(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission File No. 0-22372.

(Exact Name of Registrant as Specified in its Charter)

Nevada 98-0163743

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization Identification No.)

(Address of principal executive offices)

(Registrant's telephone number, including Area Code)

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No _____

Indicate the number of shares outstanding of each of the Issuer's classes of common equity, as of November 14, 2002: 2,685,887

Consolidated Balance Sheets

Consolidated Statements of Operations, (Unaudited)

Consolidated Statements of Stockholders' Equity and Comprehensive Income (Unaudited)

Grand Toys International, Inc., a Nasdaq SmallCap listed Company, is organized under the laws of the State of Nevada. Its principal business activity, through its wholly-owned Canadian operating subsidiaries, is the distribution of toys and related items.

1. Significant accounting policies:

2. Loan receivable:

7. Capital stock

The number of common shares has been adjusted for transactions that occurred prior to September 4, 2001, to give effect to the one-for-four reverse stock split, which reduced the number of outstanding common shares to 1,284,619 at that date and the number of authorized shares from 50,000,000 to 12,500,000.

1. Authorized capital also includes 5,000,000, $0.001 par value preferred shares, issuable in series with such designation, rights and preferences as may be determined from time to time by the Board of Directors. There are no shares issued and outstanding at September 30, 2002.

2. Share transactions:

• December 2001:

• January 2002:

• February 2002:

• June 2002:

• July 2002

3. Summary of common stock outstanding:

2. The Company was named in a lawsuit for breach of contract in a licensing dispute, for recovery totaling in excess of $600,000. A defense was filed against the plaintiff, and management had reserved, at December 31, 2000, $550,000 in the event the results were unfavorable. In March 2001, the Company received a favorable court judgment, and reversed the accrual, in full, by the third quarter of 2001.
3. The Company's Canadian subsidiary is also contingently liable for an outstanding letter of credit of $500,000 as at September 30, 2002 ($250,000 as at December 31, 2001). The short-term deposit has been pledged as collateral for this letter of credit.

1. Operating and geographic information:

2. Other information:

14. Financial instruments:

1. Foreign currency risk management:

2. Fair values:

3. Credit risk and economic dependence:

4. Interest rate risk:

The following should be read in conjunction with the consolidated financial statements included in this 10-Q and the December 31, 2001 Annual Report.

Forward-looking statements.

This Form 10-Q contains forward-looking statements about events and circumstances that have not yet occurred. For example, statements including terms such as the Company "expects" or "anticipates" are forward-looking statements. Investors should be aware that the Company's actual results may differ materially from the Company's expressed expectations because of risks and uncertainties about the future. The Company will not necessarily update the information in this Form 10-Q if and when any forward-looking statement later turns out to be inaccurate. Risks and uncertainties that may affect the Company's future results and performance include, but are not limited to, the following: intense competition and pricing pressures in the toy industry; the general consolidation in the toy industry; whether the Company's general strategy with respect to the toy industry and the Company's implementation of that strategy will correctly anticipate key trends in the toy industry; the Company's ability to retain its product lines; including without limitation, its Toy Biz line; the Company's relationships with retailers and other issues with respect to the Company's distribution channels. Additional information about factors that could affect future results and events is included elsewhere in this Form 10-Q, in the Company's Form 10-K for the year ended December 31, 2001 and in other reports filed by the Company with the Securities and Exchange Commission.

In the Company's audited financial statements for the years ended December 31, 2001 and 2000, the Company recognized that it had certain issues which raised substantial doubt about the Company's ability to continue as a going concern. The reasons cited were the Company's recurring losses and the cancellation of the Company's line of credit in 2000. This was noted in KPMG's audit report on those financial statements. In 2001, the Company implemented a plan to stem its losses, return to profitability and secured a new credit facility. However, the line of credit which the Company has been able to obtain is not sufficient to meet all of the Company's financial needs and the Company might not be able to successfully implement its new operational plan. If doubts about the Company's ability to continue as a going concern persist, it may have an adverse impact on investors' willingness to invest in the Company's stock which would negatively impact the price and liquidity of our shares.

The Company incurred net losses for the nine months ended September 30, 2002 of $440,462; $1,371,492 for the year ended December 31, 2001; and $10,156,713 for the year ended December 31, 2000. The Company has not reported an annual profit since December 31, 1997. In order to return to profitability, beginning in 2001 the Company has focused on products with higher profit margins and has reduced expenses. This has resulted in improved performance and the Company have achieved profitability for the quarter ended September 30, 2002. In spite of these efforts, there can be no assurance that the Company will become profitable on an annual basis.

