---

# UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549

FORM 10-QSB

| | x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE     ACT OF 1934
| | - | -------------------------------------------------------------------------------------

For the
quarterly period ended September 30, 2004

| | o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
| | - | ---------------------------------------------------------------

For the transition period from __________ to __________.

Commission file number: 0-21853

---

MEDIA SCIENCES INTERNATIONAL, INC.(Exact name of registrant as specified in its charter)

| | DELAWARE
(State or other jurisdiction of incorporation or organization) |  | 87-0475073
(I.R.S. Employer Identification No.) | 
| | ----------------------------------------------------------------------- |  | ----------------------------------------------- | 

40 Boroline Road, Allendale, New Jersey 07401
(Address of principal executive offices)

(201) 236-9311
(Issuer's telephone number)

---

Check whether the issuer
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the past 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 [  ]

As of November 11, 2004,
the issuer had 9,935,710 shares of common stock outstanding.

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

---

# MEDIA
SCIENCES INTERNATIONAL, INC.
AND
SUBSIDIARIES

# FORM 10-QSB
FOR THE
QUARTER ENDED SEPTEMBER 30, 2004

# TABLE OF
CONTENTS

|           |  |                                                                                                                                    | Page
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------- | ----
|PART I.    |  | FINANCIAL INFORMATION                                                                                                              |     
|Item 1.    |  | Financial Statements                                                                                                               | 3   
|           |  | Condensed Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and June 30, 2004                                       | 3   
|           |  | Condensed  Consolidated  Statements  of  Operations  For the Three  Months Ended
September 30, 2004 and 2003 (Unaudited)           | 4   
|           |  | Condensed  Consolidated  Statement  of Changes in  Shareholders'  Equity For the
Three Months Ended September 30, 2004 (Unaudited) | 5   
|           |  | Condensed  Consolidated  Statements  of Cash  Flows For the Three  Months  Ended
September 30, 2004 and 2003 (Unaudited)           | 6   
|           |  | Notes to Condensed Consolidated Financial Statements                                                                               | 7   
|Item 2.    |  | Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations                                        | 12  
|Item 3.    |  | Controls and Procedures                                                                                                            | 14  
|           |  |                                                                                                                                    |     
|           |  |                                                                                                                                    |     
|PART II.   |  | OTHER INFORMATION                                                                                                                  |     
|Item 6.    |  | Exhibits                                                                                                                           | 15  
|Signatures |  |                                                                                                                                    | 16  

---

# PART I.  
FINANCIAL INFORMATION

## ITEM 1.  
FINANCIAL STATEMENTS

# MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

`September 30,     June 30,
                                                                   2004            2004
                                ASSETS                          (Unaudited)
                                ------                         ------------    ------------

CURRENT ASSETS :
    Cash                                                       $    545,126    $    666,116
    Accounts receivable, less allowance for
       doubtful accounts of $35,000                               2,602,303       1,626,287
    Insurance claim receivable                                         --           500,000
    Inventories                                                   2,343,700       2,274,088
    Deferred tax assets                                             968,208       1,126,434
    Prepaid expenses and other current assets                       474,262         280,530
                                                               ------------    ------------
        Total Current Assets                                      6,933,599       6,473,455
                                                               ------------    ------------

PROPERTY AND EQUIPMENT, NET                                       1,196,859       1,072,186
                                                               ------------    ------------

OTHER ASSETS:
    Goodwill and other intangible assets, net                     4,466,796       4,468,973
    Other assets                                                     69,859          48,100
                                                               ------------    ------------
                                                                  4,536,655       4,517,073
                                                               ------------    ------------

TOTAL ASSETS                                                   $ 12,667,113    $ 12,062,714
                                                               ============    ============

                    LIABILITIES AND SHAREHOLDERS' EQUITY
                    ------------------------------------

CURRENT LIABILITIES:
    Bank debt                                                  $  2,606,685    $  2,189,054
    Short-term debt and current maturities of long-term debt         27,668          39,081
    Accounts payable                                              2,245,438       2,511,117
    Accrued expenses and other current liabilities                  209,830         248,580
    Income taxes payable                                             70,999          92,651
    Accrued product warranty                                        339,247         340,592
    Deferred revenue                                                333,706         153,273
                                                               ------------    ------------
        Total Current Liabilities                                 5,833,573       5,574,348
                                                               ------------    ------------

