---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

| | [x] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | --- | ---------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2002

| | [  ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934
| | ---- | ----------------------------------------------------------------------------------------------------

For the transition period from __________ to __________.

Commission file number: 0-21853

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

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| | 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) 236-1100
(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
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 90 past days.  YES [X] NO [  ]

As of January 21, 2003, the issuer had 3,577,210 shares of common stock outstanding.

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

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---

MEDIA
SCIENCES INTERNATIONAL, INC.AND
SUBSIDIARIES

# FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

|         |  |                                                                                                          | Page
|-------- |  | -------------------------------------------------------------------------------------------------------- | ----
|PART I.  |  | FINANCIAL INFORMATION                                                                                    |     
|Item 1.  |  | Financial Statements                                                                                     | 3   
|         |  | Consolidated Balance Sheets as of December 31, 2002 and June 30, 2002                                    | 3   
|         |  | Consolidated Statements of Income For the Three Months and Six Months Ended December 31, 2002 and 2001   | 4   
|         |  | Consolidated  Statement  of Changes in  Shareholders'  Equity For the Six Months
Ended December 31, 2002 | 5   
|         |  | Consolidated Statements of Cash Flows For the Six Months Ended December 31, 2002
and 2001                | 6   
|         |  | Notes to Consolidated Financial Statements                                                               | 7   
|Item 2.  |  | Management's Discussion and Analysis of Financial Condition and
             Results of Operations       | 10  
|Item 3.  |  | Controls and Procedures                                                                                  | 13  
|         |  |                                                                                                          |     
|PART II. |  | OTHER INFORMATION                                                                                        |     
|Item 2.  |  | Changes in Securities                                                                                    | 14  
|Item 5.  |  | Other Information                                                                                        | 14  
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                         | 14  

---

# PART I.  
FINANCIAL INFORMATION

## ITEM 1.  
FINANCIAL STATEMENTS

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

`December 31,      June 30,
                                                                 2002            2002
                                  ASSETS                     (Unaudited)
                                  ------                     ------------    ------------

CURRENT ASSETS :
    Cash                                                     $     67,250    $     42,180
    Accounts receivable, less allowance for doubtful
       accounts of $35,000                                      1,914,597       1,257,270
    Inventories                                                 1,111,122       1,324,583
    Deferred tax asset, net                                       926,381       1,000,000
    Prepaid expenses and other current assets                      33,906          59,846
                                                             ------------    ------------
        Total Current Assets                                    4,053,256       3,683,879

PROPERTY AND EQUIPMENT, NET                                     1,507,705       1,778,497

OTHER ASSETS:
    Goodwill and other intangible assets, net                   4,477,549       4,392,773
    Deferred income taxes                                         246,422         500,000
    Other assets                                                   60,102          57,733
                                                             ------------    ------------
                                                                4,784,073       4,950,506

TOTAL ASSETS                                                 $ 10,345,034    $ 10,412,882
                                                             ============    ============

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

CURRENT LIABILITIES :
    Short-term debt                                          $  2,345,296    $  2,113,794
    Accounts payable                                            1,897,087       2,311,790
    Accrued expenses and other current liabilities                158,523         129,495
    Accrued product warranty                                      250,000         500,000
    Accrued expense - supplier                                    583,037         395,153
    Dividends payable                                             385,106         113,849
    Loan from investors                                           600,000         535,242
    Loan from officers                                            475,000         355,000
    Deferred revenue                                              123,941         230,297
                                                             ------------    ------------
                                                                6,817,990       6,684,620

OTHER LIABILITIES :
    Long-term debt, less current maturities                        90,466         194,336
    Accrued expense - supplier                                     14,005         330,644
                                                             ------------    ------------
                                                                  104,471         524,980

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY :
    Common Stock, .001 par value,
       Authorized 20,000,000 shares; issued 3,577,210 in
       December and 3,531,363 in June                               3,578           3,532
    Series A Convertible Preferred stock, $.001 par value,
       Authorized 1,000,000 shares; issued 547,500 shares             547             547
    Additional paid-in capital                                  5,109,343       5,065,833
    Cost of 10,564 shares of common stock in treasury             (20,832)        (20,832)
    Retained earnings (deficit)                                (1,670,063)     (1,845,798)
                                                             ------------    ------------
        Total shareholders' equity                              3,422,573       3,203,282

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   $ 10,345,034    $ 10,412,882
                                                             ============    ============`

See accompanying notes to consolidated financial statements.