Net sales consist of sales of products to customers after deduction of customer cash discounts, freight and warehouse allowances, and volume rebate allowances. Sales are recorded when the merchandise is shipped.

The cost of goods sold for products imported as finished goods includes the cost of the product in the appropriate domestic currency, duty and other taxes, and freight and brokerage charges. Royalties to supplier of Grand Toys Ltd., the Company's Canadian operating subsidiary ("Grand Canada"), which are not contingent upon the subsequent sales of the suppliers' products are included in the price paid for such products.

Major components of selling, general and administrative expenses include: payroll and fringe benefits; advertising expense, which includes the cost of production of television commercials and the cost of air time; advertising allowances paid to customers for cooperative advertising programs; and royalty expense. Royalties include payments by Grand Canada to licensors of character properties and to manufacturers of toy products if such payments are contingent upon subsequent sales of the products. Royalties are usually a percentage of the price at which the product is sold and are payable once a sale is made.

Accounts receivable are receivables net of an allowance for doubtful accounts. The allowance is adjusted periodically to reflect the current status of receivables. Management believes that current reserves for doubtful accounts are adequate. Sales of products to retailers and distributors are on an irrevocable basis. Consistent with industry practices, Grand Canada may make exceptions to this policy on a case-by-case negotiated basis. Inventory is comprised of finished goods at landed cost.

The following table sets forth consolidated operations data as a percentage of net sales for the periods indicated:

On a quarterly basis management reviews its inventory of products and makes an assessment of its realizable value. The factors considered include current market prices, the demand for and the seasonality of its products. If circumstances change (i.e. unexpected shift in market demand, pricing, trends etc.) there could be a material impact on the net realizable value of inventory.

The 2001 comparative results exclude the operations of Sababa Toys, Inc., the shares of which were sold in June 2002.

Net income for the third quarter of 2002 was $106,266, or $0.04, per share as compared to a net income of $57,769, or $0.05, per share for the third quarter of 2001.

The increase in the net income is attributed to the increases in net sales (70.48%) and gross profit (2.48%) These increases were offset by the increase in selling, general and administrative expenses, as a result of restructuring expenses and certain non-recurring expenses. The income per share was reduced as a result of the private offering of shares in December 2001 and January 2002 as well as other stock issuances make by the Company during 2002.

Net sales increased for the third quarter of 2002 by $1,341,143, or by 70.48%, to $3,244,053 from $1,902,910 for the third quarter of 2001. During the quarter, gross profit also increased as a result of the Company's emphasis on profitable sales and tighter inventory control.

The increase in net sales during the quarter is primarily due to the Spider-Man, Lord of the Rings and Disney/Universal product lines. In particular, Spider-Man, the evergreen, perennially popular line of action adventure figures from the classic comic book hero has been dramatically enhanced by the release of Spider-Man the movie and additional lines of product based on the movie characters.

Similarly, sales of Lord of the Rings action figure toys based on the characters J.R.R. Tolkien's classic novel line increased as the successful movie adaptation captured the imagination of children.

The Disney/Universal line consists of records and audiotapes. The Company acquired the right to distribute these products in Canada in January 2002. The addition of this line represents 2% of the total net sales increase of 70.48% over the same quarter of 2001.

Gross profit for the Company increased during the third quarter of 2002 by $558,311, compared to the same quarter of 2001. As a percentage of sales, gross profit increased from 35.62% in the third quarter of 2001 to 38.10% in the third quarter of 2002. Gross profit increased as a result of the sales and product mix in the third quarter 2002. In addition the increased gross profit in the third quarter of 2002 resulted from the Company's continued emphasis on higher margin sales and minimized sales of discontinued products by tighter inventory control.

The increase in selling, general and administrative expenses of $229,587 to $1,081,630 in the third quarter of 2002, from $852,043 in the third quarter of 2001, was primarily due to increases in advertising and cooperative advertising ($109,374), royalties ($67,740) and consulting expenses ($64,120).

Other material expenses in the quarter were:

Of the above expenses, $119,924 is of a non-recurring nature.

Selling, general and administrative expenses as a percentage of sales, were 11.43% lower in 2002 than during the comparable period in 2001. The Company continues to conduct reviews of all aspects of its operations to reduce costs and improve profitability.