OTHER LIABILITIES :
    Deferred tax liabilities                                        543,880         543,880
                                                               ------------    ------------
        Total Other Liabilities                                     543,880         543,880
                                                               ------------    ------------

TOTAL LIABILITIES                                                 6,377,453       6,118,228
                                                               ------------    ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY :
    Series A Convertible Preferred stock, $.001 par value
       Authorized 1,000,000 shares; none issued                        --              --
    Common Stock, .001 par value
       Authorized 20,000,000 shares;
           issued 9,935,710 shares in September,
           9,857,210 shares in June                                   9,937           9,858
    Additional paid-in capital                                    7,503,212       7,425,540
    Cost of 10,564 shares of common stock in treasury               (20,832)        (20,832)
    Accumulated deficit                                          (1,202,657)     (1,470,080)
                                                               ------------    ------------
        Total Shareholders' equity                                6,289,660       5,944,486
                                                               ------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     $ 12,667,113    $ 12,062,714
                                                               ============    ============`

See accompanying notes to condensed consolidated financial statements.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

`Three Months Ended
                                                       September 30,
                                                    2004          2003
                                                 -----------   -----------

NET SALES                                        $ 4,851,869   $ 3,615,518
                                                 -----------   -----------

COST OF GOODS SOLD:
    Cost of goods sold, excluding depreciation     2,499,613     1,614,637
    Depreciation                                      63,319       145,156
                                                 -----------   -----------

        Total cost of goods sold                   2,562,932     1,759,793
                                                 -----------   -----------

GROSS PROFIT                                       2,288,937     1,855,725
                                                 -----------   -----------

OTHER COSTS AND EXPENSES:

    Selling, general and administrative            1,724,162     1,310,751
    Depreciation and amortization                     66,549        62,447
                                                 -----------   -----------

        Total other costs and expenses             1,790,711     1,373,198
                                                 -----------   -----------

INCOME FROM OPERATIONS                               498,226       482,527

INTEREST EXPENSE                                      52,520       107,308
                                                 -----------   -----------

INCOME BEFORE INCOME TAXES                           445,706       375,219
                                                 -----------   -----------

PROVISION FOR INCOME TAXES:
    Current                                           20,057        33,636
    Deferred                                         158,226       116,318
                                                 -----------   -----------

                                                     178,283       149,954
                                                 -----------   -----------

NET INCOME                                       $   267,423   $   225,265

PREFERRED STOCK DIVIDENDS                               --         157,406
                                                 -----------   -----------

NET INCOME APPLICABLE TO COMMON SHAREHOLDERS     $   267,423   $    67,859
                                                 ===========   ===========


BASIC WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING                                        9,913,916     3,577,210
                                                 ===========   ===========

DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING                                       10,482,432     3,589,880
                                                 ===========   ===========

BASIC AND DILUTED NET INCOME PER SHARE
APPLICABLE TO COMMON SHAREHOLDERS                $      0.03   $      0.02
                                                 ===========   ===========`

See accompanying notes to condensed consolidated financial statements.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
THREE MONTHS
ENDED SEPTEMBER 30, 2004
(UNAUDITED)

`Additional                                  Total
                                             Common Stock         Paid-in      Treasury    Accumulated    Shareholders'
                                       ----------------------
                                         Shares       Amount      Capital       Stock        Deficit        Equity
                                       -----------   --------   -----------   ---------    -----------    -----------

BALANCES, JUNE 30, 2004                $ 9,857,210   $  9,858   $ 7,425,540   $ (20,832)   $(1,470,080)   $ 5,944,486

   Issuance of common stock for
       exercise of stock warrants           75,000         75        74,925        --             --           75,000
   Issuance of common stock for
        exercise of stock options            3,500          4         2,747        --             --            2,751

   Net income                                 --         --            --          --          267,423        267,423
                                       -----------   --------   -----------   ---------    -----------    -----------
BALANCES, SEPTEMBER 30, 2004             9,935,710      9,937     7,503,212     (20,832)    (1,202,657)   $ 6,289,660
                                       ===========   ========   ===========   =========    ===========    ===========`

See accompanying notes to condensed consolidated financial statements.

