-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vun9gotXO15N80t0xWC1y1Kq3nnhCFASPt4TbPiehp44270UHaWHBru6tS9vqCri eEwPuWxH/QnnlB6kwYyRLw== 0001144204-03-003468.txt : 20030701 0001144204-03-003468.hdr.sgml : 20030701 20030701161755 ACCESSION NUMBER: 0001144204-03-003468 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20030701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTION PRODUCTS INTERNATIONAL INC CENTRAL INDEX KEY: 0000747435 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 592095427 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-106713 FILM NUMBER: 03768290 BUSINESS ADDRESS: STREET 1: 344 CYPRESS RD CITY: OCALA STATE: FL ZIP: 34472-3108 BUSINESS PHONE: 3526872202 MAIL ADDRESS: STREET 1: 344 CYPRESS ROAD CITY: OCALA STATE: FL ZIP: 34472-3108 FORMER COMPANY: FORMER CONFORMED NAME: ACTION PACKETS INC DATE OF NAME CHANGE: 19880818 S-3 1 s3.txt AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 2003 REGISTRATION STATEMENT NO. 333-_______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ACTION PRODUCTS INTERNATIONAL, INC. ----------------------------------- (Exact name of registrant as specified in its charter) Florida 59-2095427 ------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) Robert L. Burrows, CFO Action Products International, Inc. 390 N. Orange Ave., Suite 2185 390 N. Orange Ave., Suite 2185 Orlando, Florida 32801 Orlando, Florida 32801 (407) 481-8007 (407) 481-8007 - ----------------------------------- ------------------------------------ (Address, including zip code, and (Name, address, including zip code, telephone number, including area and telephone number, including code, of registrant's principal area code, of agent for service) executive offices) ---------- With copies to: James G. Smith, Esq. Raice Paykin & Krieg, LLP 185 Madison Avenue, 10th Floor New York, NY 10016 (212) 725-4423 ---------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] _____ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ]_____ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] CALCULATION OF REGISTRATION FEE
=============================================================================================================================== Proposed Proposed Amount Maximum Maximum Amount of to be Offering Price Aggregate Registration Title of each Class of Securities Being Registered Registered Per Security(1) Offering Price(1) Fee - ------------------------------------------------------------------------------------------------------------------------------- Common Stock underlying Warrants.......................... 3,272,092 $2.00 $6,544,184 Total...................................................................................... $6,544,184 $530(2) ===============================================================================================================================
(1) For purposes of calculating the registration fee for the common stock underlying the warrants, based on the highest exercise price of the warrants pursuant to Rule 457(g) under the Securities Act. THIS REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8, MAY DETERMINE. ================================================================================ The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Dated July 1, 2003 PROSPECTUS 3,272,092 Shares of Common Stock Underlying Common Stock Purchase Warrants ACTION PRODUCTS INTERNATIONAL, INC. ---------- On June 30, 2003, we made a distribution to our shareholders one warrant for each share of our common stock owned on June 12, 2003. Each warrant you own entitles you to purchase one share of our common stock at an exercise price of $2.00 per share. As a result of this warrant distribution, we may issue up to 3,272,092 shares of common stock upon exercise of the warrants. The warrants are exercisable until 5:00 p.m., New York City time, on June 11, 2004. Our common stock is listed on the Nasdaq SmallCap Market under the symbol "APII." On June 25, 2003, the last reported sale price of the common stock on the Nasdaq SmallCap Market was $1.90 share. There is currently no public market for our warrants and we do not anticipate that a public market for our warrants will develop. ---------- The exercise of the warrants involves substantial risk. You should refer to the discussion of Risk Factors, beginning on page 7 of this prospectus. ---------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this Prospectus is July , 2003 TABLE OF CONTENTS PAGE ---- Special Note Regarding Forward-Looking Statements.............................2 Where You Can Find More Information About Us..................................2 Prospectus Summary............................................................3 Risk Factors..................................................................7 Use of Proceeds..............................................................12 The Warrants.................................................................12 Legal Matters................................................................17 Experts......................................................................17 You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus. References in this prospectus to "we", "us", "our", "our company" and similar terms means Action Products International, Inc., a Florida corporation. 1 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Some of the statements under "Prospectus Summary," "Risk Factors" and elsewhere in this prospectus are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of those terms or other comparable words. We believe that the expectations reflected in the forward-looking statements are reasonable, but we cannot guarantee future results, levels of activity, performance, or achievements. We do not promise to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus may not occur. WHERE YOU CAN FIND MORE INFORMATION ABOUT US We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file with the Commission at the Public Reference Room at the Commission, located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information concerning the Public Reference Room. The Commission also makes these documents and other information available on its web site at http://www.sec.gov. We have filed with the Commission a registration statement on Form S-3 under the Securities Act of 1933, as amended, relating to the common stock offered by this prospectus. This prospectus is a part of the registration statement but does not contain all of the information in the registration statement and its exhibits. For further information, we refer you to the registration statement and its exhibits. The Commission allows us to "incorporate by reference" the information we file with it, which means that we can disclose important information to you by referring you to another document we have filed with the Commission. The information incorporated by reference is an important part of this prospectus and information that we file later with the Commission will automatically update and supersede this information. We incorporate by reference the following: o our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 filed with the Commission on March 26, 2003, as amended on March 31, 2003; o our Proxy Statement filed with the Commission on May 7, 2003; o our Quarterly Report on Form 10-QSB for the quarter year ended March 31, 2003 filed with the Commission on April 30, 2003; o any future filings we make with the Commission until we sell all of the common stock offered by us by this prospectus. You may request a copy of these filings, at no cost, by writing or telephoning us at Action Products International, Inc., Attn: Investor Relations, 390 N. Orange Ave., Suite 2185, Orlando, Florida 32801, (407) 481-8007, extension 723 or 718. 2 PROSPECTUS SUMMARY Questions and answers about our company What do we do? We are a brand-focused, educational toy company. We design, manufacture and market a diversified portfolio of educational and non-violent brands of toy products, to various retailing channels such as toy stores, specialty retailers, education outlets, museums, and attractions in the United States and throughout the world. Our revenues for the twelve months ended December 31, 2002 and the three months ended March 31, 2003 were approximately $6,429,000 and $1,385,000, respectively. We incurred net losses for the twelve months ended December 31, 2002 and the three months ended March 31, 2003 of approximately $1,306,000 and $130,000, respectively. We were originally incorporated, and began our operations, in New York in 1977, and relocated and re-incorporated in Florida in 1980 as a distributor of education oriented toys and children's books, stationery and souvenirs, supplying museum gift shops. Under new executive leadership, a new business model was developed and implemented. From 1997 through 2002 we successfully developed or acquired and brought to market a core portfolio of proprietary branded product lines to replace sales of divested non-core lines. Our first internally-developed proprietary toy brand, Space Voyagers(R), generated approximately $1.0 million in its first full year on the market. During the past three fiscal years, we have continued to develop other new proprietary products through internal development, licensing and acquisition. In October 2002 we began shipping our newest brand, Jay Jay The Jet Plane(TM), based on a PBS television show, videos and children's books of the same name. Our business model is based on the expansion of core brands, while developing new brands through internal product development, favorable licensing agreements and prudent acquisitions. Our growth strategy is based on diversifying distribution channels, while creating and increasing brand equity. We sell our educational toy product lines under the umbrella name "Action Products(TM)." Our marketing and promotion communications focus on our individual brands such as, Space Voyagers(R), Climb@tron(TM), I DIG DINOSAURS(R), Woodkits(TM), Drop Zone Extreme(R), Play & Store(TM) and Jay Jay The Jet Plane(TM). Products include action figures, play-sets, activity kits and various other toys with a strategic emphasis on non-violent and educational and fun topics such as space, dinosaurs, science, and nature. The EarthLore(R) I DIG DINOSAURS(R) brand acquired in October 2000 continues to grow in popularity and contributed over $1.5 million to net sales in 2002. The introduction of the new Jay Jay The Jet Plane(TM) brand in the fourth quarter 2002 added another $0.4 million in net sales. Our other brands including Drop Zone Extreme(TM), Space Voyagers(R) and Play & Store(TM) contributed the remaining $4.5 million net sales in 2002. In addition to the development of internal brands, we actively pursue prudent acquisition opportunities and licensing arrangements. In October 2000, we acquired certain assets of Earth Lore Ltd., a privately held Canada-based maker of popular award-winning educational excavation kits for children. The acquisition provided us with an appropriate product line extension, and channels of distribution that complemented our existing bases. In 2001, we acquired a license agreement with the developers of the PBS children's show Jay Jay The Jet Plane(TM) to develop and launch our new Wooden Adventure System(TM) based on the episodes, videos and books of this popular children's series. We launched this product line in the fourth quarter 2002 to popular reception from trade and consumers. Where are we located? 3 Our mailing address and telephone number of our principal executive offices are Action Products International, Inc., 390 N. Orange Ave., Suite 2185, Orlando, Florida 32801, (407) 481-8007. Questions and answers about our warrants What is a warrant? We have distributed to our shareholders, at no charge, one warrant for each share of our common stock owned as of June 12, 2003. Each warrant entitles the holder to purchase one share of our common stock at an exercise price of $2.00 per share When you "exercise" a warrant, you choose to purchase the common stock that the warrant entitles you to purchase. You may exercise all or some of your warrants, or you may choose not to exercise any of your warrants. Why did we make a warrant distribution? We made the warrant distribution to obtain additional working capital. Instead of selling shares of common stock to outside parties, our board of directors has chosen to give you the opportunity to buy more shares without diluting your interest while providing us with additional capital. How did we arrive at the $2.00 per share exercise price? In determining the exercise price, our board of directors desired to offer shares at a price that would be attractive to our shareholder base relative to the current trading price of our common stock. Our board also considered the following factors, among others, in no particular order of priority: o our desire to increase working capital at a minimal cost to us; o the historic and current market price of our common stock; o general conditions in the securities market; o alternatives available to us for raising capital; o the amount of proceeds desired; o the liquidity of our common stock; and o the level of risk to our investors. How do I exercise my warrants? You must properly complete the exercise notice on the back of your warrant certificate and deliver it to our warrant agent before 5:00 p.m., New York City time, on June 11, 2004. Your warrant certificate must be accompanied by proper payment for each share that you wish to purchase. How long will I have to exercise my warrants? You will be able to exercise your warrants only during a limited period. If you do not exercise your warrants before 5:00 p.m., New York City time, on June 11, 2004, your warrants will expire. After I exercise my warrants, can I change my mind? No. Once you send in your warrant certificate and payment, you cannot revoke the exercise of your warrant, even if you later learn information about us that you consider to be unfavorable. You should not exercise any of your warrants unless you are certain that you wish to purchase additional shares of common stock at the exercise price. 