**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 |
|--|---|-----------------------------------------------------------------------------------------------------------------|

**June      30, 2008**

|  |  ̈ | 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)  |                                             |

| Class                                        |   | Outstanding                at August 11, 2008 |
|----------------------------------------------|--------|-----------------------------------------------|
| Common                Stock, $.001 par value |   | 5,431,500                                     |

----

**INDEX**

|                                                                                                                                            |   | **Page**   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|
|                                                                                                                                            |   | **Number** |
| **PART                I. FINANCIAL INFORMATION**                                                                                           |   |       |   |
|                                                                                                                                            |   |       |   |
| Item                1. Financial Statements                                                                                                     |   |       |   |
|                                                                                                                                            |   |       |   |
| Condensed                Balance Sheets at June 30, 2008 (unaudited)and December 31,                2007                                        |   | 3          |   |
|                                                                                                                                            |   |       |   |
| Condensed                Statements of Operations - Three and six months ended June 30, 2008                and                2007 (unaudited) |   | 4          |   |
|                                                                                                                                            |   |       |   |
| Condensed                Statements of Cash Flows - Six months ended June 30, 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      |   | 11         |   |
|                                                                                                                                            |   |       |   |
| Item                4. Controls and Procedures                                                                                                  |   | 13         |   |
|                                                                                                                                            |   |       |   |
| **PART                II. OTHER INFORMATION**                                                                                                   |   |       |   |
|                                                                                                                                            |   |       |   |
| Item                2. Unregistered Sales of Securities and Use of Proceeds                                                                     |   | 13         |   |
|                                                                                                                                            |   |       |   |
| Item                5. Other Information                                                                                                        |   | 14         |   |
|                                                                                                                                            |   |       |   |
| Item                6. Exhibits                                                                                                                 |   | 14         |   |
|                                                                                                                                            |   |       |   |
| **SIGNATURE                PAGE**                                                                                                               |   | 15         |   |

