SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549
 
                              FORM 10-K

         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
            SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED).

              For the fiscal year ended January 31, 1998

                   Commission file number 1-6083

                        NOODLE KIDOODLE, INC.
       (Exact Name of Registrant as Specified in Its Charter)

            Delaware                          11-1771705
(State or Other Jurisdiction of            (I.R.S. Employer
 Incorporation or Organization)           Identification No.)

   6801 Jericho Turnpike, Syosset, NY           11791
(Address of Principal Executive Offices)      (Zip Code)

Registrant's telephone number,
including area code                         (516)-677-0500

Securities registered pursuant to Section 12 (b) of the Act:

                                          Name of Each Exchange
      Title of Each Class                  on Which Registered
Common Stock, $.001 par value             NASDAQ National Market

Securities registered pursuant to Section 12 (g) of the Act:

                              NONE

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 of 1934 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 by check mark if disclosure of delinquent filers 
pursuant to Item 405 of Regulation S-K is not contained herein, 
and will not be contained, to the best of registrant's knowledge, 
in definitive proxy or information statements incorporated by 
reference in Part III of this Form 10-K or any amendment to this 
Form 10-K. [  ]

The aggregate market value of voting stock held by non-affiliates 
of the registrant as of April 17, 1998 was $46,425,295 based on 
the closing price of same stock on that date.

The number of shares of common stock outstanding as of April 17, 
1998 was 7,579,640.

                          -1-
<PAGE>
Documents Incorporated by reference:  Certain portions of 
Registrant's definitive proxy statement with respect to its 1998 
Annual Meeting of Stockholders to be filed, pursuant to 
Regulation 14A under the Securities Exchange Act of 1934, with 
the Commission within 120 days of the close of Registrant's 
fiscal year ended January 31, 1998 are incorporated by reference 
into Part III of this report.

                             -2-
<PAGE>
                       TABLE OF CONTENTS

                                                         Page
                            PART I


Item 1. Business                                           4
Item 2. Properties                                         7
Item 3. Legal Proceedings                                  8
Item 4. Submission of Matters to a Vote of
        Security Holders                                   8


                            Part II

Item 5. Market for Registrant's Common Stock and
        Related Stockholders' Matters                      8
Item 6. Selected Financial Data                            9
Item 7. Management's Discussion and Analysis
        of Financial Condition and Results of              11
        Operations
Item 8. Financial Statements and Supplementary Data        16
Item 9. Changes in and Disagreements with
        Accountants on Accounting and Financial
        Disclosure                                         16


                            PART III

Item 10. Directors and Executive Officers of
         the Registrant                                    16
Item 11. Executive Compensation                            16
Item 12. Security Ownership of Certain Beneficial
         Owners and Management                             16
Item 13. Certain Relationships and Related
         Transactions                                      16


                            PART IV

Item 14. Exhibits, Financial Statements,
         Schedules and Reports on Form 8-K                 17

                           -3-
<PAGE>

                          PART I

ITEM 1.  BUSINESS.

(a)  General

Noodle Kidoodle, Inc., a Delaware corporation (the "Company" or 
"Registrant") is a specialty retailer of a broad assortment of 
educationally oriented, creative and non-violent children's 
products, including toys, books, games, video and audio tapes, 
computer software, crafts and other learning products.

The Company was founded in 1946 and, doing business under its 
former name Greenman Bros. Inc., engaged in the retail toy 
business as well as the wholesale distribution of general 
merchandise, with an emphasis on toys, stationery and housewares.  
During the 1980s, the Company operated a number of retail toy 
stores, including a chain of 330 stores under the Circus World 
name located principally in shopping malls in approximately 30 
states.  The Company sold the Circus World stores in Fiscal 1991 
but continued to operate a number of retail toy stores under the 
Playworld name.  The Company opened its first Noodle Kidoodle 
store in November 1993, and opened three additional Noodle 
Kidoodle stores in Fiscal 1995.  During Fiscal 1996, management 
determined that the Company should focus exclusively on its 
retail business by expanding and developing the Noodle Kidoodle 
retail concept.  Accordingly, in August 1995, the Company adopted 
a new business plan and ceased operating its wholesale division.  
The Company, in December 1995, changed its name from Greenman 
Bros. Inc. to Noodle  Kidoodle, Inc. and, in January 1996, 
changed its jurisdiction of incorporation to Delaware.