Net loss was $440,462, or $(0.24) per share, for the first nine months of 2002 compared to net loss of $573,153, or $(0.49), per share for the same period last year. However, net loss for the nine months ended September 30, 2002 included a gain of $149,541 from the sale of Sababa Toys, Inc. Without this gain, the Company would have incurred a net loss of $590,212, or $(0.32) per share.

The decrease in the net loss of $132,482 is attributed to the increases in net sales (50.00%), gross profit (88.58%) and the recognition of the gain on sale of the discontinued operations. These increases were offset by the increase in expenses, as a result of restructuring expenses and certain non-recurring expenses. The increase in the loss per share was also attributable to increased number of issued and outstanding shares as a result of the private offering of shares in December 2001 and January 2002 as well as other stock issuances make by the Company during 2002.

Net sales increased for the third quarter of 2002 by $2,971,839, or by 50.00%, to $8,926,608 from $5,954,769 for the first nine months of 2001. During the period, gross profit also increased as a result of the Company's emphasis on profitable sales and tighter inventory control.

The increase in the current period is due to the Spider-Man, Lord of the Rings and Disney/Universal product lines. In particular, Spider-Man, the evergreen, perennially popular line of action adventure figures from the classic comic book hero has been dramatically enhanced by the release of Spider-Man the movie and additional lines of product based on the movie characters.

Similarly, sales of Lord of the Rings action figure toys based on the characters of J.R.R. Tolkien's classic novel line increased as the successful movie adaptation captured the imagination of children.

The Disney/Universal line consists of records and audiotapes. The Company acquired the right to distribute these products in Canada in January 2002. The addition of this line represents 4% of the total net sales increase of 50.00% over the same period of 2001.

Gross profit for the Company increased by $1,561,591 from $1,762,847 in 2001 to $3,324,438 in 2002. As a percentage of sales, gross profit increased from 29.60% to 37.24%. Despite the decrease in net sales, gross profit increased as a result of the sales mix in the product line.

The increased gross profit in 2002 results from the Company's continued emphasis on higher margin sales and minimized sales of discontinued products by tighter inventory control. Retailers continue to be cautious in placing fall orders but retail offtake is encouraging.

The increase in selling, general and administrative expenses of $551,482 compared to the first nine months of 2001 was primarily due to increases in advertising and cooperative advertising ($187,253), royalty ($118,257), insurance ($44,815) and compensation ($113,736) expenses.

As a percentage of sales, selling, general and administrative expenses decreased by 11.53% from 53.20% for the first nine months of 2001 to 41.67% for the same period of 2002.

Other material expenses for the nine-month period ended September 30, 2002 were:

Of the above expenses, $298,480 is of a non-recurring nature.

The Company generally finances its operations through borrowings from its credit facility with Montcap Financial Inc., by cash flow from operations, and sales of equity securities.

In March 2001, the Company received gross proceeds of $500,000 from a private sale of its Common Stock and warrants.

In June 2001, the Company secured a line of credit with Montcap Financial up to $627,825 with drawdowns based upon specified percentages of its accounts receivable. The line of credit was secured by the accounts receivable of the Company.

In October 2001, the Company increased its credit facility up to $1,569,563 with drawdowns based upon specified percentages of accounts receivable and inventory and the value of its equipment. All the assets of the Company secure the line of credit.

In December 2001, the Company issued Series B Convertible Redeemable Preferred Stock for a total of $915,000 of which $800,000 was received in December 2001, and the balance in January 2002.

In May 2002, the Company increased its borrowing capacity to $2,308,403 from $1,569,563.

The Company's available borrowings under the Montcap credit facility and the net proceeds from the sale of the Company's common stock and warrants are not sufficient to fully implement the Company's business plan. To the extent that the Company will be required to fund operating losses, the Company's financial position will deteriorate. There can be no assurance that the Company will be able to find significant additional financing at all or on terms favorable to it. If equity securities are issued in connection with a financing, dilution to the Company's stockholders may result, and if additional funds are raised through the incurrence of debt, the Company may be subject to restrictions on our operations and finances. Furthermore, if the Company does incur additional debt, it may be limiting its ability to repurchase capital stock, engage in mergers, consolidations, acquisitions and asset sales, or alter its lines of business or accounting methods, even though these actions would othe rwise benefit the Company's business

Accounts receivable at September 30, 2002 were $1,985,985 compared to $1,183,175 at December 31, 2001. The sales were mainly to mass retailers. Inventory at September 30, 2002 increased to $2,387,931 from $1,373,094 at December 31, 2001.