---

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

`Three Months Ended         Six Months Ended
                                                        December 31,              December 31,
                                                      2002         2001         2002         2001
                                                   ----------   ----------   ----------   ----------

NET SALES                                          $4,023,556   $3,798,779   $7,512,706   $7,623,876
                                                   ----------   ----------   ----------   ----------

COSTS AND EXPENSES :
    Cost of goods sold, excluding depreciation      1,938,155    1,913,101    3,526,649    3,789,351
    Depreciation                                      131,979      112,950      256,195      207,754
                                                   ----------   ----------   ----------   ----------
        Total cost of goods sold                    2,070,134    2,026,051    3,782,844    3,997,105


    Selling, general and administrative expenses    1,328,370      979,558    2,533,851    2,028,971
    Depreciation and amortization                      68,076       78,638      137,325      161,952
                                                   ----------   ----------   ----------   ----------
        Total costs and expenses                    3,466,580    3,084,247    6,454,020    6,188,028
                                                   ----------   ----------   ----------   ----------

INCOME FROM OPERATIONS                                556,976      714,532    1,058,686    1,435,848

INTEREST EXPENSE, NET                                 127,349      103,243      240,693      221,201
                                                   ----------   ----------   ----------   ----------

INCOME BEFORE INCOME TAXES                            429,627      611,289      817,993    1,214,647

INCOME TAXES :
    Current                                            38,947         --         73,867         --
    Deferred                                          133,152      278,157      253,578      485,859
                                                   ----------   ----------   ----------   ----------
                                                      172,099      278,157      327,445      485,859
                                                   ----------   ----------   ----------   ----------

NET INCOME                                         $  257,528   $  333,132   $  490,548   $  728,788
                                                   ==========   ==========   ==========   ==========

PREFERRED STOCK DIVIDENDS                          $  157,407   $  157,407   $  314,813   $  314,813
                                                   ----------   ----------   ----------   ----------

INCOME APPLICABLE TO COMMON SHAREHOLDERS           $  100,121   $  175,725   $  175,735   $  413,975
                                                   ==========   ==========   ==========   ==========


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING :
    BASIC                                           3,577,210    3,485,516    3,554,287    3,482,641
                                                   ==========   ==========   ==========   ==========
    DILUTED                                         3,577,437    6,269,123    3,555,358    6,289,890
                                                   ==========   ==========   ==========   ==========

NET INCOME PER COMMON SHARE :
    BASIC                                          $     0.03   $     0.05   $     0.05   $     0.12
                                                   ==========   ==========   ==========   ==========
    DILUTED                                        $     0.03   $     0.05   $     0.05   $     0.12
                                                   ==========   ==========   ==========   ==========`

See accompanying notes to consolidated financial statements.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
SIX MONTHS ENDED DECEMBER 31, 2002

`Common Stock       Preferred Stock   Additional                               Total
                                         ------------------   ----------------     Paid-in    Treasury    Retained     Shareholders'
                                          Shares     Amount    Shares   Amount     Capital      Stock     Earnings        Equity
                                         ---------   ------   -------   ------   ----------   --------   -----------   -------------

BALANCES, JUNE 30, 2002                  3,531,363   $3,532   547,500   $  547   $5,065,833   $(20,832)  $(1,845,798)  $   3,203,282

PERIOD ENDED DECEMBER 31, 2002

  Issuance of common stock for
    dividend payment                        45,847       46        --       --       43,510         --            --          43,556
  Preferred stock dividend, 11.5%               --       --        --       --           --         --      (314,813)       (314,813)
  Net Income                                    --       --        --       --           --         --       490,548         490,548
                                         ---------   ------   -------   ------   ----------   --------   -----------   -------------

BALANCES, DECEMBER 31, 2002 (UNAUDITED)  3,577,210   $3,578   547,500   $  547   $5,109,343   $(20,832)  $(1,670,063)  $   3,422,573
                                         =========   ======   =======   ======   ==========   ========   ===========   =============`

See accompanying notes to consolidated financial statements.