4 Is exercising my warrants risky? The exercise of your warrants involves substantial risks. Exercising your warrants means buying additional shares of our common stock, and you should carefully consider this purchase as you would other equity investments. Among other things, you should carefully consider the risks described under "Risk Factors". Do I have to exercise any of my warrants? No. What happens if I choose not to exercise my warrants? You will retain your current number of shares of common stock even if you do not exercise your warrants. However, if you do not exercise any of your warrants and other holders of warrants do, the percentage of our common stock that you own will diminish, and your voting and other rights will be diluted. Can I sell or give away my warrants? Yes. However, we have not listed the warrants on the Nasdaq Stock Market or any other trading market. We cannot assure that any trading market will develop for the warrants. May the company redeem the warrants? Yes. On 21 days prior written notice, the company may redeem all, but not less than all, of the outstanding warrants at a redemption price of $0.001 per warrant. Has the Board of Directors made a recommendation regarding this offering? No. What should I do if I want to exercise my warrants, but my warrants are held in the name of my broker, dealer or other nominee? If you hold your warrants through a broker, dealer or other nominee (for example, through a custodian bank), then your broker, dealer or other nominee is the record holder of the warrants you own. This record holder must exercise the warrants on your behalf for shares you wish to purchase. Therefore, you will need to have your record holder act for you. If you wish to exercise your warrants, please promptly contact the record holder of your common stock. What fees or charges apply if I exercise my warrants? We are not charging you any fee or sales commission to issue shares to you if you exercise any of your warrants. We may, however, pay a soliciting broker for your exercise of your warrants. If you exercise your warrants through a record holder of your shares, such as a broker, you are responsible for paying any fees that person may charge. What are the Federal income tax consequences of exercising my warrants? The exercise of your warrants are intended to be nontaxable for purposes of federal income tax. However, no ruling from the Internal Revenue Service nor an opinion of counsel will be sought. You should seek specific tax advice from your personal tax advisor. 5 When will I receive my new shares? If you exercise any of your warrants, you will receive certificates representing those shares as soon as practicable after the date of exercise. Subject to state securities laws and regulations, we have the discretion to delay distribution of any shares you may have elected to purchase by exercise of your warrants in order to comply with state securities laws. How much money will our company receive from the exercise of warrants? The gross proceeds from the exercise of warrants depend on the number of shares that are purchased. If all of the warrants are exercised, we will receive gross proceeds of approximately $6.5 million. How will our company use the proceeds from the exercise of the warrants? We will use any proceeds generated from the exercise of the warrants for additional working capital. How many shares will be outstanding after the exercise of all of the warrants? The number of shares of common stock that will be outstanding after the exercise of all of the warrants distributed will be 6,544,184. ADDITIONAL QUESTIONS If you have more questions, please contact either Ronald S. Kaplan, our President and Chief Executive Officer, or Warren Kaplan, our Chairperson of the Board, at (407) 481-8007 extension 723 or 718. 6 RISK FACTORS You should carefully consider the risks described below before making an investment decision. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks and you may lose all or part of your investment. Risks associated with our business We incurred significant net losses in fiscal 2002 and 2001. If we continue to incur net losses, our ability to satisfy our cash requirements may be more difficult. We incurred net losses of approximately $1.3 million and $0.5 million in fiscal 2002 and 2001, respectively. There can be no assurance that we will return to profitability in the future. If we fail to generate operating income and net income, we could have difficulty meeting our working capital requirements. We have substantial cash requirements and may require additional sources of funds. Additional sources of funds may not be available or available on reasonable terms. We have substantial cash requirements in connection with our operations and debt service obligations. In addition, new product development, which is key to the success of our business, is cash intensive. If the cash we generate from our operations or from our other sources is not available when needed or is insufficient to satisfy our requirements, we may require additional sources of funds. We cannot assure you that such additional sources of funds would be available on reasonable terms or at all. If we do not generate sufficient amounts of capital to meet our cash requirements at the times and on the terms required by us, our business will be adversely affected. Changing consumer preferences may negatively impact our product lines. As a result of changing consumer preferences, many toys are successfully marketed for only one or two years, if at all. We cannot assure you that any of our current successful products or product lines will continue to be popular with consumers for any significant period of time, or that new products and product lines will achieve an acceptable degree of market acceptance, or that if such acceptance is achieved, it will be maintained for any significant period of time. Our success is dependent upon our ability to enhance existing product lines and develop new products and product lines. The failure of our new products and product lines to achieve and sustain market acceptance and to produce acceptable margins could have a material adverse effect on our financial condition and results of operations. We may need additional financing. We have an agreement with Citrus Bank, pursuant to which Citrus Bank provides us with a revolving line of credit for up to $2.0 million as described in the agreement. The borrowings under the line of credit are utilized to finance accounts receivable, inventory and other operating and capital requirements. This line of credit matures June 30, 2005 and contains covenants relating to our financial condition. If we fail to maintain compliance with the financial covenants contained in the line of credit, the maturity date could be accelerated. Our customers' inventory management systems may cause us to produce excess inventory that may become obsolete and increase our inventory carrying costs. Most of our largest retail customers utilize an inventory management system to track sales of products and rely on reorders being rapidly filled by us and other suppliers, rather than maintaining large product inventories. These types of systems put pressure on suppliers like us to promptly fill customer orders and also shift some of the inventory risk from the retailer to suppliers. Production of excess inventory by us to meet anticipated retailer demand could result in our carrying obsolete inventory and increasing our inventory carrying costs. Similarly, if we fail to predict consumer demand for a product, we may not be able to deliver an adequate supply of products on a timely basis and will, as a result, lose sales opportunities. Returns and markdowns could impact our revenues. As is customary in the toy industry, we have historically permitted, on a minimum basis, certain customers to return slow-moving items for 7 credit. We expect that we will continue to make such accommodations in the future. Any significant increase in the amount of returns could have a material adverse effect on our financial condition and results of operations. There are risks related to our acquisition strategy. We may, from time to time, evaluate and pursue acquisition opportunities on terms management considers favorable. A successful acquisition involves an assessment of the business condition and prospects of the acquisition target, which includes factors beyond our control. This assessment is necessarily inexact and its accuracy is inherently uncertain. In connection with such an assessment, we perform a review we believe to be generally consistent with industry practices. This review, however, will not reveal all existing or potential problems, nor will it permit us to become sufficiently familiar with the acquisition target to assess fully its deficiencies. We cannot assure you that any such acquisition would be successful or that the operations of the acquisition target could be successfully integrated with our operations. Any unsuccessful acquisition could have a material adverse effect on our financial condition and results of operations. We are dependent on contracts with manufacturers, most of which are short-term. We conduct substantially all of our manufacturing operations through contract manufacturers, many of which are located in the People's Republic of China (PRC), Hong Kong, Singapore and Taiwan. We generally do not have long-term contracts with our manufacturers. Foreign manufacturing is subject to a number of risks including, but not limited to, o transportation delays and interruptions, o political and economic disruptions, o the impositions of tariffs and import and export controls, and o changes in governmental policies. While we have not experienced any material adverse effects due to such risks to date, we cannot assure you that such events will not occur in the future and possibly result in increases in costs and delays of, or interferences with, product deliveries resulting in losses of sales and goodwill. We are dependent on intellectual property rights and cannot ensure that we will be able to successfully protect such rights. We rely on a combination of trademark, copyright, patent and other proprietary rights laws to protect our rights to valuable intellectual property related to our brands. We also rely on license and other agreements to establish ownership rights and to maintain confidentiality. We cannot assure you that such intellectual property rights can be successfully asserted in the future or that they will not be invalidated, circumvented or challenged. In addition, laws of certain foreign countries in which our products are sold, or in which we operate, do not protect intellectual property rights to the same extent as the laws of the U.S. The failure to protect our proprietary information and any successful intellectual property challenges or infringement proceedings against us could have a material adverse affect on our business, financial condition or results of operations. There are specific risks associated with international sales. We have sold products to customers in the United Kingdom, Canada, Korea, Japan, Australia and New Zealand. We expect to augment our presence in international markets. Accordingly, our business, and our ability to expand our operations internationally, is subject to various risks inherent in international business activities. We may have difficulty in safeguarding our intellectual property in countries where intellectual property laws are not well developed or are poorly enforced. General economic conditions and political conditions of various countries may be subject to severe fluctuations at any time. Such fluctuations could hinder our performance under contracts in those countries or could hinder our ability to collect for product and services delivered in those countries. Unexpected changes in foreign regulatory requirements could also make it difficult or too costly for us to conduct business internationally. In addition, although we have normally been successful in stipulating that our foreign customers pay in U.S. dollars, any payment provisions involving foreign currencies may result in less revenue than 8 expected due to foreign currency rate fluctuations. Other risks associated with international operations include o import and export licensing requirements, o trade restrictions, o changes in tariff rates, o overlapping tax structures, o transportation delays, o currency fluctuations, o potentially adverse tax consequences, and o compliance with a variety of foreign laws and regulations. Any of the foregoing factors could have a material adverse effect on our ability to expand our international sales. Increased exposure to international markets creates new areas with which we may not be familiar and could place us in competition with new vendors. We cannot assure you that we will be successful in our efforts to compete in these international markets. We face potential liability from product safety claims. Products that have been or may be developed or sold by us may expose us to potential liability from personal injury or property damage claims by end-users of such products. We have never been and are not presently a defendant in any product liability lawsuit; however, we cannot assure you that