The Company operated 32 Noodle Kidoodle stores at the close of 
the fiscal year ended January 31, 1998 ("Fiscal 1998") located in 
New York, New Jersey, Connecticut and the Boston, Chicago, and 
Detroit metropolitan areas.  The Company also operated one other 
retail toy store under the Playworld name during Fiscal 1998 
which was closed on October 31, 1997.

(b) Financial Information About Industry Segments

Registrant currently operates in an industry segment which 
involves the retail sales of children's toys and other products.  
In prior years it also operated in a second segment which was the 
wholesale distribution of general merchandise.  This segment was 
discontinued in August 1995 and the results are disclosed in 
discontinued operations.  See Note 2 (Discontinued Operations) of 
the Notes to Consolidated Financial Statements.

(c) Narrative Description of Business

Noodle  Kidoodle, Inc. is a specialty retailer of a broad 
assortment of educationally oriented, creative and non-violent 
children's products.  The Noodle Kidoodle concept offers 

                             -4-
<PAGE>
something new to parents and children by combining the attractive 
pricing and larger size of traditional toy stores with the more 
creative product selection and superior customer service of small 
boutiques, while providing an entertaining shopping environment 
through interactive play areas and frequent in-store events.

The Company's stores range from approximately 6,100 to 13,300 
square feet and average approximately 10,500 square feet.  Each 
store offers customers a warm and inviting shopping environment 
with brightly lit spaces, colorful walls, ceilings and carpets, 
wide aisles for strollers and kid-level seating and product 
shelving.  Each store typically carries approximately 20,000 
stock-keeping units ("SKU's"), conveniently displayed in separate 
merchandise departments, such as "Science & Nature" and "Arts & 
Crafts", which are identified by eye-catching signs that are 
visual as well as verbal so that children can understand them.  
All of the products carried in Noodle Kidoodle stores conform to 
the Company's creative, non-violent and educational merchandising 
strategy.  The Company generally does not carry mass market 
television advertised toys.  However, in certain product 
categories, the Company does carry brand name products which fit 
the Noodle Kidoodle philosophy, such as Crayola, Lego, Playmobil, 
Mattel, the full line of Walt Disney video titles and the 
Goosebumps line of books.  The Company purchases merchandise from 
over 550 suppliers.  There is currently one supplier, Ty, Inc., 
which represents slightly more than 9% of total purchases.

The Company operated 32 Noodle Kidoodle stores at the end of its 
1998 fiscal year, located in New York, New Jersey, Connecticut 
and the Boston, Chicago and Detroit metropolitan areas.  It has 
opened one store in fiscal 1999 in the Detroit metropolitan area 
and expects to open at least five additional stores during the 
year.  As of April 20, 1998, the Company has signed six  leases 
for new store locations. Five are scheduled to open this year and 
one next year.   The Company plans to open stores in Dallas and 
Plano, TX in the Spring of 1998, in  Austin, TX and Boca Raton, 
FL in the summer of 1998 and in Hartsdale, NY in the Fall of 
1998.  A store in Southlake, TX is scheduled to open in 1999.  
The Company believes that there are opportunities for nationwide 
expansion over the longer term.

The Company believes that the following elements are important to 
its retailing concept:

  Interactive Shopping Environment - Each Noodle Kidoodle store 
is designed with children in mind.  Each store has designated 
play areas where children and their parents are encouraged to 
explore toys and games in keeping  with the Company's "try 
before you buy" philosophy.  Among the key interactive 
features of each store are the Computer Center, "Kidoodle 
Theater" and the Electronic Learning Center.

                              -5-
<PAGE>
   Broad Assortment of Imaginative Products - Noodle Kidoodle
stores offer a broad assortment of products designed to
stimulate a child's imagination and contribute to his or her
growth and development, consistent with the Company's slogan
that "Kids learn best when they're having fun."  To keep its
merchandise mix fresh and exciting, the Company continually
seeks innovative new products.