---

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

`Six Months Ended
                                                                   December 31,
                                                                2002         2001
                                                              ---------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES :
    Net Income                                                $ 490,548    $ 728,788
    Adjustments to reconcile net income to net cash
      flows from operating activities :
         Depreciation and amortization                          393,520      369,706
         Deferred income taxes                                  327,197      485,859
         Changes in operating assets and liabilities :
             Accounts receivable                               (657,327)     300,034
             Settlement receivable                                 --       (597,914)
             Inventories                                        213,461       54,140
             Prepaid expenses and other current assets           25,940      (36,246)
             Other assets                                        (2,369)     (94,968)
             Accounts payable                                  (414,703)    (413,062)
             Accrued expenses and other current liabilities    (220,972)     (64,655)
             Accrued expense - supplier                        (128,755)     (64,197)
             Deferred revenues                                 (106,356)     (69,246)
                                                              ---------    ---------
                 Net cash flows from operating activities       (79,816)     598,239
                                                              ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES :
    Purchases of property and equipment                        (112,895)    (141,033)
    Purchase of intangible assets                               (94,609)    (139,544)
                                                              ---------    ---------
                 Net cash flows from investing activities      (207,504)    (280,577)
                                                              ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES :
    Advances on short term debt                                 296,260      107,162
    Payments on long term debt                                 (103,870)    (110,310)
    Advances / (payments) from officers                         120,000      (40,000)
    Payment of UltraHue note                                       --        (15,000)
    Preferred stock dividend                                       --       (314,813)
                                                              ---------    ---------
                 Net cash flows from financing activities       312,390     (372,961)
                                                              ---------    ---------

NET CHANGE IN CASH                                               25,070      (55,299)

CASH BEGINNING OF YEAR                                           42,180      132,144
                                                              ---------    ---------

CASH END OF PERIOD                                            $  67,250    $  76,845
                                                              =========    =========

SUPPLEMENTAL CASH FLOW INFORMATION :
    Interest paid                                             $ 176,195    $ 217,262
                                                              =========    =========
    Income taxes paid                                         $     248    $   6,130
                                                              =========    =========
    Issuance of common stock as dividend payment              $  43,556    $   8,482
                                                              =========    =========
    Inventories transferred to equipment                      $    --      $ 120,417
                                                              =========    =========`

See accompanying notes to consolidated financial statements.

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION :

| | Our
accounting and reporting policies conform to generally accepted accounting
principles. Except for the June 30, 2002 consolidated balance sheet, the
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 financial
statements are of a normal recurring nature. You should read these financial
statements in conjunction with the financial statements and notes thereto and
the report of independent accountants included in our Annual Report on Form
10-KSB for the year ended June 30, 2002. The year end balance sheet data was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. The results of operations
for the three and six months ended December 31, 2002 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 - LOAN FROM OFFICERS :

| | Between
August 17, 2000 and September 14, 2000, we borrowed an aggregate of $325,000
from our President, Michael W. Levin. We used the funds as bridge financing for
printers acquired for Cadapults No-Cap Color printer program. From
September 2001 through March 2002, we repaid $70,000 of these loans. In April
2002, we borrowed an additional $100,000 from Mr. Levin. These loans are
unsecured, payable on demand and bear an interest rate of 10%. These short-term
loans mature in May of 2003. In addition, in September 2002, we borrowed $95,000
from Mr. Levin. This loan matures in September of 2003 and carries a 23%
interest rate, with interest due monthly. There is no representation or
assurances made that Mr. Levin will make any further loans to us. We accrued
interest of $8,523 for the six months ended December 31, 2002 and $4,913 for the
six months ended December 31, 2001.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2002 we borrowed $25,000 from Duncan Yates, an officer. This loan
matures in December of 2003 and carries a 23% interest rate, with interest due
monthly.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 4 - NOTE PAYABLE TO INVESTORS :