---

# MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

`Three Months Ended
                                                                           September 30,
                                                                         2004         2003
                                                                       ---------    ---------

CASH FLOWS FROM OPERATING ACTIVITIES :
    Net income                                                         $ 267,423    $ 225,265
    Adjustments to reconcile net Income to net cash
      provided by (used in) operating activities:
         Depreciation and amortization                                   129,868      207,603
         Deferred income taxes                                           158,226      116,318
         Provision for bad debts                                           2,778       17,259
         Changes in operating assets and liabilities :
             Accounts receivable                                        (978,794)      86,223
             Insurance claim receivable                                  500,000         --
             Inventories                                                 (69,612)     (38,584)
             Prepaid expenses and other current assets                  (193,732)      (1,939)
             Other assets                                                (21,759)     (22,818)
             Accounts payable                                           (265,679)    (144,461)
             Income taxes payable                                        (21,652)        --
             Accrued expenses and other current liabilities              (40,095)     (64,437)
             Accrued expense - supplier                                     --       (107,952)
             Deferred revenue                                            180,433      (23,722)
                                                                       ---------    ---------
                 Net cash provided by (used in) operating activities    (352,595)     248,754
                                                                       ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES :
    Purchases of property and equipment                                 (252,364)     (47,809)
                                                                       ---------    ---------
                 Net cash used in investing activities                  (252,364)     (47,809)
                                                                       ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES :
    Bank debt                                                            517,631     (148,701)
    Bank term loan payments                                             (100,000)        --
    Payments of debt                                                     (11,413)     (64,786)
    Proceeds from issuance of common stock                                77,751         --
                                                                       ---------    ---------
                 Net cash provided by (used in) financing activities     483,969     (213,487)
                                                                       ---------    ---------

NET DECREASE IN CASH                                                    (120,990)     (12,542)

CASH, BEGINNING OF PERIOD                                                666,116       66,467
                                                                       ---------    ---------

CASH, END OF PERIOD                                                    $ 545,126    $  53,925
                                                                       =========    =========

SUPPLEMENTAL CASH FLOW INFORMATION :
    Interest paid                                                      $  50,878    $ 100,976
                                                                       =========    =========
    Income taxes paid                                                  $  45,206         --
                                                                       =========    =========`

See accompanying notes to condensed consolidated financial statements.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1 
BASIS OF PRESENTATION :

Our accounting and
reporting policies conform to accounting principles generally accepted in the
United States of America. Except for the June 30, 2004 consolidated balance
sheet, the consolidated financial statements presented herein are unaudited but
reflect all adjustments which, in our opinion, are necessary for the fair
presentation of the consolidated financial position, results of operations and
cash flows for the interim periods presented. All adjustments reflected in the
interim consolidated financial statements are of a normal recurring nature. You
should read these consolidated financial statements in conjunction with the
consolidated financial statements and notes thereto and the report of our
independent registered public accounting firm included in our Annual Report on
Form 10-KSB for the year ended June 30, 2004. The year-end consolidated balance
sheet data was derived from audited financial statements, but does not include
all disclosures required by accounting principles generally accepted in the
United States of America. The results of operations for the three months ended
September 30, 2004 are not necessarily indicative of the results to be expected
for the full year.

## NOTE 2 
NATURE OF BUSINESS :

We are engaged in the
business of manufacturing and distributing supplies for workgroup or business
color printers. Our products include solid ink sticks, color toner cartridges
and other consumable items. We distribute our products through an international
network of dealers and distributors. We also sell directly to end-users through
programs designed to foster our supplies business.

## NOTE 3 
STOCK-BASED COMPENSATION PRO FORMA DISCLOSURE :

The Company follows the
intrinsic value method of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. Financial
Accounting Standards Board Statement No. 123 Accounting for Stock-Based
Compensation (SFAS 123) permits a company to elect to follow the intrinsic
value method of APB 25 rather than the alternative fair value accounting
provided under SFAS 123, but requires pro forma net income and earnings per
share disclosures as well as various other disclosures. The Company has also
adopted the disclosure provisions required under Financial Accounting Standards
Board Statement No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure (SFAS 148). Under APB 25, because the exercise
price of all of the Companys stock options has equaled the market price of
the underlying stock on the date of grant, no compensation expense was
recognized.

Pro forma information
regarding net income and earnings per share is required by SFAS 123 and SFAS
148, and has been determined as if the Company had accounted for its employee
stock options under the fair value method of those statements.

