% to 50%



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##### Table of Contents

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

for the three month periods ended June 30, 2006 and 2005 respectively. The decrease in gross profit percentage compared to the same period in
2005, was mainly attributable to increased raw material, importation and product development costs, and reduced prices on our Jay Jay and Curiosity Kits lines.

Selling, general and administrative (SG&A) expensesincreased by $483,300 to $1,609,500 for the three month period ended June 30, 2006 from $1,126,200 for the three month period ended June 30, 2005. This 43% increase in
SG&A expenses is due primarily to increases in:



| |  |  | Compensation and related benefits of $131,700 resulting from staffing increases in Product Development, Marketing and executive management
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-cash charges for Employee Stock Options of $60,000 as a result of adopting SFAS 123R
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Bad debt of $148,600 resulting from an increase in reserves for sales to larger mass market accounts
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Freight out of $91,400 as a result of air freighting several large orders for a major customer
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Lease expense of $29,100 for temporary warehouse space needed for stocking Curiosity Kits products.
| | - |  | ---------------------------------------------------------------------------------------------------

Interest expense related to current and long-term debt was $15,200 and $18,100 for the three month periods ended June 30, 2006 and 2005, respectively. The decrease of $2,900 is due to lower borrowings and
reduced interest under our line of credit.

Other income and (expense) during the three month periods ended June 30, 2006 and 2005 was $2,600
and $1,200, respectively. The $1,400 change was mainly attributable to gains from investments.

Loss before income taxes,as a result of the
foregoing, was $799,300 for the three months ended June 30, 2006, compared with a loss before income taxes of $78,000.

Net loss, as result of the
foregoing,was $799,300 and for the three months ended June 30, 2006, compared with a net loss of $78,000 for the three months ended June 30, 2005.

Six Months Ended June 30, 2006 Compared With Six Months Ended June 30, 2005

The following should be read
in conjunction with our consolidated financial statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain items appearing in our condensed consolidated statements of
operations.



|                                   |  |                              |    |  |                              |   
|---------------------------------- |  | ---------------------------- | -- |  | ---------------------------- | --
|                                   |  | Six MonthsEndedJune 30, 2006 |    |  | Six MonthsEndedJune 30, 2005 |   
|Net Sales                          |  | 100                          | %  |  | 100                          | % 
|Cost of Sales                      |  | 51                           | %  |  | 44                           | % 
|Gross Profit                       |  | 49                           | %  |  | 56                           | % 
|Selling Expense                    |  | 41                           | %  |  | 26                           | % 
|General and Administrative Expense |  | 51                           | %  |  | 32                           | % 
|Total Operating Expense            |  | 92                           | %  |  | 58                           | % 
|Loss from Operations               |  | (43                          | )% |  | (2                           | )%
|Other Income (Expense)             |  | 1                            | %  |  |                             |   
|Loss before income taxes           |  | (42                          | )% |  | (2                           | )%
|Taxes                              |  |                             |    |  |                             |   
|Net Loss                           |  | (42                          | )% |  | (2                           | )%

Net salesfor the six months ended June 30, 2006 were $3,270,700, compared with net sales of
$3,866,800 for the six months ended June 30, 2005. Management attributes the $596,100 or 15% decrease in net sales to a decline in sales to selected mass market, gift and craft store accounts; reduced sales of our Jay Jay line due to a supplier
change and reduced demand for our Curiosity Kits products.



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##### Table of Contents

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

Gross profitdecreased by $541,800 to $1,610,400 for the six months ended June 30, 2006, compared with $2,152,100 for the six months ended
June 30, 2005. The gross profit percentage decreased to 49% from 56% for the six month periods ended June 30, 2006 and 2005 respectively. The decrease in gross profit percentage compared to the same period in 2005, was mainly attributable
to increased raw material, importation and product development costs, and reduced prices on our Jay Jay and Curiosity Kits lines.

Selling,
general and administrative (SG&A) expensesincreased by $788,000 to $3,030,900 for the six month period ended June 30, 2006 from $2,242,900 for the six month period ended June 30, 2005. This 35% increase in SG&A expenses is due
primarily to increases in:



| |  |  | Compensation and related benefits of $221,600 resulting from staffing increases in Product Development, Marketing and executive management
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Bad debt of $255,400 resulting from an increase in reserves for sales to larger mass market accounts
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Non-cash charges for employee stock options of $125,600 as a result of adopting SFAS 123R
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Travel of $93,000 as a result of increase travel to Asia for product development, and additional travel for International Toy Fairs sales and marketing activities
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lease expense of $65,700 for temporary warehouse space needed for stocking Curiosity Kits product and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Freight out of $61,100 as a result of air freighting several large orders for a major customer
| | - |  | ----------------------------------------------------------------------------------------------

These increases were partially offset by a $40,400 decrease in sales commissions as a result of the decrease in sales.

Interest expense related to current and long-term debt was $24,400 and $33,700 for the six month periods ended June 30, 2006 and 2005, respectively. The decrease of $9,300 is due to lower borrowings under our line of credit.

Other income and (expense) during the six month periods ended June 30, 2006 and 2005 was $59,900 and $33,500, respectively. The $26,400 change
was mainly attributable to gains from investments.

Loss before income taxes, as a result of the foregoing, was $1,385,100 for the six months ended
June 30, 2006, compared with $91,000 for the six months ended June 30, 2005.

Net loss, as a result of the foregoing, was $1,385,100 for
the six months ended June 30, 2006, compared with $91,000 for the six months ended June 30, 2005.