| | We
have a $400,000 note payable to an investor group which bears interest at 12%
per annum and is payable in quarterly installments of interest only through June
2003. Two members of this investor group are persons who bear the following
relationships with Media Sciences or with our officers and directors: Paul Baker
is a director of Media Sciences and Mitchell Baker is the son of Paul Baker.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
June 2002, we also borrowed an aggregate of $175,000 from several individuals.
The notes matured in December 2002 and bore simple interest at the rate of 12%
per year. In connection with these borrowings, we issued 87,500 detachable
warrants that were valued at $43,372, which resulted in the recording of a
discount on debt. The discount was amortized through December 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

| | In
December 2002, we repaid the $175,000 borrowed in June through cash principal
payments of $75,000 and through the issuance of new, one year notes aggregating
$100,000 and bearing simple interest of 20%, payable quarterly.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Three
of the four new note holders are persons who bear the following relationships
with Media Sciences or with our officers and directors: Paul Levin is the father
of Michael W. Levin, President and Chairman of Media Sciences; Frank and Edna
Blanco are the parents of Frances Blanco, Vice President and a director of Media
Sciences; and Mitchell Baker is the son of Paul Baker, a director of Media
Sciences. Each of Michael W. Levin, Frances Blanco, and Paul Baker disclaims
beneficial ownership of these notes.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
October 2002, we borrowed $100,000 from Paul Baker, a director of Media
Sciences. This loan matures in October of 2003 and carries a 23% interest rate,
with interest due monthly.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 5 - NOTE PAYABLE TO BANK :

| | We
have an agreement with a lender under which we can borrow up to $4,000,000 under
a revolving line of credit, subject to availability of collateral. Borrowings
bear interest at 1.25% over the lenders base rate, are payable on demand
and are collateralized by all assets of the Company. We are also required to pay
an unused Facility Fee of 0.25% per annum, payable monthly. As of December 31,
2002, $1,838,899 was outstanding under this line. Our agreement with the lender
for this revolving line of credit terminates on April 30, 2003. We are in
discussions with our current lender and several other potential lenders about a
new credit facility. While we believe that we will be able to secure a new
credit facility, there can be no assurance of that at this time, nor can there
be assurances that any new facility would be on essentially the same terms and
conditions as our existing facility.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 6 - DIVIDENDS :

| | In
June 2002, our Board of Directors voted to offer preferred shareholders the
option to receive payment in kind for the dividend periods ending June 30, 2002
and September 30, 2002 in order to conserve cash flow, through a common stock
issuance at $0.95 per share, the fair market value of our common stock on that
date. Fourteen shareholders elected to receive their dividend payments through
the payment-in-kind, totaling $87,112 and consisting of 91,694 shares of common
stock for the two periods ending June 30, 2002 and September 30, 2002, of which
45,847 shares are deemed issued as of June 30, 2002 and 45,847 shares are to be
issued on September 30, 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2002, our Board of Directors voted to defer payment of the preferred
stock dividends through the periods ending September 30, 2003. Our Board voted
to accrue 6% simple interest on the deferred dividends, to be paid upon payment
of the deferred dividends.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 7 - ACCOUNTING CHANGES :

| | Effective
July 1, 2001, we adopted SFAS 141 and SFAS 142. SFAS 141 requires business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting. It also specifies the types of acquired
intangible assets that are required to be recognized and reported separate from
goodwill. SFAS 142 requires that goodwill and certain intangibles no longer be
amortized, but instead tested for impairment at least annually. There was no
impairment of goodwill upon adoption of SFAS 142.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# MEDIA
SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

| | During
the six months ended December 31, 2002, $94,609 of goodwill related to the
ultraHue acquisition was recorded, and no goodwill was impaired, or written off.
As of December 31, 2002, goodwill was $4,986,030 and accumulated amortization
was $539,855.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
of our acquired intangible assets are subject to amortization. During the first
two quarters of fiscal 2002, we acquired no other intangible assets. Intangible
assets amortization expense for the second quarter of fiscal 2002 was $4,916.
The components of intangible assets include a covenant not to compete associated
with an acquisition, and two acquired URLs. The value of our other intangible
assets is $97,000, less accumulated amortization of $65,626.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 8 - EARNINGS PER SHARE :

| | Basic
earnings per share is computed using the weighted average number of shares
outstanding. Diluted earnings per common share is computed using the weighted
average number of shares outstanding adjusted for the incremental 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 earnings per share :
| | ----------------------------------------------------------------------------------------