   In-Store Events - The Company provides without charge
frequent in-store events such as personal appearances by
authors and children's television personalities, arts and
crafts workshops and readings from selected books to provide
entertainment to its customers, increase store traffic and
position Noodle Kidoodle as a destination store.

   Superior Customer Service - By providing knowledgeable and
friendly customer service and selecting enthusiastic employees
who enjoy working with children, the Company believes that it
has a competitive advantage over lower-service superstores
and mass merchandisers.

   Targeted Marketing - The Company conducts a targeted direct 
mail marketing program and continuously updates its customer 
database for this purpose.

   Competitive Pricing - Noodle Kidoodle offers everyday
competitive pricing.  Many products are regularly discounted
and prices in general are believed to be competitive with
those featured by superstores carrying similar lines of
merchandise.

Backlog is not considered relevant to an understanding of 
Registrant's business.  Registrant is required to carry 
substantial amounts of inventory in the months of September 
through November of each year in order to meet holiday delivery 
requirements.

Registrant did not have any customers that represented more than 
10% of consolidated revenues for the year ended January 31, 1998.

Registrant's business is highly seasonal and approximately 45% of 
its revenues occur in the fourth quarter.

The retail toy business is highly competitive.  The Company 
competes on the basis of its stores' interactive environment, 
broad merchandise selection, superior customer service and 
competitive pricing.  The Company competes with a variety of mass 
merchandisers, superstores and other toy retailers, including 
Toys R Us and Kay Bee Toy Stores and other store formats selling 
children's products, such as discount stores and smaller 
specialty toy stores.  Retailing of children's educational 
products is a relatively new concept.  Included among the 
Company's direct competitors are Zany Brainy, Learningsmith, 
Store of Knowledge, Learning Express and Imaginarium.

                           -6-
<PAGE>
Some of the Company's competitors are much larger in terms of 
sales volume and have more capital and greater management 
resources than the Company.  If any of the Company's larger 
competitors were to increase their focus on the educational 
market or if any regional competitors were to expand their 
activities in the markets primarily served by the Company, it 
could be adversely affected.  If any of the Company's major 
competitors seek to gain or retain market share by reducing 
prices, the Company may be required to reduce its prices on key 
items in order to remain competitive, which would have the effect 
of reducing its profitability.

As of January 31, 1998, the Company employed 926 people, of whom 
351 were employed full-time.  The Company also employs additional 
part-time personnel during the pre-Christmas season.  The Company 
believes that its relations with its employees are generally 
good.

The Company has registered several service marks and trademarks 
with Federal and State authorities, including Noodle Kidoodle 
(registered), Oodles & Oodles of Fun Things to Learn 
(registered), Kidoodle Animation (registered), and the Company's 
slogan "Kids learn best when they're having fun" (registered).  
The Company believes it has all licenses necessary to conduct its 
business.

ITEM 2. PROPERTIES.

The Company leases all of its Noodle Kidoodle stores.  Original 
lease terms generally are for ten years, and many leases contain 
renewal options.  The Company's stores are generally located in 
either strip shopping centers or mall locations.  The 32 stores 
operating at the end of Fiscal 1998 ranged in size from 
approximately 6,100 to 13,300 square feet.

The Company currently supports its retail operations with an 
owned 269,000 square foot distribution center in Phillipsburg, 
New Jersey.  The Company had previously supported its total 
retail and wholesale operations with three other distribution 
centers located in Farmingdale, New York, West Haven, Connecticut 
and Birmingham, Alabama.  In conjunction with discontinuing its 
wholesale operations the Company has ceased operating the 
Farmingdale and West Haven distribution centers.  The Company 
discontinued the use of the Birmingham center in 1989 and has 
been sub-leasing the space to third parties since such 
discontinuance.  The Company sold the Farmingdale facility in 
July 1996.  The lease for the West Haven center expired in March 
1996.  The Company does not believe that disposing of or 
discontinuing operations in any of these facilities will have a 
material adverse effect on its operations or financial condition.