The fair value of options
granted in 2004 and 2003 were estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions, respectively:

`Three Months Ended
                                                                     September 30,
                                                                    2004       2003
         ----------------------------------------------------     ---------  --------
         Risk-free interest rate                                     4%         6%
         Dividend yield                                             0.0%       0.0%
         Expected common stock market price volatility factor        9%        74%
         Expected life of stock options                           10 years   10 years`

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For purposes of pro forma
disclosures, the estimated fair value of options is amortized to expense over
the options vesting periods. The Companys pro forma information
follows:

`Three Months Ended
                                                                          September 30,

                                                                        2004         2003
                                                                     ---------    ---------
        Net income as reported                                       $ 267,423    $ 225,265
           Less preferred stock dividends                                 --        157,406
                                                                     ---------    ---------
        Income applicable to common shareholders                       267,423       67,859

        Stock-based employee compensation expense under fair value
            method, net of related tax effects                         (16,746)      (8,931)
                                                                     ---------    ---------
        Pro forma net income applicable to common shareholders       $ 250,677    $  58,928
                                                                     =========    =========

        Income per share applicable to common shareholders :
                Basic and diluted, as reported                           $0.03        $0.02
                                                                         =====        =====
                Basic, pro forma                                         $0.03        $0.02
                                                                         =====        =====
                     Diluted, pro forma                                  $0.02        $0.02
                                                                         =====        =====`

## NOTE 4 
BANK LINE OF CREDIT :

We have an agreement with a
lender under which we can borrow up to $3,000,000 under a revolving line of
credit, subject to availability of collateral. Borrowings bear interest at 1.75%
over the lenders base rate, are payable on demand and are collateralized
by all of the assets of the Company. As of September 30, 2004, $2.3 million was
outstanding under this line and included in the bank debt in the accompanying
condensed consolidated balance sheet. The interest rate was 6.5%. The line of
credit expires on October 31, 2006.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 5 
EARNINGS PER SHARE

Basic earnings per common share
is computed using the weighted average number of common shares outstanding.
Diluted earnings per common share is computed using the weighted average number
of common shares outstanding adjusted for the incremental dilutive shares
attributed to outstanding options and warrants to purchase common stock, and
other potentially dilutive securities.

The following table sets
forth the computation of basic and diluted net income per share applicable to
common shareholders :

`Three Months Ended
                                                                                September 30,
                                                                              2004          2003
                                                                          -----------   -----------

         Numerator :
             Net income applicable to common shareholders - basic
                 and diluted                                              $   267,423   $    67,859
                                                                          ===========   ===========

         Denominator :
             Denominator for basic net income per share :
                 Weighted average shares                                    9,913,916     3,577,210


             Effect of dilutive securities -
                 stock options and warrants                                   568,516        12,670
                                                                          -----------   -----------
             Denominator for diluted earnings per share                    10,482,432     3,589,880
                                                                          ===========   ===========

             Net income per share applicable to common shareholders :
                 Basic                                                    $      0.03   $      0.02
                                                                          ===========   ===========
                 Diluted                                                  $      0.03   $      0.02
                                                                          ===========   ===========`

The following warrants and
options to purchase common stock were excluded from the computation of diluted
net income per share as of September 30, 2004 and 2003 because they were
anti-dilutive for those periods:

`September 30,
                                                                              2004          2003
                                                                          -----------   -----------

             Anti-dilutive warrants and options                             1,850,650     3,189,423
                                                                          ===========   ===========`

The assumed conversion of
the Class A convertible preferred stock has been excluded from the computation
of diluted net income per share for the three months ended September 30, 2003.
Such conversion, when taking into account the additional income applicable to
common shareholders generated by the elimination of the dividend, would be
anti-dilutive.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 6 
RECALL AND WARRANTY EXPENSES:

The Company provides a
warranty for all of its consumable supply products. The Companys warranty
stipulates that the Company will pay reasonable and customary charges for the
repair of a printer needing service as a result of using the Companys
products. The Company estimates the costs that may be incurred and records a
liability in the amount of such costs at the time product revenue is recognized.
Factors that may affect the warranty include the number of units shipped to
customers, historical and anticipated rates of warranty claims and cost per
claim. The Company periodically assesses the adequacy of its recorded warranty
liability and adjusts the amount as necessary. These expenses are classified as
selling, general and administrative costs.