`Three Months               Six Months
                                                                  Ended                     Ended
                                                              December 31,              December 31,
                                                            2002         2001         2002         2001
                                                         ----------   ----------   ----------   ----------

Numerator :
    Income applicable to common  shareholders - basic   $  100,121   $  175,725   $  175,735   $  413,975
                                                         ==========   ==========   ==========   ==========
    Income applicable to common shareholders - diluted   $  100,121   $  333,132   $  175,735   $  728,788
                                                         ==========   ==========   ==========   ==========

Denominator :
    Denominator for basic earnings per share :
        Weighted average shares                           3,577,210    3,485,516    3,554,287    3,482,641
                                                         ----------   ----------   ----------   ----------

    Effect of dilutive securities
        Conversion of preferred stock to  common               --      2,737,500         --      2,737,500
        Stock options and warrants                              227       46,107        1,071       69,749
                                                         ----------   ----------   ----------   ----------
    Denominator for diluted earnings per share            3,577,437    6,269,123    3,555,358    6,289,890
                                                         ==========   ==========   ==========   ==========

    Earnings per share :
        Basic                                            $     0.03   $     0.05   $     0.05   $     0.12
                                                         ==========   ==========   ==========   ==========
       Diluted                                           $     0.03   $     0.05   $     0.05   $     0.12
                                                         ==========   ==========   ==========   ==========`

| | The
conversion of the Class A convertible preferred stock has been excluded from the
computation of diluted earnings per share for the three months and six months
ended December 31, 2002. Such conversion, when taking into account the
additional net income generated by the elimination of the dividend, would have
been anti-dilutive.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following warrants to purchase common stock were excluded from the computation
of diluted earnings per share for the three months and six months ended December
31, 2002 because the warrants exercise price was greater than the average
market price of the common stock for those periods:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Three Months               Six Months
                                                                  Ended                     Ended
                                                              December 31,              December 31,
                                                            2002         2001         2002         2001
                                                         ----------   ----------   ----------   ----------

          Anti-dilutive warrants and options              3,382,979    2,578,226    3,382,979    2,578,226
                                                         ==========   ==========   ==========   ==========`

---

## 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 October 15, 2002.

## Results of
Operations

## For the Three and Six Months Ended December 31, 2002 and 2001

Sales. Our consolidated sales for the three months ended December 31, 2002 compared to the same period in 2001,
increased approximately 6% to $4,023,556 from $3,798,779.  Our consolidated sales for the six months ended
December 31, 2002 compared to the same period in 2001, decreased approximately 2% to $7,512,706 from $7,623,876.
The increase in our sales for the three months can be attributed to a 22% increase in our Media Sciences color
printer supply business from the same period one year ago, offset by a reduction in our Cadapult Graphic Systems
legacy reseller business.  The slight decrease in our sales for the six months can be attributed to a 5% increase
in our Media Sciences color printer supply business from the same period one year ago, offset by a reduction in
our Cadapult Graphic Systems legacy reseller business.

Cost of Sales. Our cost of
sales for the three months ended December 31, 2002 were $1,938,155, or
approximately 48% of sales, as compared to $1,913,101, or approximately 50% of
sales for the comparable period in 2001. Our cost of sales for the six months
ended December 31, 2002 was $3,526,649, or approximately 47% of sales, as
compared to $3,789,351, or approximately 50% of sales for the comparable period
in 2001. The decrease in our cost of sales can be attributed to the continued
growth of the higher margin business generated by our Media Sciences subsidiary.
Further, during the three and six months ended December 31, 2002, we incurred
approximately $100,000 in incremental inbound shipping expenses, due to the west
coast dock strike and slowdown. We do not anticipate incurring those additional
shipping expenses in the foreseeable future.