The Company's executive offices are located at Syosset, New York. 
The Company has a two-year lease for its executive offices which 
contains renewal options.

                            -7-
<PAGE>
Registrant believes that the foregoing facilities are adequate 
for its present operations and such facilities are maintained in 
a good state of repair.

See Note 6 (Commitments and Contingencies) of the Notes to 
Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS.

The Company is not a party to any legal proceedings other than 
claims and lawsuits arising in the normal course of its business 
which, in the opinion of the Company's management, are not 
individually or in the aggregate material to its business.

As disclosed last year, the Company was a defendant in a 
purported plantiffs' class action filed in August 1995, in the 
United States District Court for the Eastern District of New York 
against Playmobil USA, Inc., a toy manufacturer ("Playmobil"), 
and against the Company and another retailer, as defendant class 
representatives of a purported class of those toy retailers 
nationwide selling products  manufactured by Playmobil.  The case 
was later consolidated with two others pending against Playmobil.  
On October 23, 1996, plaintiffs filed an Amended Complaint 
dropping the Company as a defendant, but naming it and three 
other retailers as "Co-conspirators who were induced to 
participate and did participate in an alleged price fixing scheme 
organized by Playmobil."  No damages or other forms of relief are 
requested against the Company.  These developments confirm the 
Company's earlier view that this litigation was not material to 
the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

None

                          PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
        STOCKHOLDERS' MATTERS.

The Company's Common Stock is quoted on the NASDAQ National 
Market under the symbol "NKID". The following table sets forth, 
for the periods indicated, the high and low sales prices per 
share for the Common Stock for each of the fiscal quarters 
indicated for Fiscal 1998 and for the fiscal year ended February 
1, 1997 ("Fiscal 1997").




                           -8-

<PAGE>
<TABLE>
                                  High      Low
<CAPTION>
<S>                            <C>        <C>
Fiscal 1998
     First Quarter             $ 3.88     $ 2.50
     Second Quarter              4.50       2.38
     Third Quarter               4.13       2.75
     Fourth Quarter              5.13       3.69
      
Fiscal 1997
     First Quarter              $ 9.50    $ 6.25
     Second Quarter               8.63      5.88
     Third Quarter                8.00      5.38
     Fourth Quarter               7.25      3.00
</TABLE>
As of January 31, 1998 there were approximately 638 holders of 
record of Common Stock.

The Company has not paid cash dividends on its Common Stock since 
1969 and currently anticipates that it will retain all available 
funds generated by its operations for the development and growth 
of its business.  Any future determination as to dividend policy 
will be made at the discretion of the Board of Directors of the 
Company and will depend on a number of factors, including the 
future earnings, capital requirements, financial condition and 
business prospects of the Company and such other factors as the 
Board of Directors may deem relevant.


ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data presented below reflects the 
consolidated results of operations, financial condition and 
operating data of the Company for the periods indicated, after 
giving retroactive effect to the Company's discontinued wholesale 
business segment.  This data should be read in conjunction with 
the Consolidated Financial Statements and notes thereto and 
Management's Discussion and Analysis of Financial Condition and 
Results of Operations included elsewhere in this report.  The 
consolidated financial data for the fifty-two weeks ended January 
31, 1998, February 1, 1997, fifty-three weeks ended February 3, 
1996, and the fifty-two weeks ended January 28, 1995, and January 
29, 1994 are derived from the consolidated financial statements 
of the Company which have been audited by Janover Rubinroit, LLC, 
independent certified public accountants.