Financial Condition, Liquidity, and Capital
Resources

As of June 30, 2006, we had cash and cash equivalents of $720,600 representing an increase of $497,200 since December 31, 2005.

After taking account of non-cash items and other adjustments, our cash generated from operations for the six months ended June 30, 2006 were
$642,900. The principal sources of cash from operating activities for the six months ended June 30, 2006 were:



| |  |  | $874,200 due to collections of accounts receivable
| | - |  | --------------------------------------------------



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##### Table of Contents

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



| |  |  | $777,700 increase in accrued expenses due primarily to an increase in other liabilities related to the Companys short selling of investment securities
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $135,800 increase in accounts payable due to a seasonal increase in inventory purchases
| | - |  | ---------------------------------------------------------------------------------------

Principal uses of cash from operating activities in the first six months of fiscal 2006 were increases of:



| |  |  | $151,900 in investment securities and
| | - |  | -------------------------------------



| |  |  | $140,100 in prepaid expenses and
| | - |  | --------------------------------



| |  |  | $70,500 in inventories
| | - |  | ----------------------

The uses of cash from investing activities for the
first six months of 2006 were $22,600 for additional telecommunication and computer equipment.

To meet a portion of our operating cash requirements, we
received net proceeds of $33,200 from common stock warrant exercises. After applying $123,400 to decrease borrowing under our line of credit and $32,900 to repayment of mortgage principal, this left a net decrease in cash from financing activities
of $123,100.

At June 30, 2006, borrowing under our line of credit was $779,500, a decrease of $33,900 from $813,400 as of June 30, 2005. Our
line of credit provides for borrowings up to $2,500,000 at the prime rate plus and matures August 30, 2006. Under the line of credit agreement, we are subject to financial covenants relating to certain asset balances and financial ratios. As of
June 30, 2006 we were eligible to borrow $2,500,000 under our line of credit and were in compliance with our financial covenants. The Company is negotiating an extension to its revolving line of credit (the Revolver) and reviewing
options with other financial institutions. Through June 30, 2006, the Company has been able to meet its obligations as they come due; however, it is at least reasonably possible that if the Company continues to incur losses and negative cash
flows, it will have to obtain additional sources of debt or equity financing to maintain its liquidity. There can be no assurance that such financing will be available or available on terms acceptable to the Company, if needed.



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##### Table of Contents

ITEM 3. Controls and Procedures

As of the end of the period covered by this report, our company conducted an evaluation,
under the supervision and with the participation of our chief executive officer and chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief executive
officer and chief financial officer concluded that our companys disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There was no change in our
internal controls, which are included within disclosure controls and procedures, during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls.

PART II. OTHER INFORMATION

ITEM 2. Changes in Securities

Repurchase of Securities

On March 24, 2004, our Board of Directors authorized, effective immediately, a program to repurchase up to 150,000 of our outstanding common shares.
Repurchases may be made by us from time to time in the open market at prevailing prices, in either block purchases or in privately negotiated transactions. The share repurchase program will expire three years from the date of authorization, although
prior to such time the program may be discontinued or suspended at any time. As of June 30, 2006 we have repurchased 30,201 of our common shares and 119,799 remain available under the plan.

Repurchases of Common Shares



|                               |  |                                     |  |                                  |  |                                                                                    |  |                                                                                                              
|------------------------------ |  | ----------------------------------- |  | -------------------------------- |  | ---------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------
|                               |  | Totalnumber ofcommonsharespurchased |  | Averageprice paidper commonshare |  | Total number ofcommon sharespurchased as partof
publiclyannounced plans orprograms |  | Maximum number(or approximatedollar
value) of common sharesthat may yet bepurchased underthe plans orprograms
|April 1, 2006  April 30, 2006 |  |                                    |  |                                 |  |                                                                                   |  | 119,799                                                                                                      
|May 1, 2006  May 31, 2006     |  |                                    |  |                                 |  |                                                                                   |  | 119,799                                                                                                      
|June 1, 2006  June 30, 2006   |  |                                    |  |                                 |  |                                                                                   |  | 119,799                                                                                                      
|Total                          |  |                                    |  |                                 |  |                                                                                   |  | 119,799                                                                                                      

ITEM 4. Submission of Matters to Vote of Shareholders

None

ITEM 5. Other Information



| | a) | None
| | -- | ----



| | b) | None.
| | -- | -----



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##### Table of Contents

PART II. OTHER INFORMATION (Continued)

ITEM 6. Exhibits and Reports on Form 8-K



|A. | Exhibits
|-- | --------



|            |  |                                                                       
|----------- |  | ----------------------------------------------------------------------
|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



|B. | Reports on Form 8-K
|-- | -------------------



| |  |  | Form 8-K dated July 28, 2006 was filed on July 31, 2006 setting forth the Companys expected revenues for the three months and six months ended June 30, 2006 and
reporting the resignation of the Companys President.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Form 8-K dated July 31, 2006 was filed on August 1, 2006 extending the term of the 2006 warrants distributed to all shareholders of record on January 18, 2006
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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: August 8, 2006 |  | By:                                 |  | /s/ RONALD S. KAPLAN                                  
|                     |  |                                     |  | Ronald Kaplan                                         
|                     |  |                                     |  | Chief Executive Officer (Principal Executive Officer) 
|                     |  |                                    
|Date: August 8, 2006 |  | By:                                 |  | /s/ JOHN R. OLIVER                                    
|                     |  |                                     |  | John R. Oliver                                        
|                     |  |                                     |  | Chief Financial Officer (Principal Accounting Officer)



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