Selling, General and
Administrative. For the three months ended December 31, 2002 as compared to the
same period in 2001, our selling, general and administrative expenses increased
to $1,328,370 from $979,558, which represents an increase to 33% of sales from
26% of sales. For the six months ended December 31, 2002 as compared to the same
period in 2001, our selling, general and administrative expenses increased to
$2,533,851 from $2,028,971, which represents an increase to 34% of sales from
27% of sales. We continue to incur certain warranty expenses associated with the
recall of our solid inks in January of 2002. However the claim rates have
dropped substantially over the last several months and we expect them to
continue to subside. We evaluate and adjust our warranty accrual quarterly,
based on managements experience and expectation of future claims. During
the three months ended December 31, 2001, we settled a legal malpractice suit
and recorded a one-time benefit of approximately $600,000. Had this one-time
settlement not occurred in 2001, our selling, general and administrative
expenses for the three months ended December 31, 2002 as compared to the same
period in 2001 would have decreased to $1,328,370 from $1,577,472, which
represents a decrease to 33% of sales from 41% of sales, and our selling,
general and administrative expenses for the six months ending December 31, 2002
as compared to the same period in 2001 would have decreased to $2,533,851 from
$2,626,885, which represents a decrease to 34% of sales from 35% of sales.

Depreciation and
Amortization. For the three months ended December 31, 2002 compared to the same
period in 2001, our depreciation expense increased to $200,055 from $191,588 as
a result of the depreciation of capital leases and equipment purchases during
the last year. Amortization of intangibles was $4,916 for both periods. For the
six months ended December 31, 2002 compared to the same period in 2001, our
depreciation expense increased to $393,520 from $369,706 as a result of the
depreciation of capital leases and equipment purchases during the last year.
Amortization of intangibles was $9,832 for both periods.

Interest Expense. For the
three months ended December 31, 2002 as compared to the same period in 2001, our
Interest expense increased to $127,349 from $103,243. For the six months ended
December 31, 2002 as compared to the same period in 2001, our interest expense
increased to $240,693 from $221,201. The increases in interest expense are a
result of the interest component of the accrued supplier agreement, capital
leases and other increased borrowings.

---

Income Taxes. For the three
months ended December 31, 2002, we recorded a current income tax expense of
$38,947 and a deferred income tax expense of $133,152 as compared to a deferred
income tax expense of $278,157 in 2001. For the six months ended December 31,
2002, we recorded a current income tax expense of $73,867 and a deferred income
tax expense of $253,578 as compared to a deferred income tax expense of $485,859
in 2001. For the three and six months ended December 31, 2002, we recorded the
current income tax expense due to New Jerseys two year suspension of the
use of Net Operating Loss carry forwards.

Dividends.  For the three months ending December 31, 2002, we accrued $157,407 of stock dividends to our
preferred shareholders.  For the six months ended December 31, 2002, we accrued $271,256 of stock dividends to
our preferred shareholders and paid $43,556 in stock dividends through a common stock issuance at $0.95 per share
as discussed in Note 6 above.

Net Income. For the three
month period ended December 31, 2002, we earned $100,121 or $0.03 per share
basic and diluted as compared to $175,725 or $0.05 per share basic and diluted,
for the corresponding three month period ended December 31, 2001. For the six
month period ended December 31, 2002, we earned $175,735, or $0.05 per share
basic and diluted, as compared to $413,975, or $0.12 per share, basic and
diluted, for the corresponding six month period ended December 31, 2001. Had we
not incurred the additional shipping expenses resulting from the west coast dock
strike and slowdown, for the three month period ended December 31, 2002, we
would have earned approximately $160,121, or $0.04 per share basic and diluted,
and for the six months ended December 31, 2002, we would have earned
approximately $235,735, or $0.07 per share basic and diluted.

## Liquidity and
Capital Resources

We experienced positive
cash flow of $25,070 for the six months ended December 31, 2002. Cash generated
by operations resulted in negative cash flows of $79,816 primarily due to net
income of $490,548, a non cash charge of $393,520 for depreciation and
amortization and $327,197 for deferred income taxes, and a reduction in
inventory of $213,461 offset by an increase in accounts receivable of $657,327,
a decrease in accounts payable of $414,703 and a decrease of $432,512 of accrued
expenses and other liabilities.