                               -9-

<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
                                                      Fiscal Years Ended
                                      Jan. 31,   Feb. 1,   Feb. 3,   Jan. 28,   Jan. 29,
                                        1998      1997      1996       1995       1994 
                                     (52 weeks)(52 weeks)(53 weeks) (52 weeks) (52 weeks)
                                              (In thousands except share data)

<S>                                  <C>        <C>       <C>        <C>       <C>   
STATEMENT OF OPERATIONS DATA:
  Net Sales                           $81,664    $59,410    $32,143   $23,308    $20,712

  Net income (loss) from:
    Continuing operations             $(1,918)   $(7,492)   $(5,272)  $(4,490)   $(1,180)
    Discontinued operations                 -          -     (9,059)    1,096      1,889
      Net income (loss)               $(1,918)   $(7,492)  $(14,331)  $(3,394)   $   709

  Basic and diluted income
  (loss) per share:
    Continuing operations             $  (.25)   $ (1.00)   $  (.99)  $  (.86)   $  (.22)
    Discontinued operations                 -          -      (1.70)      .21        .35
      Net income (loss) per share     $  (.25)   $ (1.00)   $ (2.69)  $  (.65)   $   .13

Weighted average shares:
  Basic                                 7,580      7,488      5,320     5,220      5,338
  Diluted                               7,587      7,601      5,498     5,361      5,368

BALANCE SHEET DATA:
  Working capital                     $15,977    $16,819    $14,031   $35,667    $39,810
  Total assets                         49,481     51,036     37,276    48,042     49,629
  Stockholders' equity                 33,781     35,699     27,080    40,870     44,064
  Long term obligations                   733        753          -         -          -
  Dividends per common share                -          -          -         -          -
</TABLE>
In accordance with FASB No. 128, as a result of losses from continuing
operations, the inclusion of employee stock options were antidilutive and,
therefore, were not utilized in the computation of diluted earnings per share.

                                       -10-
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

Fiscal Year Ended January 31, 1998 Compared to
Fiscal Year Ended February 1, 1997.

Continuing Operations

Net sales increased a total of 37.5% to $81.7 million in Fiscal 
1998 from $59.4 million in Fiscal 1997.  Noodle Kidoodle sales 
increased $23.8 million or 41.2% to $81.5 million in Fiscal 1998 
from $57.7 million in the prior year, primarily due to increased 
comparable store sales of 16%, the addition of one store during 
Fiscal 1998 and thirteen stores during Fiscal 1997.  Other retail 
sales decreased 88.2% to $.2 million in Fiscal 1998 from $1.7 
million in the prior year, primarily as a result of closing the 
last Playworld store on October 31, 1997.  The Company operated 
32 Noodle Kidoodle stores at January 31, 1998 compared to 31 
Noodle Kidoodle stores and one Playworld store at February 1, 
1997.

Gross profit (derived from net sales less cost of products sold, 
which includes buying and warehousing costs) increased 36.7% to 
$31.3 million for Fiscal 1998 from $22.9 million in Fiscal 1997. 
Overall gross profit as a percent of net sales ("gross profit 
percentage") decreased to 38.3% in Fiscal 1998 from 38.5% in 
Fiscal 1997.  The decrease in gross profit percentage was 
primarily attributable to increased markdowns of .7%, offset by 
lower merchandise costs,  decreases in buying costs (including 
the salaries and related expenses of the Company's buyers) and 
greater sales leverage against warehousing costs which contain 
some fixed elements.  Gross profit in the other retail store was 
immaterial to the overall gross profit percentage.

Selling and administrative expenses increased 8.0% to $33.6 
million in Fiscal 1998 from $31.1 million in the prior year.  
These increases resulted primarily from higher direct store 
expenses which increased $4.6 million due to change in the store 
base and higher sales levels, offset by a reduction in  home 
office expenses of $1.9 million and a $.2 million reduction in 
store pre-opening costs.  The reduction in home office expenses 
reflects steps taken last year to reduce administrative staff by 
approximately 20%.  Selling and administrative expenses as a 
percentage of net sales decreased to 41.1% in Fiscal 1998 from 
52.4% in the prior year, primarily as a result of leveraging 
selling and administrative expenses which did not rise 
commensurately with increased sales levels.

Net loss from continuing operations decreased 74.7% to $1.9 
million ($.25 per share) in Fiscal 1998 from $7.5 million ($1.00 
per share) in the prior year.  The net loss in both Fiscal 1998 
and Fiscal 1997 did not include tax benefits.  At January 31, 

                             -11-
<PAGE>
1998, the Company had approximately $21.4 million of net 
operating loss carryforwards.