Changes in accrued product
warranty for the three months ended September 30, 2004 and 2003 are as follows:

`Three Months Ended
                                                                 September 30,
                                                               2004         2003
                                                             ---------    ---------

        Warranty reserve at the beginning of the period      $ 340,592    $ 250,000
                                                             ---------    ---------

               Warranty expenses accrued during the period     294,277      302,000
               Warranty claims settled during the period      (295,622)    (302,000)
                                                             ---------    ---------
        Net change in warranty reserve                          (1,345)        --
                                                             ---------    ---------

        Warranty reserve at end of period                    $ 339,247    $ 250,000
                                                             =========    =========`

## NOTE 7 
ENGINEERING AND PRODUCT DEVELOPMENT EXPENSES :

Engineering and product
development costs, which consist of salary and related benefits costs of our
technical staff, as well as product development costs, including conceptual
formulation, design and testing of product alternatives, and construction of
prototypes, are expensed as incurred. For the three months ended September 30,
2004 and 2003, engineering and product development costs were approximately
$106,000 and $8,000, respectively.

## NOTE 8 
ADVERTISING EXPENSES :

The Company accounts for
advertising costs in accordance with Statement of Position 93-7, Reporting
on Advertising Costs. Advertising expenses are deferred until first use of
the advertising. Deferred advertising costs at September 30, 2004 and 2003
totaled approximately $84,000 and $69,000, respectively. Advertising expense for
the three months ended September 30, 2004 and 2003 amounted to approximately
$215,000 and $105,000, respectively.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
9  SEGMENT INFORMATION:

The Company has adopted the
provisions of Statements of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). Pursuant to the provisions of SFAS 131, the Company is
reporting segment sales, cost of goods sold, gross margins and operating income
in the same format reviewed by the Companys chief operating decision maker
(the management approach). The Company has two reporting segments:
Media Sciences and Cadapult. The Media Sciences segment
is comprised of the operations connected with manufacturing and distributing
color printer supplies, including ink sticks and toner cartridges through
distributors. The Cadapult segment is comprised of selling supplies, including
Media Sciences supplies, directly to certain end users and the sale and support
of other computer graphics systems.

The Company assesses and
measures segment operating results based on operating income. Asset information
is not reported since the Company does not use this measure to assess
performance.

Net sales, cost of goods
sold and other related segment information follows:

`September 30,
                                                                     2004           2003
                                                                  -----------    -----------
Net sales:
     Media Sciences                                               $ 4,126,499    $ 2,891,116
     Cadapult                                                         829,315        860,070
     Elimination                                                     (103,945)      (135,668)
                                                                  -----------    -----------
          Totals                                                  $ 4,851,869    $ 3,615,518
                                                                  ===========    ===========

Cost of goods sold:
     Media Sciences                                               $ 2,109,350    $ 1,360,267
     Cadapult                                                         550,116        552,670
     Elimination                                                      (96,534)      (153,144)
                                                                  -----------    -----------
          Totals                                                  $ 2,562,932    $ 1,759,793
                                                                  ===========    ===========

Gross profit:
     Media Sciences                                               $ 2,017,149    $ 1,530,849
     Cadapult                                                         279,199        307,400
     Elimination                                                       (7,411)        17,476
                                                                  -----------    -----------
          Totals                                                  $ 2,288,937    $ 1,855,725
                                                                  ===========    ===========

Selling, general, administrative and other expenses:
     Media Sciences                                               $ 1,565,066    $ 1,057,212
     Cadapult                                                         225,645        315,986
     Elimination                                                         --             --
                                                                  -----------    -----------
          Totals                                                  $ 1,790,711    $ 1,373,198
                                                                  ===========    ===========

Income from operations:
     Media Sciences                                               $   452,083    $   473,637
     Cadapult                                                          53,554         (8,586)
     Elimination                                                       (7,411)        17,476
                                                                  -----------    -----------
          Totals                                                  $   498,226    $   482,527
                                                                  ===========    ===========

Reconciliation to consolidated net income:
     Segment income from operations                               $   498,226    $   482,527
     Non-operating items                                              (52,520)      (107,308)
     Income taxes                                                    (178,283)      (149,954)
                                                                  -----------    -----------
     Net income                                                   $   267,423    $   225,265
                                                                  ===========    ===========`

---

## ITEM 2.  
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS

You should read the
following discussion and analysis in conjunction with the information set forth
in the unaudited financial statements and notes thereto, included elsewhere
herein, and the audited financial statements and the notes thereto, included in
our Form 10-KSB filed September 28, 2004.