The cash we used in
investing activities included the purchase of equipment in the amount of
$112,895 and the purchase of intangible assets generated by the ultraHue
earn-out in the amount of $94,609. The ultraHue earn-out has been concluded as
of December 13, 2002 and there will be no further purchase of intangibles
associated with this acquisition.

Cash generated by financing
activities included proceeds from short term debt of $296,260, advances from
officers of $120,000 offset by the repayment of $103,870 of long-term. We have
an agreement with a lender under which we can borrow up to $4,000,000 under a
revolving line of credit, subject to availability of collateral. Borrowings bear
interest at 1.25% over the lenders base rate, are payable on demand and
are collateralized by all assets of the Company. We are also required to pay an
unused Facility Fee of 0.25% per annum, payable monthly. As of December 31,
2002, $1,838,899 was outstanding under this line. Our agreement with the lender
for this revolving line of credit terminates on April 30, 2003. We are in
discussions with our current lender and several other potential lenders about a
new credit facility. While we believe that we will be able to secure a new
credit facility, there can be no assurance of that at this time, nor can there
be assurances that any new facility would be on essentially the same terms and
conditions as our existing facility.

In June 2002, we borrowed
an aggregate of $175,000 from several individuals. The notes matured in December
2002 and bore simple interest at the rate of 12% per year. In December 2002, we
repaid the $175,000 borrowed in June through cash principal payments of $75,000
and through the issuance of new, one year notes aggregating $100,000 and bearing
simple interest of 20%, payable quarterly. Three of the four new note holders
are persons who bear the following relationships with Media Sciences or with our
officers and directors: Paul Levin is the father of Michael W. Levin, President
and Chairman of Media Sciences; Frank and Edna Blanco are the parents of Frances
Blanco, Vice President and a director of Media Sciences; and Mitchell Baker is
the son of Paul Baker, a director of Media Sciences.

---

Between August 17, 2000 and
September 14, 2000, we borrowed an aggregate of $325,000 from our President,
Michael W. Levin. We used the funds as bridge financing for printers acquired
for Cadapults No-Cap Color printer program. From September 2001 through
March 2002, we repaid $70,000 of these loans. In April 2002, we borrowed an
additional $100,000 from the President. These loans are unsecured, payable on
demand and bear an interest rate of 10%. These short-term loans mature in May of
2003. In addition, in September 2002, we borrowed $95,000 from Mr. Levin. This
loan matures in September of 2003 and carries a 23% interest rate, with interest
due monthly. We accrued interest of $8,523 for the six months ended December 31,
2002 and $4,913 for the six months ended December 31, 2001.

In October 2002, we
borrowed $100,000 from Paul Baker, a director of Media Sciences. This loan
matures in October of 2003 and carries a 23% interest rate, with interest due
monthly.

In December 2000, the note
payable to ultraHue came due and was satisfied with a cash payment of $760,000
and a six month term note in the amount of $400,000, and bearing an interest
rate of 13% per annum. Under this note, $250,000 is currently outstanding.

In December 2002 we
borrowed $25,000 from Duncan Yates, an officer. This loan matures in December of
2003 and carries a 23% interest rate, with interest due monthly.

The terms of these loans
borrowed from the companys officers, directors, and others having
relationships with our officers and directors were determined by the Board of
Directors in light of the companys financial condition, the terms of
previous borrowings from such persons, and the terms on which short-term loans
were available from public resources. The terms of these loans were deemed fair
to the company and viewed as an arms length transaction. There is no
ongoing contractual or other commitments with any of these persons resulting
from these transaction, and there is no representation or assurances made that
any of these person will make any further loans to us.

## 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 its 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 due to the sales cycles associated with our
legacy business. 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 the 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 the
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

(a)  Evaluation of Controls and Procedures

Within 90 days prior to the
filing of this report, under the supervision and with the participation of the
companys management, including the companys Chief Executive Officer,
Vice President of Operations, and Controller, an evaluation of the effectiveness
of our disclosure controls and procedures was performed. Based on this
evaluation, the Chief Executive Officer Vice President of Operations, and
Controller have concluded that our disclosure controls and procedures are
effective to ensure that material information is recorded, processed, summarized
and reported by management of the company on a timely basis in order to comply
with the companys disclosure obligations under the Securities Exchange Act
of 1934 and the SEC rules thereunder.