such a suit will not be brought against us in the future. We currently maintain product liability insurance coverage in the amount of $1.0 million per occurrence, with a $2.0 million excess umbrella policy. We cannot assure you that we will be able to maintain such coverage or obtain additional coverage on acceptable terms, or that such insurance will provide adequate coverage against all potential claims. Moreover, even if we maintain adequate insurance, any successful claim could materially and adversely affect our reputation and prospects, and divert management's time and attention. The U.S. Consumer Products Safety Commission, or CPSC, has the authority under certain federal laws and regulations to protect consumers from hazardous goods. The CPSC may exclude from the market goods it determines are hazardous, and may require a manufacturer to repurchase such goods under certain circumstances. Some state, local and foreign governments have similar laws and regulations. In the event that such laws or regulations change or we are found in the future to have violated any such law or regulation, the sale of the relevant product could be prohibited and we could be required to repurchase such products. We may become subject to burdensome governmental regulation. In the U.S., we are subject to the provisions of, among other laws, the Federal Consumer Product Safety Act and the Federal Hazardous Substances Act. These acts empower the CPSC to protect the public against unreasonable risks of injury associated with consumer products, including toys and other articles. The CPSC has the authority to exclude from the market articles, which are found to be hazardous and can require a manufacturer to repair or repurchase such toys under certain circumstances. Any such determination by the CPSC is subject to court review. Violations of these acts may also result in civil and criminal penalties. Similar laws exist in some states and cities in the U.S. and in many jurisdictions throughout the world. We maintain a quality control program, including the retention of independent testing laboratories, to ensure compliance with applicable laws. We believe we are currently in substantial compliance with these laws. In general, we have not experienced difficulty complying with such regulations, and compliance has not had an adverse effect on our business. There are risks related to our customers' payment terms. The majority of our customers receive trade terms to which payments for products are delayed for up to 30 days and some receive up to 90 days, pursuant to various sales promotion programs. To reduce our exposure to uncollectible accounts receivable, in March 2001 we secured a business credit insurance policy to guarantee the majority of our accounts receivable. Although we have secured such a policy, the insolvency or business failure of one or more of our customers with large accounts receivable could have a material adverse affect on our future sales. 9 Seasonality may affect our results of operations. Our sales have historically been seasonal in nature, reflecting peak sales in the third and fourth quarters and slower sales in the first and second quarters. Risks associated with our warrants The warrants are "out-of-the-money." The warrant exercise price is higher than the recent trading prices of our common stock at the date of this prospectus. Our Board of Directors determined the warrant exercise price and approved the distribution of warrants to give our shareholders a fixed opportunity to buy additional shares without brokerage fees. However, there is no assurance that the market price of our common stock will equal or exceed the exercise price of the warrants at any time before or after the expiration time. The offering price was determined by our Board of Directors and bears no direct relationship to the value of our assets, financial condition or other established criteria for value. Our common stock may trade at prices above or below this price. Your interest in us may be diluted to the extent other warrant holders exercise warrants and you do not. If you do not exercise your warrants in full, your percentage ownership and voting rights will decrease to the extent that warrants are exercised by others. After submitting your warrant certificate and exercise price, you may not revoke your exercise and could be committed to buy shares above the prevailing market price. As of June 25, 2003, the trading price of the common stock was $1.90. Because the warrant exercise price is $2.00 per share, subject to adjustment, the warrants are "out-of-the-money" on the date of this prospectus. We can give no assurance that the trading price of our common stock will ever meet or exceed the warrant exercise price and, consequently, whether it will ever be profitable for the holders of warrants to exercise the warrants. If you exercise your warrants while the trading price of our common stock is less than the warrant exercise price, then you will have committed to buy shares of our common stock at a price above the prevailing market price. Once you have exercised your warrants, you may not revoke your exercise. Moreover, you may be unable to sell your shares of common stock at a price equal to or greater than the warrant exercise price you pay. The exercise price determined for this offering is not a indication of our value. Our board of directors set the exercise price. The exercise price does not necessarily bear any relationship to the book value of our assets, past operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the exercise price as an indication of our value. There has been no prior market for our warrants and a public market for our warrants may not develop or be sustained. We have not applied for listing of our warrants on the Nasdaq Stock Market or any other market or exchange. We can not assure you that a public market for our warrants will ever develop. If a public market for our warrants does not develop, or if a public market does develop but is not sustained, the liquidity of your warrants may be significantly harmed. Risks associated with investing in us We expect our stock price to be volatile. The market price of the shares of our common stock has been, and will likely continue to be, subject to wide fluctuations in response to several factors, such as o actual or anticipated variations in our results of operations, o new services or product introductions by us or our competitors, o changes in financial estimates by securities analysts, and o conditions and trends in the consumer toy industry. 10 The stock markets generally, and the Nasdaq SmallCap Market in particular, have experienced extreme price and volume fluctuations that have particularly affected the market prices of equity securities of many companies and that often have been unrelated or disproportionate to the operating performance of those companies. These market fluctuations, as well as general economic, political and market conditions such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. If our common stock is delisted from Nasdaq, liquidity in our common stock will likely be adversely affected. Our common stock is listed for trading on the Nasdaq SmallCap Market. In order to continue to be listed on Nasdaq, however, we must meet certain criteria, including one of the following o maintaining $2,500,000 in shareholders' equity, o having a market capitalization of at least $35,000,000, or o generating net income of $500,000. In addition, the minimum bid price of our common stock must be at least $1.00 per share and the market value of the public float must be at least $1,000,000. On June 25, 2003, our bid price was $1.90. The dilution to our shareholders which could be caused by the additional shares of our common stock being sold into the market could cause the per share value of our common stock to drop below the minimum bid price of $1.00. As of March 31, 2003, we had shareholders' equity of $2,736,200 but did not satisfy the requirements for market capitalization or net income. The failure to meet Nasdaq's maintenance criteria may result in the delisting of our common stock from Nasdaq, and trading, if any, in our securities would thereafter be conducted in the non-Nasdaq over-the-counter market. As a result of such delisting, you could find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our securities. If our common stock is delisted from Nasdaq, our common stock may become subject to the penny stock rules. Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 other than securities registered on certain national securities exchanges or quoted on Nasdaq provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The rules require that, prior to a transaction in a penny stock not otherwise exempt from the rules, the broker-dealer must o deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market, o provide the customer with current bid and offer quotations for the penny stock, o disclose the compensation of the broker-dealer and its salesperson in connection with the transaction, o provide the customer monthly account statements showing the market value of each penny stock held in the customer's account, and o make a special written determination that the penny stock is a suitable investment for the customer and receive the customer's written agreement to the transaction. These disclosure requirements may have the effect of reducing the liquidity of penny stocks. If our securities are subject to the penny stock rules, you may find it more difficult to sell your shares of our common stock. Our officers and directors control a large percentage of outstanding stock and may be able to exercise significant control. Our current officers and directors beneficially own approximately 59% of our common stock on a fully diluted basis. As a result, current management will be able to exercise significant influence over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. We have implemented anti-takeover provisions that could prevent an acquisition of us at a premium price. Certain provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects and may delay, defer or prevent a take-over attempt of us. We are subject to the 11 "affiliated transactions" and "control share acquisition" provisions of the Florida Business Corporation Act. These provisions require, subject to certain exceptions, that an "affiliated transaction" be approved by the holders of two-thirds of the voting shares other than those beneficially owned by an "interested shareholder" or by a majority of disinterested directors. Voting rights must also be conferred on "control shares" acquired in specific control share acquisitions. Lastly, our articles of incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined form time to time by our board, of which all shares remain without designation and available for issuance. We include such preferred stock in our capitalization in order to enhance our financial flexibility. However, the issuance of large blocks of preferred stock may have a dilutive effect with respect to existing holders of our common stock. We depend on key personnel. Our success largely depends on a number of key employees. The loss of services of one or more of these employees could have a material adverse effect on our business. We are especially dependent upon the efforts and abilities of certain of our senior management, particularly Ronald S. Kaplan, our President and Chief Executive Officer. Currently, we do not maintain key man life insurance on Mr. Kaplan or any other executive officer. We believe that our future success will also depend, in part, upon our ability to attract, retain and motivate qualified personnel. We cannot assure you, however, that we will be successful in attracting and retaining such personnel. We do not plan to pay cash dividends. We expect that we will retain all available earnings generated by our operations for the development and growth of our business. Accordingly, we do not anticipate paying any cash dividends on our common stock. The issuance of additional shares of common stock or the exercise of outstanding options and warrants will dilute the interests of our shareholders. As of June 27, 2003, we had 3,272,092 shares of our common stock outstanding. Our board has the ability, without further shareholder approval, to issue up to approximately 11,700,000 additional shares of common stock. Such issuance may result in a reduction of the book value or market price of our outstanding common shares. Issuance of additional common stock will reduce the proportionate ownership and voting power of the then existing shareholders. Further, if all our outstanding options and warrants are exercised, we will have approximately 7.0 million shares outstanding. Thus, the percentage of shares owned by all existing shareholders will be reduced proportionately as options and warrants are exercised. USE OF PROCEEDS The maximum net proceeds that we may receive from this offering, assuming payment of 10% of the gross exercise proceeds to broker-dealers for soliciting the exercise, could be up to approximately $5.85 million if all warrants are exercised. However, all of the warrants may not be exercised and no assurance can be given as to when or whether any warrants will be exercised, nor as to the timing of receipt or the amount of proceeds. The warrants are intended to provide shareholders an opportunity to acquire additional shares of our common stock. We are not dependent upon, nor do we expect, any material amount of proceeds from the warrants at any given time, if ever. Although there is no accurate way to determine the number of warrants that will be exercised, if any, we will use any net proceeds