----

**PART      I. FINANCIAL INFORMATION**

**ITEM      1. Financial Statements**

|                                                                                                             |   | June 30, 2008 |       |                        |   |
|------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|-----------------------------|--------|
|                                                                                                             |   | (Unaudited)             |       | December 31, 2007 |   |
| ASSETS                                                                                                           |   |                    |       |                        |   |   |   |
| CURRENT                ASSETS                                                                                    |   |                    |       |                        |   |   |   |
| Cash                and cash equivalents                                                                         |   | $                       | 29,400     |                        | $      | 44,400 |   |
| Investment                securities                                                                             |   |                    | 1,124,800  |                        |   | 475,000 |   |
| Accounts                receivable, net of allowance of $68,000 and $47,200                                      |   |                    | 797,300    |                        |   | 1,429,800 |   |
| Other                receivable                                                                                  |   |                    | -          |                        |   | 3,233,700 |   |
| Inventories,                net                                                                                  |   |                    | 1,725,100  |                        |   | 2,131,800 |   |
| Prepaid                expenses and other assets                                                                 |   |                    | 523,100    |                        |   | 197,700 |   |
| TOTAL                CURRENT ASSETS                                                                              |   |                    | 4,199,700  |                        |   | 7,512,400 |   |
|                                                                                                             |   |                    |       |                        |   |   |   |
| PROPERTY,                PLANT AND EQUIPMENT                                                                     |   |                    | 3,670,200  |                        |   | 3,650,400 |   |
| Less                accumulated depreciation and amortization                                                    |   |                    | (2,841,600 | )                           |   | (2,761,100 | ) |
| NET                PROPERTY, PLANT AND EQUIPMENT                                                                 |   |                    | 828,600    |                        |   | 889,300 |   |
|                                                                                                             |   |                    |       |                        |   |   |   |
| GOODWILL                                                                                                         |   |                    | 1,405,300  |                        |   | 1,405,300 |   |
| OTHER                ASSETS                                                                                      |   |                    | 463,600    |                        |   | 276,100 |   |
| TOTAL                ASSETS                                                                                      |   | $                       | 6,897,200  |                        | $      | 10,083,100 |   |
|                                                                                                             |   |                    |       |                        |   |   |   |
| LIABILITIES                AND SHAREHOLDERS' EQUITY                                                              |   |                    |       |                        |   |   |   |
| CURRENT                LIABILITIES                                                                               |   |                    |       |                        |   |   |   |
| Accounts                payable                                                                                  |   | $                       | 569,400    |                        | $      | 1,811,900 |   |
| Accrued                expenses, payroll and related expenses                                                    |   |                    | 515,600    |                        |   | 593,900 |   |
| Borrowings                under line of credit                                                                   |   |                    | 1,498,600  |                        |   | 1,960,400 |   |
| Borrowings                under investment account                                                               |   |                    | 336,000    |                        |   | 141,800 |   |
| Other                current liabilities                                                                         |   |                    | 185,200    |                        |   | 89,600 |   |
| TOTAL                CURRENT LIABILITIES                                                                         |   |                    | 3,104,800  |                        |   | 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 - 228,600 and 208,600 shares, at par                                               |   |                    | (200       | )                           |   | (200 | ) |
| Additional                paid-in capital                                                                        |   |                    | 9,291,300  |                        |   | 9,260,200 |   |
| Unearned                share based compensation cost                                                            |   |                    | (112,800   | )                           |   | (256,300 | ) |