(b)  Changes in Internal Controls

There were no significant
changes in the companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation.

---

# PART II.  
OTHER INFORMATION

## ITEM 2.  
CHANGES IN SECURITIES

In March 2000, we completed
a private placement of 550,000 units of our securities and raised gross proceeds
of approximately $5,500,000 in transactions deemed to be exempt under Section
4(2) of the Securities Act and under Rule 506 of Regulation D promulgated under
the Securities Act. Each purchaser represented to us that the purchaser was an
accredited person who had financial, tax and business sophistication to evaluate
the merits and risks of the investment and agreed that the purchaser has no
right to demand that the units be registered. We made a determination that each
purchaser was an accredited investor and that each purchaser was a sophisticated
investor with enough knowledge and experience in business to evaluate the risks
and merits of the investment. Each unit consisted of one share of convertible
preferred stock and warrants to purchase two shares of common stock. The
preferred stock has rights to quarterly dividends of 11.5%. In December 2002,
our Board of Directors voted to defer payment of the preferred stock dividends
through the periods ending September 30, 2003. Our Board voted to accrue 6%
simple interest on the deferred dividends, to be paid upon payment of the
deferred dividends.

## ITEM 5.  
 OTHER INFORMATION

On January 21, 2003, our Board of Directors elected Sagiv Shiv to serve on our Board of Directors.  Dr. Shiv is
currently a Managing Director at Punk Ziegel and Company, a full service investment bank, which he joined in
2001, that provides services centered around emerging, high growth companies.  Prior to joining Punk Ziegal, from
1999 to 2001, he worked at Ryan, Beck & Co., where he was a director.  From 1997 to 1999, he worked at Josepthal
& Co., Inc., where he was a vice president.  Dr. Shiv has also served as Chief Financial Officer  for both the
Plastiflex Group, an international manufacturing company, from 1993 to 1997, and The Petroglas Group, a
diversified holding company, from 1987 to 1993. In addition, Dr. Shiv has extensive experience in international business,
international treasury management, mergers and acquisitions, and project finance.  He holds a B.Sc. and Ph. D.
Degrees in Finance and Commercial Economics from Pacific Western University.

## ITEM 6.  
EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits.

The following exhibits are filed with this report:

|Exhibit 11 | Statement Concerning 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 99 | Certifications
|---------- | --------------

(b)        Reports on Form 8-K.

Not applicable.

---

# 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:  February 12, 2003 | By:/s/ Michael W. Levin
      Michael W. Levin
      Chief Executive Officer and President
|------------------------- | ------------------------------------------------------------------------------------------

|Dated:  February 12, 2003 | By:/s/ Duncan Huyler
      Duncan Huyler
      Vice President of Operations
|------------------------- | ---------------------------------------------------------------------------

|Dated:  February 12, 2003 | By:/s/ Denise Hawkins
      Denise Hawkins
      Controller and Vice President
|------------------------- | ------------------------------------------------------------------------------

---

# CERTIFICATIONS

I, Michael W. Levin, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Media Sciences International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this quarterly report;

4.       The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a)       designed such disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)       presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to
the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent functions):

a)       all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this quarterly report whether there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date:  February 12, 2003

| | /s/ Michael W. Levin
Michael W. Levin
Chief Executive Officer
| | -------------------------------------------------------------

---

I, Duncan Huyler, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Media Sciences International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this quarterly report;

4.       The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a)       designed such disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)       presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to
the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent functions):

a)       all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this quarterly report whether there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date:  February 12, 2003

| | /s/ Duncan Huyler
Duncan Huyler
Vice President of Operations
| | ------------------------------------------------------------

---

I, Denise Hawkins, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Media Sciences International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this quarterly report;

4.       The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a)       designed such disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)       presented in this quarterly report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to
the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent functions):

a)       all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this quarterly report whether there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date:  February 12, 2003

| | /s/ Denise Hawkins
Denise Hawkins
Controller and Vice President
| | ---------------------------------------------------------------

---