Fiscal Year Ended February 1, 1997 Compared to
Fiscal Year Ended February 3, 1996
 
Continuing Operations

Net sales increased a total of 85.0% to $59.4 million in Fiscal 
1997 from $32.1 million in fiscal year ended February 3, 1996 
("Fiscal 1996").  Noodle Kidoodle sales increased $30.0 million 
or 108.3% to $57.7 million in Fiscal 1997 from $27.7 million in 
the prior year, primarily due to the addition of thirteen Noodle 
Kidoodle stores during Fiscal 1997.  Other retail sales decreased 
61.4% to $1.7 million in Fiscal 1997 from $4.4 million in the 
prior year, primarily as a result of the closing of one Playworld 
store and two Toy Park stores in the first half of Fiscal 1997.  
Comparable store sales were virtually flat.  The Company operated 
31 Noodle Kidoodle stores and one Playworld store at February 1, 
1997 compared to 18 Noodle Kidoodle stores, two Playworld stores 
and two Toy Park stores at February 3, 1996. Fiscal 1997 
contained 52 weeks compared to 53 weeks in Fiscal 1996.  Sales 
for the extra week in Fiscal 1996 represented 1.7% of annual 
sales.

Gross profit (derived from net sales less cost of products sold, 
which includes buying and warehousing costs) increased 86.2% to 
$22.9 million for Fiscal 1997 from $12.3 million in Fiscal 1996.  
Overall gross profit as a percentage of net sales ("gross profit 
percentage") increased to 38.5% in Fiscal 1997 from 38.3% in 
Fiscal 1996.  The increase in gross profit percentage was 
primarily  attributable to the increased sales volume at Noodle 
Kidoodle stores, which generated higher margins, offset by 
decreased sales and margins at the other retail stores.  Gross 
profit percentage at Noodle Kidoodle stores increased to 38.5% in 
Fiscal 1997 from 37.9% in the prior year, primarily as a result 
of leveraging buying costs (including the salaries and related 
expenses of the Company's buyers) partially offset by increases 
in the cost of merchandise.  Warehousing costs, which contain 
some fixed elements remained flat and did not rise commensurately 
with the increased sales levels.  Gross margin in the other 
retail stores decreased to 36.5% in Fiscal 1997 from 40.7% in the 
prior year, primarily due to markdowns taken to liquidate 
inventories in three stores that were closed in the first half of 
Fiscal 1997 offset by lower buying and warehousing costs.

Selling and administrative expenses, excluding the provision for 
restructuring in Fiscal 1996, increased 75.7% to $31.1 million in 
Fiscal 1997 from $17.7 million in the prior year. These increases 
resulted primarily from; higher direct store expenses, which 
increased $9.1 million due to changes in the store base; non-
recurring charges of $.6 million for upgrading the stores' point 
of sale system and a provision for severance costs related to a 
20% administrative staff reduction; and higher home office 
expenses.  Selling and administrative expenses as a percentage of 

                            -12-
<PAGE>
net sales decreased to 52.4% in Fiscal 1997 from 55.0% in the 
prior year, primarily as a result of increased sales due to an 
increased store base.

Provision for restructured operations was $.5 million in Fiscal 
1996 related to the closing of certain other retail stores.  This 
included losses from store operations from the date of 
announcement until closing, employee severance costs, estimated 
lease liabilities, loss on liquidation of inventories and 
disposition of assets and other related restructuring costs.

Net loss from continuing operations increased 41.5% to $7.5 
million ($1.00 per share) in Fiscal 1997 from $5.3 million ($.99 
per share) in the prior year.  The net loss in both Fiscal 1997 
and Fiscal 1996 did not include tax benefits.  At February 1, 
1997, the Company had approximately $18.0 million of net 
operating loss carryforwards.

Discontinued Operations

In Fiscal 1997 the Company's discontinued operations had no 
sales.  No income or loss was recognized from these operations in 
Fiscal 1997.

Net sales were $51.9 million in Fiscal 1996.

Operating loss before provision for discontinued operations was 
$1.9 million in Fiscal 1996.