| Accumulated                deficit                                                                               |   |                    | (5,391,600 | )                           |   | (3,523,900 | ) |
| TOTAL                SHAREHOLDERS' EQUITY                                                                        |   |                    | 3,792,400  |                        |   | 5,485,500 |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS' EQUITY                                                        |   | $                       | 6,897,200  |                        | $      | 10,083,100 |   |

----

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

|                                                                 |   | Three Months Ended June 30 |      | Six Months Ended June 30 |   |
|----------------------------------------------------------------------|--------|------------------------------------------------|-----------|----------------------------------------------|--------|
|                                                                 |   | 2008                                           |      | 2007                                         |   | 2008 |   | 2007 |   |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |
| GROSS                SALES                                           |   | $                                              | 1,155,900 |                                         | $      | 1,465,400 |   | $ | 2,414,200 |   | $ | 2,908,900 |   |
| SALES                RETURNS AND ALLOWANCES                          |   |                                           | 44,900    |                                         |   | 32,600 |   |   | 79,500 |   |   | 106,900 |   |
| NET                SALES                                             |   |                                           | 1,111,000 |                                         |   | 1,432,800 |   |   | 2,334,700 |   |   | 2,802,000 |   |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| COST                OF SALES                                         |   |                                           | 689,200   |                                         |   | 854,100 |   |   | 1,480,000 |   |   | 1,632,000 |   |
| GROSS                PROFIT                                          |   |                                           | 421,800   |                                         |   | 578,700 |   |   | 854,700 |   |   | 1,170,000 |   |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| OPERATING                EXPENSES                                    |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| Selling                                                              |   |                                           | 447,300   |                                         |   | 338,300 |   |   | 840,600 |   |   | 816,300 |   |
| General                and administrative                            |   |                                           | 788,100   |                                         |   | 637,900 |   |   | 1,730,600 |   |   | 1,316,900 |   |
| TOTAL                OPERATING EXPENSES                              |   |                                           | 1,235,400 |                                         |   | 976,200 |   |   | 2,571,200 |   |   | 2,133,200 |   |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| LOSS                FROM OPERATIONS                                  |   |                                           | (813,600  | )                                            |   | (397,500 | ) |   | (1,716,500 | ) |   | (963,200 | ) |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| OTHER                INCOME (EXPENSE)                                |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| Interest                expense                                      |   |                                           | (29,400   | )                                            |   | (35,900 | ) |   | (65,100 | ) |   | (58,400 | ) |
| Other                                                                |   |                                           | (119,100  | )                                            |   | 183,100 |   |   | (86,300 | ) |   | 222,500 |   |
| TOTAL                OTHER INCOME (EXPENSE)                          |   |                                           | (148,500  | )                                            |   | 147,200 |   |   | (151,400 | ) |   | 164,100 |   |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| LOSS                BEFORE INCOME TAX PROVISION                      |   |                                           | (962,100  | )                                            |   | (250,300 | ) |   | (1,867,900 | ) |   | (799,100 | ) |
| INCOME                TAX PROVISION                                  |   |                                           | -         |                                         |   | - |   |   | - |   |   | - |   |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| NET                LOSS                                              |   | $                                              | (962,100  | )                                            | $      | (250,300 | ) | $ | (1,867,900 | ) | $ | (799,100 | ) |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| LOSS                PER SHARE                                        |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted                                     |   | $                                              | (0.18     | )                                            | $      | (0.05 | ) | $ | (0.34 | ) | $ | (0.15 | ) |
|                                                                 |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| Weighted                average number of common shares outstanding: |   |                                           |      |                                         |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted                                     |   |                                           | 5,438,505 |                                         |   | 5,230,290 |   |   | 5,444,990 |   |   | 5,230,930 |   |