## RESULTS OF
OPERATIONSFOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

Sales.  Our consolidated sales for the three months ended September 30, 2004 compared to the same period in 2003, increased
approximately 34% to $4.9 million from $3.6 million.  Media Sciences sales increased approximately 43% to $4.1 million from $2.9
million.  Cadapult sales decreased approximately 4% to $0.83 million from $0.86 million.  Approximately 60% of the increase in Media Sciences sales was due to the shipment of new products, while 40% of the increase was due to increased sales of existing products.

Gross Profit.  The
consolidated gross profit for the three months ended September 30, 2004 was $2.3
million, or approximately 47% of sales, as compared to $1.9 million, or
approximately 51% of sales for the three months ended September 30, 2003. Media
Sciences gross profit margins decreased to 49% from 53% in the prior year.
Cadapults gross profit margins decreased slightly to 34% from 36%. The
decrease in Media Sciences gross profit margins was due to a shift in the
mix of toner product sales and to a temporary increase in our solid ink
manufacturing costs.

Selling, General and
Administrative.  Consolidated selling, general and administrative expenses
for the three months ended September 30, 2004 increased to $1.7 million or 36%
of sales, from $1.3 million or 36% of sales for the three months ended September
30, 2003. Media Sciences selling, general and administrative expenses
increased slightly to 38% of sales from 37% of sales. The increase in Media
Sciences selling, general and administrative expenses was primarily due to
increased sales, marketing and new product development costs. Cadapults
selling, general and administrative expenses decreased to 27% of sales from 37%
of sales primarily due to a shift in the allocation of overhead from Cadapult to
Media Sciences. The allocation of overhead has shifted from Cadapult to Media
Sciences due to the relative increases in management time, financial resources,
and space resulting from the focus on growing the Media Sciences business.

Depreciation and
Amortization.  For the three months ended September 30, 2004 compared to the
same period in 2003, our depreciation and amortization expense decreased to
$0.13 million, of which $0.06 million was included in cost of goods sold, from
$0.2 million of which $0.15 million was included in cost of goods sold. The
decrease in depreciation was due to substantially all of the No-Cap Color
printer assets and one Media Sciences tooling investment being fully
depreciated in our last fiscal year. Amortization of intangibles for the three
months ended September 30, 2004 was $2,177 and for the three months ended
September 30, 2003 was $2,317.

Interest Expense.  
For the three months ended September 30, 2004 compared to the same period in
2003, our interest expense decreased to $0.05 million from $0.1 million due to
the retirement of high interest rate debt during our fiscal 2004 year.

Income Taxes.  For
the three months ended September 30, 2004, we recorded a current income tax
expense of $0.02 million and a deferred income tax expense of $0.16 million as
compared to a current income tax expense of $0.03 million and a deferred income
tax expense of $0.12 million in 2003. For the three months ended September 30,
2004, we recorded the current income tax expense because of New Jerseys
suspension of the use of 50% of net operating loss carry forwards. For the three
months ended September 30, 2003, we recorded the current income tax expense
because of New Jerseys full suspension of the use of net operating loss
carry forwards. An effective aggregate state and federal tax rate of 40% was
used for both periods.

Dividends.  There were no dividends for the three months ended September 30, 2004.  For the three months ended September 30, 2003, we
accrued $0.16 million of stock dividends to our preferred shareholders.

Net Income Applicable to
Common Shareholders.  For the three month period ended September 30, 2004, we
earned $0.27 million or $0.03 per share basic and diluted as compared earned
$0.07 million or $0.02 per share basic and diluted for the corresponding three
month period ended September 30, 2003.

---

## LIQUIDITY AND
CAPITAL RESOURCES

For the three months ended
September 30, 2004, we experienced negative cash flows of $0.12 million. Cash
flows from operating activities resulted in negative cash flows of $0.35 million
primarily due to net income of $0.27 million, non cash charges of $0.13 million
for depreciation and amortization and $0.16 million for deferred income taxes,
the receipt of the insurance claim receivable of $0.5 million and an increase in
deferred revenue of $0.18 million, offset by an increase in accounts receivable
of $1 million, an increase in prepaid expenses of $0.19 million and a decrease
in accounts payable of $0.27 million.

The cash we used in
investing activities included the purchase of equipment and tooling in the
amount of $0.25 million.