of the sale of our common stock from this offering for general corporate purposes. THE WARRANTS Below is a summary of the material terms of the warrants, as more fully described in the Warrant Agreement by and between our company and the warrant agent. The Warrant Agreement is an exhibit to the registration statement of which this prospectus is a part. A copy of the Warrant Agreement may also be obtained from our company. General 12 On June 30, 2003, we distributed to holders of our common stock, one warrant for each share of our common stock that they own on the record date of June 12, 2003. As a warrant holder, you may purchase shares of our common stock through exercise of your warrants. To purchase shares of our common stock, you must deliver one warrant for each share of our common stock you intend to purchase. Exercising Your Warrants Each warrant entitles the holder to purchase one share of our common stock. You may exercise your warrants by properly completing and signing the exercise notice on the back of your warrant certificate, including, if required, a signature guarantee from an eligible institution and delivering the properly executed warrant certificate to the warrant agent, together with payment of the aggregate warrant exercise price in full. There is no minimum amount of shares that you must purchase. You may exercise your warrants in whole or in part, but no warrants may be exercised for fractional shares. A holder of warrants will not have any rights, privileges or liabilities as a shareholder prior to exercise of the warrants. Warrant Exercise Price The exercise price for the warrants is $2.00 per share, payable in cash. To exercise your warrants to purchase shares of our common stock, you must deliver a properly completed and signed exercise notice on the back of your warrant certificate together with payment of the aggregate warrant exercise price to the warrant agent prior to expiration. We may pay a solicitation fee under certain circumstances to brokers who solicit the exercise of the warrants. If you exercise your warrant, please indicate on the exercise notice whether your exercise was solicited by a broker, and, if so, the name and firm of the broker. Expiration Time The warrants will expire at 5:00 p.m., New York City Time, on June 11, 2004, the expiration time. After expiration of the warrants, all unexercised warrants will be null and void and no longer exercisable by the holder. We will not be obligated to honor any purported exercise of warrants received by the warrant agent after the expiration time, regardless of when the documents relating to such exercise were sent. Redemption The warrants are redeemable by us at any time prior to their expiration date. We may redeem the warrants by giving all of the holders of our warrants 21 days' prior written notice at $0.001 per warrant. Transfer and Warrant Agent and Registrar Our transfer and warrant agent and registrar for our securities is Registrar and Transfer Company. The address to which you must make any required deliveries is: Registrar and Transfer Company P.O. Box 1010 Cranford, New Jersey 07016-1010 Distribution of Warrants We have distributed the warrants at no cost to those persons who were holders of outstanding shares of our common stock on June 12, 2003. No warrants will be exercisable unless at the time of 13 exercise there is a current prospectus covering the shares of common stock issuable upon exercise of such warrants under an effective registration statement filed with the Securities and Exchange Commission and such shares have been qualified for sale or are exempt from qualification under the securities laws of the state or residence of the holder of such warrants. Although we intend to seek to have the shares of our common stock so qualified in the states where the warrants are being offered and to maintain a current prospectus relating thereto, until the expiration of the warrants, there can be no assurance that we will be able to do so. Warrant Payments You must pay the warrant exercise price in full for all shares you intend to purchase by: o check or bank draft drawn upon a U.S. bank, or postal, telegraphic or express money order, payable to Registrar and Transfer Company, as warrant agent; or o wire transfer of immediately available funds to an account which the warrant agent maintains for this purpose. Please contact the warrant agent at (800) 368-5948 to obtain appropriate wiring instructions. The warrant exercise price will be deemed to have been received by the warrant agent only upon: o clearance of any uncertified check; o receipt by the warrant agent of any certified check or bank draft drawn upon a U.S. bank or of a postal, telegraphic or express money order; or o receipt of good funds in the warrant agent's account designated in the wiring instructions provided by the warrant agent. Anti-Dilution Protection The warrant exercise price and the number of shares of common stock issuable upon exercise of the each warrant will be subject to adjustment to protect against dilution in the event of stock dividends, stock splits, combinations, subdivisions, reclassifications, reorganizations, mergers, and similar corporate transactions. However, the warrants are not subject to adjustment for issuance of shares of our common stock (or securities convertible into or exercisable for our common stock) at prices below the exercise price of the warrants. Any adjustment required by the foregoing events will be determined by our Board of Directors. Warrant Amendments We reserve the right to make any modification to the terms of the warrants that is not materially adverse to the holders of the warrants. Any such modification will be determined by our Board of Directors and we will cause written notice of any such modification to be sent to all record holders of the warrants which describes the modification and its effective date. Nominee Holders Holders on the record date who hold shares of our common stock for the account of others, such as brokers, trustees or depositories for securities, should contact the respective beneficial owners of such shares to ascertain the intentions of the beneficial owners of such shares and to obtain instructions with respect to their warrants. If a beneficial owner so instructs, the nominee should properly complete the applicable warrant certificate and submit it to the warrant agent with the proper payment. In addition, beneficial owners of our common stock or warrants held through such nominee should contact the nominee and request the nominee to effect transactions in accordance with the beneficial owner's instructions. 14 Ambiguities in Exercise of the Warrants If you do not specify the number of warrants being exercised on your warrant certificate, or if your payment is not sufficient to pay the total warrant exercise price for all of the shares that you indicate you wish to purchase, you will be deemed to have exercised the maximum number of warrants that could be exercised for the amount of the payment that the warrant agent receives from you. If your payment exceeds the number of warrants you specify are being exercised on your warrant certificate, you will be deemed to have exercised the maximum number of warrants that could be exercised for the amount of payment the warrant agent receives from you, up to the aggregate number of warrants exercisable by your warrant certificate. Any excess payment remaining after the foregoing allocation will be returned to you by mail as soon as practicable following processing of your warrant certificate, without interest or deduction. Interpretation All questions concerning the timeliness, validity, form and eligibility of any exercise of warrants will be determined by us and our determinations will be final and binding. We reserve the right, in our sole discretion, to waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as we may determine, or reject the purported exercise of any warrant. Warrants will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as we determine in our sole discretion. We reserve the right, in our sole discretion, to reject any exercise or related documents or payment not properly submitted or the acceptance of which would, in the opinion of our counsel, be unlawful. Neither we nor the warrant agent will be under any duty to give notification of any defect or irregularity in connection with the exercise of warrant certificates or incur any liability for failure to give such notification. Risk of Loss on Delivery of Warrant Certificates and Payments The instructions contained in the warrant certificate should be read carefully and followed in detail. The method of delivery of warrant certificates and payment of the warrant exercise price to the warrant agent will be at the election and risk of the warrant holders but, if sent by mail it is recommended that warrant certificates and payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the warrant agent and clearance of payment at or prior to the expiration time. In addition, if you request reissuance of a warrant certificate, the delivery will be at your risk. Exercise of Less Than All Warrants If you exercise your warrants for fewer than all of the shares represented by your warrant certificate, you may receive from the warrant agent a new warrant certificate representing the unexercised warrants. A new warrant certificate for the remaining warrants will be issued to you only if the warrant agent receives a properly endorsed warrant certificate from you no later than 5:00 p.m., New York City Time, on the fifth business day prior to the expiration time. The warrant agent will not issue new warrant certificates for partially exercised warrant certificates submitted after that date and time. Unless you make other arrangements with the agent, a new warrant certificate issued after 5:00 p.m., New York City Time, on the fifth business day before the expiration time will be held for pick-up by you at the offices of the warrant agent. Transferability of Warrants 15 In the event you desire to present your warrant certificate for registration of transfer, the assignment form included therein shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer, in form satisfactory to us and the warrant agent, duly executed by you or your attorney-in-fact duly authorized in writing. Moreover, your signature on your warrant certificate must be guaranteed by an Eligible Guarantor Institution. Please see "Signature Guarantees" below for a discussions regarding Eligible Guarantor Institutions and guaranteed signatures. The warrant agent may impose a reasonable service charge against you for any registration of transfer of your warrant certificate. You may also be required you to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such transfer. In addition, we do not intend to apply, and are not obligated to apply, for listing of the warrants on any securities exchange, the Nasdaq Stock Market, or any other market. Signature Guarantees Signatures on your warrant certificate do not need to be guaranteed unless you desire to transfer any or all of your warrants in a manner permitted in this offering. If your shares are being transferred in a manner permitted, then your signature on each warrant certificate must be guaranteed by an Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, and required under the standards and procedures adopted by the warrant agent. Eligible Guarantor Institutions include banks, brokers, dealers, credit unions, national securities exchanges and savings associations, each as defined. No Revocation Once you exercise your warrants, you may not revoke that exercise. Warrants not exercised prior to their expiration will be null and void as of and after such time. No Board Recommendation Our Board of Directors does not make any recommendation to you about whether you should exercise any warrants. If you exercise warrants, you risk investment loss on money invested. We cannot assure you that anyone purchasing shares of our common stock will be able to sell those shares in the future at a higher price. An investment in our common stock must be made in accordance with your evaluation of your own best interest. Issuance of Stock Certificates Stock certificates for shares purchased in the offering will be issued to you as soon as practicable after your due exercise of your warrants. Registrar & Transfer Company will deliver payment of the warrant exercise price to us only after the issuance of stock certificates to those exercising warrants. If you exercise warrants, you will have no rights as a shareholder until certificates representing the shares you purchased are issued. Shares purchased by the exercise of warrants will be registered in the name of the person exercising the warrants. State and Foreign Securities Law The warrants may not be exercised by any person, and neither this prospectus nor the warrant certificate shall constitute an offer to sell or a solicitation of an offer to purchase any shares of our common stock, in any jurisdiction in which such transactions would be unlawful. We believe that no action has been taken in any jurisdiction outside the United States to permit offers and sales of the warrants or the offer, sale or distribution of the shares of our common stock outside the United 16 States. Consequently, we may reject the exercise of warrants by any holder of warrants outside the United States. We may also reject the exercise of warrants by holders in jurisdictions within the United States, and we may refuse to distribute warrants to any person, if we should determine that we may not lawfully issue securities to such person. We may do so even if we could qualify the securities for sale or distribution by taking other actions or modifying the terms of the offering or the distribution in such jurisdictions, which we may decline to do in our sole discretion. In such event, warrant holders who are residents of these jurisdictions will not be eligible to exercise the warrants. Regulatory Limitation We will not be required to issue shares pursuant to this offering to anyone who, in our opinion, would be required to obtain prior clearance or authorization from any state or federal regulatory authorities to own or control such shares if such clearance or authorization has not been obtained at the expiration of this offering. Questions or Requests for Assistance If you have questions about this offering, including questions about the procedure for exercising warrants or requests for additional copies of this prospectus, please contact the warrant agent toll free at (800) 368-5948. LEGAL MATTERS The validity of the issuance of shares of common stock offered by this prospectus will be passed upon for us by Raice Paykin & Krieg, LLP. Elissa Paykin, the spouse of one of the partners of the firm, owns 237,254 shares of our common stock. Ms. Paykin is the sister of Ronald Kaplan, a director and our President and Chief Executive Officer, and is the daughter of two of our directors, Warren and Judith Kaplan. EXPERTS Our consolidated balance sheet as of December 31, 2002 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2002 have been incorporated by reference in this prospectus and in the registration statement in reliance on the report of Moore Stephens Lovelace, P.A., independent auditors, given upon the authority of that firm as experts in accounting and auditing. 