----

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

**ACTION      PRODUCTS INTERNATIONAL INC.**

**CONDENSED      STATEMENTS OF CASH FLOWS (Unaudited)**

|                                                                                                                   |   | Six Months Ended June 30 |       |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|
|                                                                                                                   |   | 2008                                         |       | 2007 |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                                    |   |                                         |       |   |   |
| Net                Loss                                                                                                |   | $                                            | (1,867,900 | ) | $ | (799,100 | ) |
| Adjustments                to reconcile net loss to net cash provided by/(used in) operating                activities |   |                                         |       |   |   |   |   |
| Depreciation                                                                                                           |   |                                         | 80,500     |   |   | 90,500 |   |
| Amortization                                                                                                           |   |                                         | 81,000     |   |   | 46,000 |   |
| Unrealized                (gain)loss on investment securities                                                          |   |                                         | 354,300    |   |   | (79,200 | ) |
| Stock                based compensation expense                                                                        |   |                                         | 191,300    |   |   | 12,600 |   |
| Provision                for bad debts                                                                                 |   |                                         | 41,300     |   |   | (26,800 | ) |
| Loss                on disposal of other assets                                                                        |   |                                         | -          |   |   | 52,400 |   |
| Changes                in:                                                                                             |   |                                         |       |   |   |   |   |
| Litigation                settlement receivable                                                                        |   |                                         | 3,233,700  |   |   | - |   |
| Accounts                receivable                                                                                     |   |                                         | 610,700    |   |   | 891,000 |   |
| Investment                securities                                                                                   |   |                                         | (1,004,100 | ) |   | (602,300 | ) |
| Inventories                                                                                                            |   |                                         | 406,700    |   |   | (430,500 | ) |
| Prepaid                expenses                                                                                        |   |                                         | (322,700   | ) |   | 54,500 |   |
| Other                assets                                                                                            |   |                                         | (290,500   | ) |   | (77,400 | ) |
| Accounts                payable                                                                                        |   |                                         | (1,242,500 | ) |   | 255,100 |   |
| Accrued                expenses, payroll and related expenses                                                          |   |                                         | 17,400     |   |   | 83,900 |   |
| Deferred                revenue                                                                                        |   |                                         | -          |   |   | (12,500 | ) |
| NET                CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                     |   |                                         | 289,200    |   |   | (541,800 | ) |
|                                                                                                                   |   |                                         |       |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                                    |   |                                         |       |   |   |   |   |
| Acquisition                of property, plant and equipment                                                            |   |                                         | (19,900    | ) |   | (51,200 | ) |
|                                                                                                                   |   |                                         |       |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                                                    |   |                                         |       |   |   |   |   |
| Purchase                of treasury stock                                                                              |   |                                         | (16,700    | ) |   | (7,100 | ) |
| Repayment                of mortgage principal                                                                         |   |                                         | -          |   |   | (39,800 | ) |
| Common                stock options and warrants issuance costs                                                        |   |                                         | -          |   |   | (800 | ) |
| Net                change in borrowings under line of credit                                                           |   |                                         | (461,800   | ) |   | 316,600 |   |
| Net                change in borrowings under investment account                                                       |   |                                         | 194,200    |   |   | 177,200 |   |
| NET                CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                                     |   |                                         | (284,300   | ) |   | 446,100 |   |
|                                                                                                                   |   |                                         |       |   |   |   |   |
| NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                    |   |                                         | (15,000    | ) |   | (146,900 | ) |
| CASH                AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                        |   |                                         | 44,400     |   |   | 369,900 |   |
| CASH                AND CASH EQUIVALENTS AT END OF PERIOD                                                              |   | $                                            | 29,400     |   | $ | 223,000 |   |
|                                                                                                                   |   |                                         |       |   |   |   |   |
| Supplemental                disclosures - cash paid for:                                                               |   |                                         |       |   |   |   |   |
| Interest                                                                                                               |   | $                                            | 43,300     |   | $ | 38,000 |   |
| 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 June 30, 2008 and December 31, 2007, the results of its (i)                operations for the three and six month periods ended June 30, 2008                and                2007 and (ii) cash flows for the six month periods ended June 30,                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 during the three and six                month                periods ended June 30, 2008. 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.** On                June 25, 2008, the Company and Presidential Financial Corporation                entered into a Loan Agreement and Security Agreement which replaced                the                previous facility with Regions Bank and was funded on July 1, 2008.                The                Loan Agreement provides the Company the ability to borrow up to $2                million                at any time during the term of the Loan Agreement. The amount that                the                Company may have outstanding under the Loan Agreement at any time                is the                sum of 85% of the Company’s receivables approved by the Lender plus 50% of                the Company’s eligible inventory. The maximum amount of the inventory loan                the Company may have outstanding against its inventory is the lesser                of                $600,000, or $700,000 from July 1 through September 30, and the                loan amount outstanding against the Company’s receivables. Borrowings                under the Loan Agreement will bear interest at a rate equal to 1%                over the                prime rate as quoted in the Wall Street Journal adjusted upon each                change                in such prime rate. The Company shall also pay the Lender a monthly                service charge of 0.6% of the average daily outstanding balance during                the                month. The Company shall also pay an annual facility fee equal to                1% of                the $2 million maximum loan amount. The Lender may audit the Company’s                records at the Company’s expense of $550 per day, up to a maximum amount                of $8,000 per year. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

**Line      of Credit **
***(cont.)***

| **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 June                30,                2008 ranged from 4.24 percent to 7.24 percent based on the balance                borrowed. Borrowings under this account were $336,000 and $141,800                as of                June 30, 2008 and December 31, 2007,                respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **Earnings                (loss) per share.**Common                stock equivalents were not included in the computation of diluted                earnings                (loss) per share for the three and six month periods ended June 30,                2008                and 2007, as their effect would have been anti-dilutive. Common share                equivalents excluded from the diluted earnings per share computations                were                7,000,300 and 7,126,600 for the three and six months ended June 30,                2008                and June 30, 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.                During the three month period ended June 30, 2008 the Company repurchased                19,969 shares of its common stock at a cost of $16,700 and 127,131                shares                remain available for repurchase under the                plan. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Share-Based      Compensation**