Cash provided by financing
activities was $0.48 million, comprised primarily of advances from our credit
facility of $0.52 million and proceeds from stock option and warrant exercises
of $0.08 million, offset by term loan payments of $0.1 million.

We have an agreement with a
lender under which we can borrow up to $3,000,000 under a revolving line of
credit, subject to availability of collateral. Borrowings bear interest at 1.75%
over the lenders base rate, are payable on demand and are collateralized
by all assets of the Company. As of September 30, 2004, $2.3 million was
outstanding under this line.

We anticipate that our cash
requirements over the next twelve months which will include increases in
inventory associated with new product launches and capital expenditures
associated with new product launches, the move to new facilities, and the
acquisition of certain manufacturing equipment to scale our solid ink
manufacturing, will be met through internal cash generated by increased sales
and profitability, the use of our revolving line of credit and where appropriate
operating leases.

## INFLATION

We have historically offset
any inflation in operating costs by a combination of increased productivity and
price increases, where appropriate. We do not expect inflation to have a
significant impact on our business in the future.

## SEASONALITY

We anticipate that our cash
flow from operations will be slightly better in the fall and winter months than
in the spring and summer months. In the event that we are unable to generate
sufficient cash flows from operations, we may be required to utilize other cash
reserves, if any, or seek additional equity or debt financing to meet operating
expenses, and there can be no assurance that there will be any other cash
reserves or that additional financing will be available or, if available, on
reasonable terms.

## FORWARD
LOOKING STATEMENTS

The foregoing management
discussion and analysis contains forward-looking statements and information that
are based on our managements beliefs, as well as assumptions made by, and
information currently available to our management. These forward-looking
statements are based on many assumptions and factors, and are subject to many
conditions, including our continuing ability to obtain additional financing,
dependence on contracts with suppliers, competitive pricing for our products,
demand for our products which depends upon the condition of the computer
industry, and the effects of increased indebtedness as a result of our business
acquisitions. Except for the historical information contained in this new
release, all forward-looking information are estimates by our management and are
subject to various risks, uncertainties and other factors that may be beyond our
control and may cause results to differ from our managements current
expectations, which may cause our actual results, performance or achievements to
be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements.

---

## ITEM 3.
CONTROLS AND PROCEDURES

## Disclosure
Controls and Procedures

The Companys
management, with the participation of the Companys Chief Executive Officer
and Principal Financial Officer, has evaluated the effectiveness of the
Companys disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2004.
Based on such evaluation, the Companys Chief Executive Officer and
Principal Financial Officer have concluded that, as of the such date, the
Companys disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.

There have not been any
changes in the Companys internal control over financial reporting during
the quarter ended September 30, 2004 to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

---

# PART II.  
OTHER INFORMATION

## ITEM 6.  
EXHIBITS

The following exhibits are
filed with this report:

|Exhibit Number | Description of Exhibit
|-------------- | ----------------------

|Exhibit 11* | Statement re: computation of per share earnings is hereby incorporated by
reference to Financial Statements of Part I - Financial Information,
Item 1  Financial Statements, contained in this Form 10-QSB.
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 31.1* | Certification of Chief Executive Officer pursuant to Securities Exchange Act
                           Rule 13a-14(a)/15d-14(a)
|------------- | --------------------------------------------------------------------------------------------------------------------------------

|Exhibit 31.2* | Certification of Principal Financial Officer pursuant to Securities Exchange
                           Act Rule 13a-14(a)/15d-14(a)
|------------- | ------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 32.1* | Certification of Chief Executive Officer Pursuant to Securities Exchange Act
                           Rule 13a-14(b) and 18 U.S.C. Section 1350
|------------- | -------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 32.2* | Certification of Principal Financial Officer Pursuant to Securities Exchange
                           Act Rule 13a-14(b) and 18 U.S.C. Section 1350
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|_____ | 
|----- | 

|* Filed herewith. | 
|----------------- | 

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# SIGNATURES

In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

| | MEDIA SCIENCES INTERNATIONAL, INC.
| | ----------------------------------

|Dated:  November 11, 2004 | By:/s/ Michael W. Levin
        Michael W. Levin
        Chief Executive Officer and President
|------------------------- | ----------------------------------------------------------------------------------------------

|Dated:  November 11, 2004 | By:/s/ Denise Hawkins
        Denise Hawkins
        Vice President and Controller
        (Principal Financial Officer)
|------------------------- | ------------------------------------------------------------------------------------------------------------------------

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