17 ACTION PRODUCTS INTERNATIONAL, INC. 3,272,092 Shares of Common Stock Underlying Common Stock Purchase Warrants ---------- Prospectus ---------- July , 2003 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated expenses in connection with the distribution of the securities being registered, all of which are to be paid by the registrant, are as follows: Securities and Exchange Commission Registration Fee $530 Printing 3,000 Legal Fees and Expenses 20,000 Accounting Fees and Expenses 10,000 Miscellaneous Fees and Expenses 1,470 Total $35,000 - ----------------- All amounts other than the registration fee are estimates. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 607.0850 of the Florida Business Corporation Act ("FBCA") generally permits each corporation to indemnify its directors, officers, employees or other agents who are subject to any third-party actions because of their service to the corporation if such persons acted in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation. If the proceeding is a criminal one, such person must also have had no reasonable cause to believe his conduct was unlawful. In addition, the corporation may indemnify its directors, officers, employees or other agents who are subject to derivative actions against expenses and amounts paid in settlement which do not exceed, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, including any appeal thereof, actually and reasonably incurred in connection with the defense or settlement of such proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the corporation. To the extent that a director, officer, employee or other agent is successful on the merits or otherwise in defense of a third-party or derivative action, such person will be indemnified against expenses actually and reasonably incurred in connection therewith. This Section also permits each corporation to further indemnify such persons by other means unless a judgment or other final adjudication establishes that such person's actions or omissions which were material to the cause of action constitute (1) a crime (unless such person had reasonable cause to believe his conduct was lawful or had no reasonable cause an action to believe it unlawful), (2) a transaction from which he derived an improper personal benefit, (3) an action in violation of FBCA Section 607.0834 (unlawful distributions to shareholders), or (4) willful misconduct or a conscious disregard for the best interests of the corporation in a proceeding by or in the right of such registrant to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. Furthermore, FBCA Section 607.0831 provides, in general, that no director shall be personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to act, regarding corporate management or policy, unless: (a) the director breached or failed to 1 perform his duties as a director; and (b) the director's breach of, or failure to perform, those duties constitutes (i) a violation of criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (ii) a transaction from which the director derived an improper personal benefit, either directly or indirectly, (iii) a circumstance under which the liability provisions of FBCA Section 607.0834 are applicable, (iv) in a proceeding by or in the right of a registrant to procure a judgment in its favor or by or in the right of a shareholder, conscious disregard for the best interest of the corporation, or willful misconduct, or (v) in a proceeding by or in the right of someone other than the corporation or a shareholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. The term "recklessness", as used above, means the action, or omission to act, in conscious disregard of a risk: (a) known, or so obvious that it should have been known, to the director; and (b) known to the director, or so obvious that it should have been known, to be so great as to make it highly probable that harm would follow from such action or omission. Under Article VI of the registrant's Bylaws, the registrant has agreed to indemnify each director and officer of the registrant who it is empowered to indemnify to the fullest extent permitted by the provisions of the FBCA. The registrant's Bylaws also provide that the indemnification rights provided thereby shall not be deemed to be exclusive of any other rights to which the registrant's directors and officers may be entitled, including, without limitation, any rights of indemnification to which they may be entitled pursuant to any agreement, insurance policy, or otherwise. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to officers and directors under any of the foregoing provisions, the registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits Exhibit No. Description 5.1 Form of opinion of Raice Paykin & Krieg, LLP 10.1 Warrant Agreement by and between Action Products International, Inc. and Registrar & Transfer Company dated June 12, 2003. 23.1 Consent of Moore Stephens Lovelace, P.A. 23.3 Consent of Raice Paykin & Krieg, LLP (included in Exhibit 5) (b) Financial Statement Schedules Schedules are omitted because they are either not required, are not applicable or because equivalent information has been included in the financial statements, the notes thereto or elsewhere herein. ITEM 17. UNDERTAKINGS a. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: 2 (a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(a) and (1)(b) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. b The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the Registration Statement shall by deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. c Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment to the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. d. The undersigned registrant hereby undertakes that: (1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective, and 3 (2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on a Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Orlando, State of Florida, on June 30, 2003. ACTION PRODUCTS INTERNATIONAL, INC. By: /S/ RONALD S. KAPLAN -------------------- Name: Ronald S. Kaplan Title: Chief Executive Officer Known All Men by These Presents, that each person whose signature appears below does hereby constitute and appoint Ronald S. Kaplan with full power to act as his or her true and lawful attorney-in-fact and agent for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement including without limitation any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same, as fully, for all intents and purposes, as he or she could or might do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities on June 30, 2003. By: /S/ RONALD S. KAPLAN ------------------------------------------- Ronald S. Kaplan President, Chief Executive Officer and Director (principal executive officer) By: /S/ ROBERT L. BURROWS ------------------------------------------- Robert L. Burrows Chief Financial Officer and Secretary (principal financial officer and principal accounting officer) By: /S/ WARREN KAPLAN ------------------------------------------- Warren Kaplan Chairperson of the Board By: /S/ JUDITH KAPLAN ------------------------------------------- Judith Kaplan Director By: /S/ NEIL SWARTZ ------------------------------------------- Neil Swartz Director By: /S/ SCOTT RUNKEL ------------------------------------------- Scott Runkel Director 5 EXHIBIT INDEX Exhibit No Description 5.1 Form of opinion of Raice Paykin & Krieg, LLP 10.1 Warrant Agreement by and between Action Products International, Inc. and Registrar & Transfer Company dated June 12, 2003. 23.1 Consent of Moore Stephens Lovelace, P.A. 23.3 Consent of Raice Paykin & Krieg, LLP (included in Exhibit 5) EX-5.1 3 ex5_1.txt EXHIBIT 5.1 OPINION OF RAICE PAYKIN & KRIEG, LLP [RAICE PAYKIN & KRIEG, LLP LETTERHEAD] June 30, 2003 Action Products International, Inc. 390 N. Orange Ave., Suite 2185 Orlando, Florida 32801 Re: Form S-3 Registration Statement Ladies and Gentlemen: We have acted as counsel for Action Products International, Inc., a Florida corporation, (the "Corporation"), in connection with the referenced Registration Statement on Form S-3 (the "Registration Statement") being filed by the Corporation with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, and covering 3,272,092 shares of the Corporation's Common Stock, $0.001 par value ("Common Stock"), that may be issued pursuant to the warrants referenced in the Registration Statement. This Opinion Letter is rendered pursuant to Item 16 of Form S-3 and Item 601(b)(5) of Regulation S-K. We have examined the Articles of Incorporation of the Corporation, as amended, the Bylaws of the Corporation, as amended, records of proceedings of the Board of Directors of the Corporation deemed by us to be relevant to this opinion letter, the Registration Statement and other documents and agreements we deemed necessary for purposes of expressing the opinion set forth herein. We also have made such further legal and factual examinations and investigations as we deemed necessary for purposes of expressing the opinion set forth herein. As to certain factual matters relevant to this opinion letter, we have relied upon certificates and statements of officers of the Corporation and certificates of public officials. We have made no independent investigation with regard thereto, and, accordingly, we do not express any opinion as to matters that might have been disclosed by independent verification. This opinion letter is provided to the Corporation and the Commission for their use solely in connection with the transactions contemplated by the Registration Statement. The only opinion rendered by us consists of those matters set forth in the sixth paragraph hereof, and no opinion may be implied or inferred beyond those expressly stated. We are admitted to practice law in the State of New York, and we render this opinion only with respect to, and express no opinion herein concerning the application or effect of the laws of any jurisdiction other than, the existing laws of the United States of America, of the State of New York and of the Business Corporation Act of the State of Florida and applicable case law. Based on the foregoing, it is our opinion that the 3,272,092 shares of Common Stock covered by the Registration Statement to be issued pursuant to the warrants referenced in the Registration Statement, when issued in accordance with the terms and conditions of the warrants will be, legally issued, fully paid and non-assessable. We consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the use of our firm name wherever appearing in the Registration Statement. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder. Sincerely, /s/ RAICE PAYKIN & KRIEG, LLP EXHIBIT 5.1 - OPINION OF RAICE PAYKIN & KRIEG, LLP [RAICE PAYKIN & KRIEG, LLP LETTERHEAD] June 30, 2003 Action Products International, Inc. 390 N. Orange Ave., Suite 2185 Orlando, Florida 32801 Re: Form S-3 Registration Statement Ladies and Gentlemen: We have acted as counsel for Action Products International, Inc., a Florida corporation, (the "Corporation"), in connection with the referenced Registration Statement on Form S-3 (the "Registration Statement") being filed by the Corporation with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, and covering 3,272,092 shares of the Corporation's Common Stock, $0.001 par value ("Common Stock"), that may be issued pursuant to the warrants referenced in the Registration Statement. This Opinion Letter is rendered pursuant to Item 16 of Form S-3 and Item 601(b)(5) of Regulation S-K. We have examined the Articles of Incorporation of the Corporation, as amended, the Bylaws of the Corporation, as amended, records of proceedings of the Board of Directors of the Corporation deemed by us to be relevant to this opinion letter, the Registration Statement and other documents and agreements we deemed necessary for purposes of expressing the opinion set forth herein. We also have made such further legal and factual examinations and investigations as we deemed necessary for purposes of expressing the opinion set forth herein. As to certain factual matters relevant to this opinion letter, we have relied upon certificates and statements of officers of the Corporation and certificates of public officials. We have made no independent investigation with regard thereto, and, accordingly, we do not express any opinion as to matters that might have been disclosed by independent verification. This opinion letter is provided to the Corporation and the Commission for their use solely in connection with the transactions contemplated by the Registration Statement. The only opinion rendered by us consists of those matters set forth in the sixth paragraph hereof, and no opinion may be implied or inferred beyond those expressly stated. We are admitted to practice law in the State of New York, and we render this opinion only with respect to, and express no opinion herein concerning the application or effect of the laws of any jurisdiction other than, the existing laws of the United States of America, of the State of New York and of the Business Corporation Act of the State of Florida and applicable case law. Based on the foregoing, it is our opinion that the 3,272,092 shares of Common Stock covered by the Registration Statement to be issued pursuant to the warrants referenced in the Registration Statement, when issued in accordance with the terms and conditions of the warrants will be, legally issued, fully paid and non-assessable. We consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the use of our firm name wherever appearing in the Registration Statement. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder. Sincerely, /s/ RAICE PAYKIN & KRIEG, LLP EX-10.1 4 ex10_1.txt EXHIBIT 10.1 - WARRANT AGREEMENT WARRANT AGREEMENT AGREEMENT, dated this 12th day of June 2003 by and between ACTION PRODUCTS INTERNATIONAL, INC., a Florida corporation (the "Company"), and REGISTRAR AND TRANSFER COMPANY, as Warrant Agent (the "Warrant Agent"). WHEREAS, each record holder of the Company's common stock, $0.001 par value (the "Common Stock"), on the record date of June 12, 2003 (the "Record Date"), will receive one (1) warrant (a "Warrant") to purchase an additional share of the Company's Common Stock for each one (1) share of Common Stock held on the Record Date at an exercise price as determined herein; and WHEREAS, the Warrants shall be exercisable for a one (1) year period from the date hereof (the "Effective Date") unless earlier redeemed as provided herein; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer and exchange of certificates representing the Warrants and the exercise of the Warrants. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the certificates representing the Warrants and the respective rights and obligations thereunder of the Company, the holders of certificates representing the Warrants and the Warrant Agent, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms used herein and not otherwise defined shall have the following meanings, unless the context shall otherwise require: "Corporate Office" shall mean the office of the Warrant Agent (or its successor) at which at any particular time its principal business shall be administered, which office is located on the date hereof at 10 Commerce Drive, Cranford, New Jersey 07016. "Exercise Date" shall mean as to any Warrant, the date on which the Warrant Agent shall have received both (a) the Warrant Certificate representing such Warrant, with the Exercise Form thereon duly executed by the Registered Holder hereof with such Registered Holder's signature guaranteed, and (b) payment in cash or by bank or cashier's check made payable to the Warrant Agent for the account of the Company, of the amount in lawful money of the United States of America equal to the applicable Exercise Price. "Exercise Price" shall mean $2.00 per share of Common Stock, if the Exercise Date is after the Effective Date but on or before June 11, 2004 subject to modification and adjustment as provided in Section 8. "Expiration Date" shall mean, unless the Warrants are redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (Eastern time) on June 11, 2004. "Registered Holder" shall mean the person in whose name any certificate representing the Warrants shall be registered on the books maintained by the Warrant Agent pursuant to Section 6. "Warrant Certificate" shall mean a certificate representing each of the Warrants substantially in the form annexed hereto as Exhibit A. 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES. (a) Each Warrant shall entitle the Registered Holder of the Warrant Certificate representing such Warrant to purchase at the Exercise Price therefor from the Effective Date until the Expiration Date one (1) share of Common Stock upon the exercise thereof, subject to modification and adjustment as provided in Section 8. (b) From time to time, up to the Expiration Date, the Warrant Agent shall countersign and deliver Warrant Certificates in required denominations of one or whole number multiples thereof to the person entitled thereto in connection with any transfer or exchange permitted under this Agreement. No Warrant Certificates shall be issued except (i) Warrant Certificates initially issued hereunder, (ii) those issued on or after the Effective Date, upon the exercise of fewer than all Warrants represented by any Warrant Certificate, to evidence any unexercised Warrants held by the exercising Registered Holder, (iii) Warrant Certificates issued upon any transfer or exchange of Warrants, (iv) Warrant Certificates issued in replacement of lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7, and (v) at the option of the Company, Warrant Certificates in such form as may be approved by its Board of Directors, to reflect any adjustment or change in the Exercise Price, the number of shares of Common Stock purchasable upon exercise of the Warrants or the redemption price therefor made pursuant to Section 9 hereof. 3. FORM AND EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates shall be substantially in the form annexed hereto as Exhibit A and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or market on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates). Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, President or any Vice President and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary, by manual signatures or by facsimile signatures printed thereon, and shall have imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer of the Company before the date of issuance of the Warrant Certificates or before countersignature by the Warrant Agent and issue and delivery thereof, such Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be such officer of the Company. 4. EXERCISE. (a) Warrants may be exercised commencing at any time on or after the Effective Date, but not after the Expiration Date, upon the terms and subject to the conditions set forth herein and in the applicable Warrant Certificate. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date, provided that the Warrant Certificate representing such Warrant, with the Exercise Form thereon duly executed by the Registered Holder thereof with such Registered Holder's signature guaranteed, together with payment in cash or by bank or cashier's 2 check made payable to the order of the Company, of an amount in lawful money, of the United States of America equal to the applicable Exercise Price, has been received in good funds by the Warrant Agent or the Company. If received by the Company, the Company shall deliver the original Warrant Certificate and Exercise Form to the Warrant Agent as soon as practicable. The person entitled to receive the securities deliverable upon such exercise shall be treated for all purposes as the holder of such securities as of the close of business on the Exercise Date. As soon as practicable on or after the Exercise Date and in any event within five business days after such date, the Warrant Agent on behalf of the Company shall cause to be issued to the person or persons entitled to receive the same a Common Stock certificate or certificates for the shares of Common Stock deliverable upon such exercise, and the Warrant Agent shall deliver the same to the person or persons entitled thereto. Upon the exercise of Warrants, the Warrant Agent shall promptly notify the Company in writing of such fact and of the number of securities delivered upon such exercise and shall cause all payments of an amount in cash or by check made payable to the order of the Company, equal to the Exercise Price, to be deposited promptly in the Company's bank account. (b) If any Warrants are exercised which exercise was solicited by a broker-dealer with whom the Company agreed in writing to pay a solicitation fee for exercise of the Warrant (a "Broker-Dealer"), then the soliciting Broker-Dealer shall be entitled to receive from the Company upon exercise of each of the Warrants so exercised, a fee of not less than six percent (6%) and not greater than ten percent (10%), the exact percentage to be determined by a separate agreement between the Company and the Broker-Dealer, of the aggregate price of the Warrants so exercised (the "Exercise Fee"); provided, that, at the time of exercise, (i) the market price of the Company's Common Stock is equal to or greater than the Exercise Price, (ii) the Broker-Dealer is a member of the National Association of Securities Dealers, Inc., (iii) the Warrant is not held in a discretionary account, unless prior specific written approval for exercise has been received by the Broker-Dealer from its customer, (iv) disclosure of the compensation arrangement is made in documents provided to the holders of the Warrants, and (v) the solicitation of the Warrant is not in violation of Regulation M promulgated under the Securities Exchange Act of 1934, as amended. Within five (5) days after the end of each month, the Warrant Agent will notify the Company of each Warrant Certificate which has been properly completed for exercise by holders of Warrants during the last month. The Warrant Agent will provide the Company with such information, in connection with the exercise of each Warrant, as the Company shall reasonably request. In the event that an Exercise Fee is paid to a Broker-Dealer with respect to a Warrant which was not properly completed for exercise or in respect of which such Broker-Dealer is not entitled to an Exercise Fee, such Broker-Dealer will return such Exercise Fee to the Company. (c) The Company shall not be obligated to issue any fractional share interests or fractional warrant interests upon the exercise of any Warrant or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of fractional interests. Any fractional interest shall be rounded up to the nearest whole figure. (d) Anything in this Section 4 notwithstanding, no Warrant will be exercisable unless at the time of exercise the Company has filed with the Securities and Exchange Commission, and there shall be then effective, a registration statement under the Securities Act of 1933, as amended (the "Act") covering the offer and sale of the shares of Common Stock issuable upon exercise of such Warrant and such offer and sale of the shares have been so registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of such Warrant. (e) In addition, if it is required by law and upon instruction by the Company, the Warrant Agent will deliver to each Registered Holder a prospectus that complies with the provisions of Section 5 of the Securities Act, as amended, and the Company agrees to supply the Warrant Agent with a sufficient number of prospectuses to effectuate that purpose. 3 5. RESERVATION OF SHARES; PAYMENT OF TAXES. (a) The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon exercise of warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants shall, at the time of delivery thereof, be duly and validly issued and fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens and charges with respect to the issuance thereof. (b) The Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance or delivery of any shares of Common Stock upon exercise of the Warrants; provided, however, that if shares of Common Stock are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Warrant Agent the amount of transfer taxes or charges incident thereto, if any. 6. EXCHANGE AND REGISTRATION OF TRANSFER. (a) Warrant Certificates may be exchanged for other Warrant Certificates representing an equal aggregate number of Warrants or may be transferred in whole or in part. Warrant Certificates to be so exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and, upon satisfaction of the terms and conditions hereof, the Company shall execute and the Warrant Agent shall countersign, issue and deliver in exchange therefor the Warrant Certificate or Certificates which the Registered Holder making the exchange shall be entitled to receive. (b) The Warrant Agent shall keep, at its Corporate Office, books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and the transfer thereof. Upon due presentment for registration of transfer of any Warrant Certificate at such office, the Company shall execute and the Warrant Agent shall issue and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants. (c) With respect to any Warrant Certificates presented for registration of transfer, or for exchange or exercise, the Exercise Form or Assignment Form, as the case may be, on the reverse thereof shall be duly endorsed or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company and the Warrant Agent, duly executed by the Registered Holder thereof with such Registered Holder's signature guaranteed. (d) A service charge may be imposed by the Warrant Agent for any exchange, registration or transfer of Warrant Certificates. (e) All Warrant Certificates surrendered for exercise or for exchange shall be promptly canceled by the Warrant Agent. (f) Prior to due presentment for registration or transfer thereof, the Company and the Warrant Agent may deem and treat the Registered Holder of any Warrant Certificate as the absolute owner thereof of each Warrant represented thereby (notwithstanding any notations of ownership or writing thereon made by anyone other than the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. 