----

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

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

| Options                                            |   | Number ofOptions |    | Weighted-AverageExercise Price |   | Weighted-AverageRemainingContractual Term |   | Weighted-Average         Grant Date Fair         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 |   |
| Grants                                             |   |                  | -       |                                | $      | -                                              |   |                                                                                                                                                       | -      |   | $ | - |   |
| Exercises                                          |   |                  | -       |                                | $      | -                                              |   |                                                                                                                                                       | -      |   | $ | - |   |
| Cancellations                                      |   |                  | (6,000  | )                                   | $      | 6.25                                           |   |                                                                                                                                                       | -      |   | $ | 1.79 |   |
| Outstanding                at June 30, 2008        |   |                  | 258,000 |                                | $      | 2.54                                           |   |                                                                                                                                                       | 1.7    |   | $ | 1.55 |   |
| Shares                exercisable at June 30, 2008 |   |                  | 258,000 |                                | $      | 2.54                                           |   |                                                                                                                                                       | 1.7    |   | $ | 1.55 |   |

|                                             |   | 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   |   |
|                                             |   |                                                 |   |   |

----

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

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

| 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 |   |

| Six                months ended December 31, 2008 |   | $ | 68,500  |   |
|---------------------------------------------------|--------|---|---------|--------|
| Year                ended December 31, 2009       |   | $ | 44,300  |   |
|                                              |   | $ | 112,800 |   |

| **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 June 30, 2008 marketable                securities consisted of the                following: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | Value At June 30, 2008 |      | Cumulative UnrealizedGain(Loss) At June 30, 2008 |   |
|----------------------------------|--------|--------------------------------------------|-----------|---------------------------------------------------------------------------|--------|
| Equity                Securities |   | $                                          | 1,124,800 |                                                                      | $      | (314,400 | ) |
| Stock                Options     |   | $                                          | (185,300  | )                                                                         | $      | (40,000 | ) |
| Total                            |   | $                                          | 939,500   |                                                                      | $      | (354,400 | ) |

----

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

| **8.** | **Related                Party Transactions**.                During the six months ended June 30, 2008 and 2007, the Company paid                $25,400 and $21,200, respectively, to Warren Kaplan, $3,100 and $-0-,                respectively, to Judith Kaplan and $52,900 and $49,100, respectively,                for                consulting services to Ronel Management Company, wholly owned by                Warren                Kaplan, former Chairperson of the Board and Judith Kaplan, former                Board                member. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **10.** | **Subsequent                Events.**On                July 24, 2008, Action Products International, Inc. (the "Company")                received notification from The Nasdaq Listing Qualifications Department                (the "Staff") that the Company had regained compliance with the Minimum                Bid Price Marketplace Rule 4310(c)(4) (the "Rule") and the Staff                now                considers the matter closed. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

**Forward-looking      Statements:**

**Results      of Operations:**

***Three      Months and Six Months Ended June 30, 2008 Compared With Three Months and Six      Months Ended June 30, 2007***