Working capital increased from $1,111,171 at December 31, 2001 to $1,650,022 at September 30, 2002. Net cash used for operating activities was $1,009,858 in 2002 compared to net cash used by operating activities of $494,211 in 2001. Cash for additions to equipment and leasehold improvements was $18,253 in 2002 compared to $23,068 for 2001.

The Company's accounts receivable level is subject to significant seasonal variations due to the seasonality of sales. As a result, the Company's working capital requirements are greatest during its third and fourth quarters. In addition, to the extent accounts receivable, inventories, guarantees and advance payments increase as a result of growth of the Company's business, the Company could require additional working capital to fund its operations.

Sources of such funding include cash flow from operations, drawings on the financing facilities, or sales of additional equity or debt securities by the Company.

If the funds available to the Company for current cash and cash equivalents are not sufficient to meet the Company's cash needs, the Company may from time to time seek to raise capital from additional sources, including project-specific financing, additional public or private debt or equity financing.

The Company's management believes that in order to achieve its long-term expansion objectives and to enhance its competitive position in the U.S. market, the Company will need additional financial resources over the next several years. The precise amount and timing of the Company's future financing needs cannot be determined at this time and will depend upon a number of factors, including the demand for its products and the management of its working capital. The Company may not be able to obtain additional financing on acceptable terms or at all. If the Company is are unable to obtain sufficient capital, it could require the Company to curtail its expansion plans.

None

The Company has determined that the new pronouncements that will come into effect in the year 2002 will not have a significant impact on the financial statements.

The Company is exposed to certain market risks, which arise from transactions entered into the normal course of business. The Company's primary exposures are changes in interest rates with respect to its debt and foreign currency exchange fluctuations.

INTEREST RATE RISK The interest payable on the Company's revolving lines-of-credit are variable based on the prime rate, and therefore, affected by changes in market interest rates. The Company does not use derivative financial instruments.

FOREIGN CURRENCY RISK While the Company's product purchases are transacted in United States dollars, most transactions among the suppliers and subcontractors are effected in HK dollars. Accordingly, fluctuations in Hong Kong monetary rates may have an impact on the Company's cost of goods. Furthermore, appreciation of Chinese currency values relative to the Hong Kong dollar could increase the cost to the Company of the products manufactured in the People's Republic of China, and thereby have a negative impact on the Company. As well since the majority of the Company's sales are in Canadian dollars, the Company is at risk with regards to the conversion of Canadian dollars to US dollars to pay its suppliers. Therefore, fluctuations in the conversion rate may have an impact on the Company. The Company may use derivative financial instruments solely to hedge the effects of such currency fluctuations.

Within the 90 days prior to the date of filing this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings.

During the quarter ended September 30, 2002, there were no other material developments to any legal proceedings, which have been previously reported by the Company.

Other than discussed above or in Note 12 to the Company's December 31, 2001 Consolidated Financial Statements, the Company is not a party to, nor is it aware of, any other pending litigation of a material nature.

In July 2002, 243,555 common shares were issued in partial satisfaction for outstanding legal fees and settlement negotiation.

None

None

None

(a) Exhibits.

(b) Reports on Form 8-K.

None

Pursuant to the requirements of the Security Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 14, 2002 GRAND TOYS INTERNATIONAL, INC.

I, Stephen Altro, Interim - President and Chief Executive Officer (principal executive officer) of Grand Toys International, Inc. (the "Registrant"), certifies that:

1. I have reviewed this quarterly report on Form 10-Q of Grand Toys International , Inc.

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

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

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

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

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

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

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

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

Date: ...............

_______________________
Stephen Altro

Date: November 14, 2002

I, Tania Clarke, Chief Financial Officer (principal financial officer) of Grand Toys International, Inc. (the "Registrant"), certifies that:

1. I have reviewed this quarterly report on Form 10-Q of Grand Toys International , Inc.

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

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

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

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

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

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

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

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

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: ...............

_______________________
Tania Clarke

Date: November 14, 2002

Exhibit 99.1

I, Stephen Altro, Interim - President and Chief Executive Officer (principal executive officer) of Grand Toys International, Inc. (the "Registrant"), certifies that to the best of my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended September 30, 2002 of the Registrant (the "Report"):

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

I, Tania Clarke, Chief Financial Officer (principal financial officer) of Grand Toys International, Inc. (the "Registrant"), certifies that to the best of my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended September 30, 2002 of the Registrant (the "Report"):

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.