4 7. LOSS OR MUTILATION. Upon receipt by the Company and the Warrant Agent of evidence satisfactory to them of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and (in the case of loss, theft or destruction) of indemnity satisfactory to them, and (in case of mutilation) upon surrender and cancellation thereof, the Company shall execute and the Warrant Agent shall countersign and deliver in lieu thereof a new Warrant Certificate representing an equal aggregate number of Warrants. Applicants for a substitute Warrant Certificate shall also comply with such other reasonable requests and pay such other reasonable costs and expenses as the Warrant Agent may impose. 8. ADJUSTMENTS OF NUMBER AND KIND OF SHARES PURCHASABLE AND EXERCISE PRICE. The number and kind of securities or other property purchasable upon exercise of a Warrant shall be subject to adjustment from time to time upon the occurrence, after the date hereof, of any of the following events: (a) In case the Company shall (i) pay a dividend in, or make a distribution of, shares of capital stock on its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of such shares or (iii) combine its outstanding shares of Common Stock into a smaller number of such shares, the total number of shares of Common Stock purchasable upon the exercise of each Warrant outstanding immediately prior thereto shall be adjusted so that the holder of any Warrant Certificate thereafter surrendered for exercise shall be entitled to receive at the same aggregate Exercise Price the number of shares of capital stock (of one or more classes) which such holder would have owned or have been entitled to receive immediately following the happening of any of the events described above had such Warrant been exercised in full immediately prior to the record date with respect to such event. Any adjustment made pursuant to this subsection shall, in the case of a stock dividend or distribution, become effective as of the record date therefor and, in the case of a subdivision or combination, be made as of the effective date thereof. If, as a result of an adjustment made pursuant to this subsection, the holder of any Warrant Certificate thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company (whose determination shall be conclusive and shall be evidenced by a Board resolution filed with the Warrant Agent) shall determine the allocation of the adjusted Exercise Price between or among shares of such classes of capital stock. (b) In the event of a capital reorganization or a reclassification of the Common Stock (except as provided in subsection a. above or subsection b. below), any Registered Holder, upon exercise of Warrants, shall be entitled to receive, in substitution for the Common Stock to which they would have become entitled upon exercise immediately prior to such reorganization or reclassification, the shares (of any class or classes) or other securities or property of the Company (or cash) that he would have been entitled to receive at the same aggregate Exercise Price upon such reorganization or reclassification if such Warrants had been exercised immediately prior to the record date with respect to such event; and in any such case, appropriate provision (as determined by the Board of Directors of the Company, whose determination shall be conclusive and shall be evidenced by a certified Board resolution filed with the Warrant Agent) shall be made for the application of this subsection with respect to the rights and interests thereafter of the Registered Holders (including but not limited to the allocation of the Exercise Price between or among shares of classes of capital stock), to the end that this subsection (including the adjustments of the number of shares of Common Stock or other securities purchasable and the Exercise Price thereof) shall thereafter be reflected, as nearly as reasonably practicable, in all subsequent exercises of the Warrants for any shares or securities or other property (or cash) thereafter deliverable upon the exercise of the Warrants. 5 (c) Whenever the number of shares of Common Stock or other securities purchasable upon exercise of a Warrant is adjusted as provided in this Section, the Company will promptly file with the Warrant Agent a certificate signed by a Chairman or co-Chairman of the Board or the President or a Vice President of the Company and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth the number and kind of securities or other property purchasable upon exercise of a Warrant, as so adjusted, stating that such adjustments in the number or kind of shares or other securities or property conform to the requirements of this Section, and setting forth a brief statement of the facts accounting for such adjustments. Promptly after receipt of such certificate, the Company, or the Warrant Agent at the Company's request, will deliver, by first-class, postage prepaid mail, a brief summary thereof (to be supplied by the Company) to the registered holders of the outstanding Warrant Certificates; provided, however, that failure to file or to give any notice required under this subsection, or any defect therein, shall not affect the legality or validity of any such adjustments under this Section. (d) In case of any consolidation of the Company with, or merger of the Company into, another corporation or entity (other than a consolidation or merger which does not result in any reclassification or change of the outstanding Common Stock), or in case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety, the corporation or entity formed by such consolidation or merger or the corporation or entity which shall have acquired such assets, as the case may be, shall execute and deliver to the Warrant Agent a supplemental warrant agreement providing that the holder of each Warrant then outstanding shall have the right thereafter (until the expiration of such Warrant) to receive, upon exercise of such Warrant, solely the kind and amount of shares of stock and other securities and property (or cash) receivable upon such consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock of the Company for which such Warrant might have been exercised immediately prior to such consolidation, merger, sale or transfer. Such supplemental warrant agreement shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section. The above provision of this subsection shall similarly apply to successive consolidations, mergers, sales or transfers. The Warrant Agent shall not be under any responsibility to determine the correctness of any provision contained in any such supplemental warrant agreement relating to either the kind or amount of shares of stock or securities or property (or cash) purchasable by holders of Warrant Certificates upon the exercise of their Warrants after any such consolidation, merger, sale or transfer or of any adjustment to be made with respect thereto, but may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, a certificate of a firm of independent certified public accountants (who may be the accountants regularly employed by the Company) with respect thereto. (e) Irrespective of any adjustments in the number or kind of shares issuable upon exercise of Warrants, Warrant Certificates theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrant Certificates initially issuable pursuant to this Agreement. (f) The Company may retain a firm of independent public accountants of recognized standing, which may be the firm regularly retained by the Company, selected by the Board of Directors of the Company or the Audit Committee of said Board, and not disapproved by the Warrant Agent, to make any computation required under this Section, and a certificate signed by such firm shall, in the absence of fraud or gross negligence, be conclusive evidence of the correctness of any computation made under this Section. (g) For the purpose of this Section 8, the term "Common Stock" shall mean (i) the Common Stock or (ii) any other class of stock resulting from successive changes or reclassifications of 6 such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time as a result of an adjustment made pursuant to this Section, the holder of any Warrant thereafter surrendered for exercise shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Section, and all other provisions of this Agreement, with respect to the Common Stock, shall apply on like terms to any such other shares. (h) Before taking any action that would cause an adjustment pursuant to Section 8 hereof reducing the portion of the Exercise Price required to purchase one share of capital stock below the then par value (if any) of a share of such capital stock, the Company will use its best efforts to take any corporate action which, in the opinion of its counsel, may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such capital stock. 9. REDEMPTION. (a) Commencing on the Effective Date, the Company may, on twenty-one (21) days' prior written notice redeem all the Warrants at $0.001 per Warrant. All Warrants must be redeemed if any are redeemed. (b) In the event the Company exercises its right to redeem all of the Warrants, it shall give or cause to be given notice to the Registered Holders of the Warrants, by mailing to such Registered Holders a notice of redemption, first class, postage prepaid, not later than the twenty-first (21st) day before the date fixed for redemption, at their last address as shall appear on the records of the Warrant Agent. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. (c) The notice of redemption shall specify (i) the redemption price, (ii) the date fixed for redemption, (iii) the place where the Warrant Certificate shall be delivered and the redemption price shall be paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on the business day immediately preceding the date fixed for redemption. The date fixed for the redemption of the Warrants shall be the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Registered Holder (i) to whom notice was not mailed or (ii) whose notice was defective. An affidavit of the Warrant Agent or the Secretary or Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (d) From and after the Redemption Date, all rights of the Registered Holders (except the right to receive the redemption price) shall terminate, but only if (i) no later than one day prior to the redemption date the Company shall have irrevocably deposited with the Warrant Agent as paying agent a sufficient amount to pay on the Redemption Date the redemption price for all Warrants called for redemption and (ii) the notice of redemption shall have stated the name and address of the Warrant Agent and the intention of the Company to deposit such amount with the Warrant Agent no later than one day prior to the Redemption Date. (e) The Warrant Agent shall pay to the holders of record of redeemed Warrants all monies received by the Warrant Agent for the redemption of Warrants to which the holders of record of such redeemed Warrants who shall have surrendered their Warrants are entitled. 7 (f) Any amounts deposited with the Warrant Agent that are not required for redemption of Warrants may be withdrawn by the Company. Any amounts deposited with the Warrant Agent that shall be unclaimed after three (3) months after the redemption date may be withdrawn by the Company, and thereafter the holders of the Warrants called for redemption for which such funds were deposited shall look solely to the Company for payment. The Company shall be entitled to the interest, if any, on funds deposited with the Warrant Agent and the holders of redeemed Warrants shall have no right to any such interest. (g) Any right to exercise a warrant shall terminate at 5:00 p.m. (New York time) on the business day immediately preceding the Redemption Date. The redemption price payable to the Registered Holders shall be mailed to such persons at their addresses of record. 10. CONCERNING THE WARRANT AGENT. (a) The Warrant Agent acts hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not, by issuing and delivering Warrant Certificates or by any other act hereunder, be deemed to make any representations as to the validity or value or authorization of the Warrant Certificates or the Warrants represented thereby or of any securities or other property delivered upon exercise of any Warrant or whether any stock issued upon exercise of any Warrant is fully paid and nonassessable. (b) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of Warrant Certificates to make or cause to be made any adjustment to the Warrant provided in this Agreement, or to determine whether any fact exists which may require any such adjustment, or with respect to the nature or extent of any such adjustment, when made, or with respect to the method employed in making the same, it shall not (i) be liable for any recital or statement of fact contained herein or for any action taken, suffered or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Warrant Certificate, or (iii) be liable for any act or omission in connection with this Agreement except for its own gross negligence or willful misconduct. (c) The Warrant Agent may at any time consult with counsel satisfactory to it (who may be counsel for the Company) and shall incur no liability or responsibility for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. (d) Any notice, statement, instruction, request, direction, order or demand of the Company shall be sufficiently evidenced by an instrument signed by the Chairman of the Board of Directors, Vice-Chairman or Secretary (unless other evidence in respect thereof is herein specifically prescribed). The Warrant Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction, order or demand. (e) The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder; the Company further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers hereunder except losses, expenses and liabilities arising as a result of the Warrant Agent's gross negligence or willful misconduct. 