|                                              |   | Three MonthsEnded June 30,2008 |   | Three MonthsEnded June 30,2007 |   | Six MonthsEnded June 30,2008 |   | Six MonthsEnded June 30,2007 |   |
|---------------------------------------------------|--------|-----------------------------------------------|--------|-----------------------------------------------|--------|---------------------------------------------|--------|---------------------------------------------|--------|
| Net                Sales                          |   |                                          | 100.0  | %                                             |   | 100.0                                       | %      |                                        | 100.0  | % |   | 100.0 | % |
| Cost                of Sales                      |   |                                          | 62.0   | %                                             |   | 59.6                                        | %      |                                        | 63.4   | % |   | 58.2 | % |
| Gross                Profit                       |   |                                          | 38.0   | %                                             |   | 40.4                                        | %      |                                        | 36.6   | % |   | 41.8 | % |
| Selling                Expense                    |   |                                          | 40.3   | %                                             |   | 23.6                                        | %      |                                        | 36.0   | % |   | 29.1 | % |
| General                and Administrative Expense |   |                                          | 70.9   | %                                             |   | 44.5                                        | %      |                                        | 74.1   | % |   | 47.0 | % |
| Total                Operating Expense            |   |                                          | 111.2  | %                                             |   | 68.1                                        | %      |                                        | 110.1  | % |   | 76.1 | % |
| Loss                from Operations               |   |                                          | (73.2  | )%                                            |   | (27.7                                       | )%     |                                        | (73.5  | )% |   | (34.3 | )% |
| Other                Income (Expense)             |   |                                          | (13.4  | )%                                            |   | 10.3                                        | %      |                                        | (6.5   | )% |   | 5.8 | % |
| Loss                before income taxes           |   |                                          | (86.6  | )%                                            |   | (17.5                                       | )%     |                                        | (80.0  | )% |   | (28.5 | )% |
| Income                Taxes                       |   |                                          | -      |                                          |   | -                                           |   |                                        | -      |   |   | - |   |
| Net                Loss                           |   |                                          | (86.6  | )%                                            |   | (17.5                                       | )%     |                                        | (80.0  | )% |   | (28.5 | )% |

**Net      sales **

**Gross      profit **
** **

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

**Selling,      general and administrative (SG&A)**

|   | · | An                increase in compensation and related benefit costs of $97,900 and                $289,600                for the three and six month periods, respectively, principally as                the                result of additions of senior financial and sales personnel and an                increase in stock based compensation; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                increase in professional services of $70,400 and $97,400 for the                three and                six month periods, respectively, resulting primarily from Sarbanes-Oxley                compliance consulting services, legal, investor relations services and                recruiting fees; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                increase in contract design and temporary labor services of $53,700                and                $103,000 for the three and six month periods, respectively;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                increase in bad debt expense of $43,900 and $68,100 for the three                and six                month periods, respectively. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                decrease in brand licensing expense of $57,800;                and |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | A                decrease in advertising and promotion of                $61,600. |
|--------|--------|-----------------------------------------------------------------------------------|

**Interest      expense**

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

**Net      loss,**

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

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**ITEM      4.**
**Controls      and Procedures.**

**PART      II. OTHER INFORMATION**

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

**Repurchase      of Securities**

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

**Repurchase      of Securities **
***(cont.)***

| Repurchases                of Common Shares   |   |
|-----------------------------------------------|--------|
|                                          |   | Total number ofcommon sharespurchased |   | Average pricepaid percommon share |   | Total number ofcommon sharespurchased aspart of publiclyannouncedplans orprograms |   | Maximumnumber ofcommonshares thatmay bepurchasedunder the plansor programs |   |
| April                1, 2008 - April 30, 2008 |   |   | 10,203 |   | $ | 0.95 |   |   | 10,203 |   |   | 136,897 |   |
| May                1, 2008 - May 31, 2008     |   |   | - |   | $ | - |   |   | - |   |   | 136,897 |   |
| June                1, 2008 - June 30, 2008   |   |   | 9,766 |   | $ | 0.73 |   |   | 9,766 |   |   | 127,131 |   |
| Total                                         |   |   | 19,969 |   | $ | 0.84 |   |   | 19,969 |   |   | 127,131 |   |

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

**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* |

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**SIGNATURES**

**ACTION      PRODUCTS INTERNATIONAL, INC.**

| Date:                August 13, 2008 | By:    | /s/                RONALD S. KAPLAN                                  |
|--------------------------------------|--------|----------------------------------------------------------------------|
|                                 |   | Ronald                S. Kaplan                                      |
|                                 |   | Chief                Executive Officer (Principal Executive Officer) |
|                                 |   |                                                                 |
| Date:                August 13, 2008 | By:    | /s/                ROBERT BURROWS                                    |
|                                 |   | Robert                Burrows                                        |
|                                 |   | Chief                Financial Officer (Principal Financial and      |
|                                 |   | Accounting                Officer)                                   |

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