8 (f) The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own negligence or willful misconduct), after giving 60 days prior written notice to the Company. At least 15 days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Registered Holder of each Warrant Certificate at the Company's expense. Upon such resignation the Company shall appoint in writing a new warrant agent. After acceptance in writing of such appointment by the new warrant agent is received by the Company, such new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the warrant agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the resigning Warrant Agent and shall forthwith cause a copy of such notice to be mailed to the Registered Holder of each Warrant Certificate. (g) Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged, any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party, or any corporation succeeding to the corporate trust business of the Warrant Agent or any new warrant agent shall be a successor warrant agent under this Agreement without any further act, provided that such corporation is eligible for appointment as successor to the Warrant Agent under the provisions of the preceding paragraph. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Company and to the Registered Holders of each Warrant Certificate. 11. RIGHTS OF REGISTERED HOLDERS. No Registered Holder, as such, shall have any rights of a shareholder of the Company, either at law or equity, and the rights of the Registered Holders, as such, are limited to those rights expressly provided in this Agreement or in the Warrant Certificates. The Company and the Warrant Agent may treat the registered Registered Holder in respect of any Warrant Certificates as the absolute owner thereof for all purposes notwithstanding any notice to the contrary. 12. MODIFICATION OF AGREEMENT. The Warrant Agent and the Company may by supplemental agreement make any changes or corrections in this Agreement without the approval of any holders of Warrants (i) that they shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; (ii) that they may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates; or (iii) which may be required by law; provided, however, that this Agreement shall not otherwise be modified, supplemented or altered except with the consent in writing of the Registered Holders representing not less than 50% of the Warrants then outstanding; provided, further, that no change in the number of the securities purchasable upon the exercise of any Warrant, or an increase in the Exercise Price therefor, shall be, made without the consent in writing of the Registered Holder of the Warrant Certificate, other than such changes as are specifically permitted or prescribed by this Agreement as originally executed. 13. NOTICES. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or five days after mailed first-class postage prepaid, or upon receipt when sent by facsimile, with confirmation received, if to the Registered Holder of a Warrant Certificate, at the address of such holder as shown on the registry books maintained by the Warrant Agent; if to the Company at: 9 Action Products International, Inc. 390 North Orange Avenue, Suite 2185 Orlando, Florida 32801 Attn: Ronald S. Kaplan With a copy to: Raice Paykin & Krieg, LLP 185 Madison Avenue, 10th Floor New York, New York 10016 Attn: James G. Smith, Esq. or at such other address as may have been furnished to the Warrant Agent in writing by the Company, and if to the Warrant Agent, at its Corporate Office. 14. GOVERNING LAW; VENUE. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without giving effect to conflicts of laws. In the event the Company, the Warrant Agent or any Registered Holder commences any litigation, proceeding or other legal action in connection with or relating to this Agreement or any matters described or contemplated herein, the Company, the Warrant Agent and the Registered Holders hereby (a) agree under all circumstances absolutely and irrevocably to institute any litigation, proceeding or other legal action in a court of competent jurisdiction located within the County of Orange, State of Florida, whether a state or federal court; (b) agree that in the event of any such litigation, proceeding or action, such parties will consent and submit to personal jurisdiction in such court; and (c) agree to waive to the full extent permitted by law any objection that they may now or hereafter have to the venue of any such litigation, proceeding or action in any such court or that any such litigation, proceeding or action was brought in an inconvenient forum. 15. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company, the Warrant Agent and their respective successors and assigns and the holders from time to time of Warrant Certificates or any of them. Except as hereinafter stated, nothing in this Agreement is intended or shall be construed to confer upon any other person any right, remedy or claim or to impose upon any other person any duty, liability or obligation. 16. TERMINATION. This Agreement shall terminate at the Expiration Time or such earlier date upon which all Warrants have been exercised or surrendered, except that the Warrant Agent shall account to the Corporation for cash held by it and the provisions of Section 8 hereof shall survive such termination. 17. INTEGRATION. As of the date hereof, this Agreement contains the entire and only agreement, understanding, representation, condition, warranty or covenant between the parties hereto with respect to the matters herein, supersedes any and all other agreements between the parties hereto relating to such matters, and may be modified or amended only by a written agreement signed by both parties hereto. 18. COUNTERPARTS. This Agreement may be executed in several counterparts, which taken together shall constitute a single document. [remainder of page intentionally left blank] 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. ACTION PRODUCTS INTERNATIONAL, INC. By: /s/ Ronald S. Kaplan ----------------------------------- Ronald S. Kaplan Chief Executive Officer REGISTRAR AND TRANSFER COMPANY By: /s/ William P. Tatler ----------------------------------- Name: William P. Tatler Title: Vice President 11 EXHIBIT A No. _______ VOID AFTER 5:00 P M on June 11, 2004 _________ WARRANTS REDEEMABLE WARRANT CERTIFICATE TO PURCHASE SHARES OF COMMON STOCK ACTION PRODUCTS INTERNATIONAL, INC. NO. _______ CUSIP: THIS CERTIFIES THAT, FOR VALUE RECEIVED _____________________ or registered assigns (the "Registered Holder") is the owner of the number of Warrants (the "Warrants") specified above. Each Warrant initially entitles the Registered Holder to purchase, subject to the terms and conditions set forth in this Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and non-assessable share of Common Stock, $0.001 par value, of Action Products International, Inc., a Florida corporation (the "Company"), at any time from June 12, 2003 and prior to the Expiration Date (as hereinafter defined) upon the presentation and surrender of this Warrant Certificate with the Exercise Form on the reverse hereof duly executed, at the corporate office of Registrar and Transfer Company, as Warrant Agent, or its successor (the "Warrant Agent"), or the Company, accompanied by the Exercise Price (as defined below), in lawful-money of the United States of America in cash or by check made payable to the Warrant Agent for the account of the Company. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated June 12, 2003, by and between the Company and the Warrant Agent. In the event of certain contingencies provided for in the Warrant Agreement, the Exercise Price and the number of shares of Common Stock subject to purchase upon the exercise of each Warrant represented hereby are subject to modification or adjustment. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional interests will be issued. In the case of the exercise of less than all the warrants represented hereby, the Company shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor, which the Warrant Agent shall countersign, for the balance of such Warrants. The term "Expiration Date" shall mean 5:00 P.M. (New York time) on June 11, 2004. If such date shall in the State of New York be a holiday or a day on which the banks are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York time) the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. 12 Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any rights of a shareholder of the Company, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. Subject to the provisions of the Warrant Agreement, this Warrant may be redeemed at the option of the Company, at a redemption price of $0.001 per Warrant, at any time commencing after June 12, 2003. Notice of redemption shall be given not later than the twenty-first (21st) day before the date fixed for redemption, all as provided in the Warrant Agreement. On and after the date fixed for redemption, the Registered Holder shall have no rights with respect to this Warrant except to receive the $0.001 per Warrant upon surrender of this Certificate. Prior to due presentment for registration or transfer hereof, the Company and the Warrant Agent may deem and treat the Registered Holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notations of ownership or writing hereon made by anyone other than a duly authorized officer of the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary, except as provided in the Warrant Agreement. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Florida without giving effect to conflicts of laws. This Warrant Certificate is not, valid unless countersigned by the Warrant Agent. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile by two of its officers thereunto duly authorized. Dated: ACTION PRODUCTS INTERNATIONAL, INC. By: ----------------------------------- Ronald S. Kaplan Chief Executive Officer By: ----------------------------------- Robert L. Burrows Secretary COUNTERSIGNED: REGISTRAR AND TRANSFER COMPANY as Warrant Agent By: ------------------------------ Authorized Officer 13 EXERCISE FORM To Be Executed by the Registered Holder in Order to Exercise Warrant The undersigned Registered Holder hereby irrevocably elects to exercise ______________ Warrants represented by this Warrant Certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER --------------------------------------- --------------------------------------- --------------------------------------- (please print or type name and address) and be delivered to: --------------------------------------- --------------------------------------- --------------------------------------- (please print or type name and address) and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below. IMPORTANT: PLEASE CHECK WHICH IS APPLICABLE: [ ] The exercise of this Warrant was solicited by: (name of individual broker) ------------------------------------ (name of firm) ------------------------------------ [ ] The exercise of this Warrant was not solicited. Dated: _____________, 200__ X ------------------------------------ Signature ------------------------------------ Name X ------------------------------------ Signature Guaranteed 14 ASSIGNMENT FORM --------------- To Be Executed by the Registered Holder in Order to Assign Warrants FOR VALUE RECEIVED, ______________________________, hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER - -------------------------------------- - -------------------------------------- - -------------------------------------- (please print or type name and address) _______________________________________________________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints ________________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises. Dated: ___________________, 200____ X ------------------------------------ Signature X ------------------------------------ Signature Guaranteed - ---------------------- THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE MEDALLION GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE, WHO IS A MEMBER OF THE MEDALLION PROGRAM. 15 EX-23.1 5 ex23_1.txt EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" in the Registration Statement of Action Products International, Inc., on Form S-3, for the registration of 3,272,092 shares of its common stock and to the incorporation by reference therein, and in the related prospectus, of our report dated January 30, 2003, except for Note 11 as to which the date is March 12, 2003, with respect to the consolidated financial statements of Action Products International, Inc. and subsidiary included in its Annual Report on Form 10-KSB for the year ended December 31, 2002, filed with the Securities and Exchange Commission. /s/ MOORE STEPHENS LOVELACE, P.A. - --------------------------------- MOORE STEPHENS LOVELACE, P.A. CERTIFIED PUBLIC ACCOUNTANTS Orlando, Florida June 30, 2003 -----END PRIVACY-ENHANCED MESSAGE-----