Provision for loss on disposal of discontinued operations was 
$7.1 million in Fiscal 1996 related to the disposal of the 
wholesale business, including the estimated losses through the 
disposal period and the anticipated sale of two of the Company's 
distribution centers, net of income tax expense of $1.6 million.

Net loss from discontinued operations was $9.1 million ($1.70 per 
share) in Fiscal 1996 including the $7.1 million ($1.34 per 
share) provision for loss on disposal of discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

During the past three fiscal years the Company satisfied the cash 
requirements for its continuing retail operations principally 
through the sale of securities, cash flows from discontinued 
wholesale operations and internal cash balances.  These cash 
requirements principally include operating losses, working 
capital requirements and expenditures for new store openings.

                              -13-
<PAGE>
<TABLE>
<CAPTION>
                                              Fiscal Years Ended
                                        1998         1997         1996
                                                (In thousands)

<S>                                   <C>          <C>         <C>
Net cash provided by (used in)
 Operating activities:
  Continuing operations               $ 2,673      $(9,438)    $(7,281)
  Discontinued operations              (1,252)      (1,585)     12,128
 Investing activities                  (1,637)      (1,798)     (8,960)
 Financing activities                     (18)      16,882         477

Net increase (decrease) in cash
 and cash equivalents                    (234)       4,061      (3,636)
Cash and cash equivalents -
 beginning of year                     11,333        7,272      10,908
Cash and cash equivalents -
 end of year                          $11,099     $ 11,333     $ 7,272
</TABLE>
During Fiscal 1998, the Company generated $2.7 million of cash 
from operating activities of its continuing operations, primarily 
from a net loss of $1.9 million offset by non-cash charges of 
$2.7 million and a decrease in working capital of $1.9 million.  
The net liabilities of discontinued operations were reduced by 
$1.3 million during the year.  Net cash used in investing 
activities was $1.6 million, primarily to purchase fixed assets 
for new and remodeled stores.  As a result of the foregoing, cash 
and cash equivalents decreased during the year by $.2 million.

During Fiscal 1997, the Company generated $16.9 million of cash  
from financing activities, principally from the sale of new 
Common Stock, the net proceeds of which were approximately $16.0 
million.  Net cash used in investing activities was $1.8 million, 
composed of property additions for new stores and for upgrading 
the stores' point-of-sale computer system, which together totaled 
$9.4 million, offset by $7.6 million of proceeds from the sale of 
property from discontinued operations.  Cash was also used to 
fund $9.4 million of cash requirements for continuing operations, 
attributable to a net loss of $7.5 million and increased working 
capital needs of $4.2 million due to new store openings and 
increased inventory levels, offset by non-cash charges of $2.3 
million.  Inventory increased from $10.3 million at February 3, 
1996 to $17.3 million at February 1, 1997, primarily resulting 
from new store openings.  As a result of the foregoing, cash and 
cash equivalents increased during the year by $4.1 million.

During Fiscal 1996, the Company generated $12.1 million of cash 
from discontinued operations, primarily attributable to 
reductions in inventory and other working capital of $20.4 
million  and $.8 million of non-cash charges offset by a net loss 
of $9.1 million, which included a $7.1 million provision for the 
discontinuance of the wholesale operations.  This cash was used 
primarily to fund $7.3 million of cash requirements for 
continuing retail operations, attributable to increases in 
working capital needs of $3.5 million due to new store openings 
and increased inventory levels as well as a net loss of $5.3 
million.  Inventory increased from $4.3 million at January 28, 
1995 to $10.3 million at February 3, 1996 primarily as a result 

                              -14-
<PAGE>
of new store openings.  The Company also used cash to fund 
investing activities of $9.0 million, primarily for the purchase 
of fixed assets for new stores.  As a result of the foregoing, 
cash and cash equivalents decreased during the year by $3.6 
million.

During the past several fiscal years, the Company did not require 
any cash borrowings under its $10.0 million revolving credit 
line, which expired in June 1995.  In February 1996 the Company 
obtained a line of credit from a bank which was unsecured and 
provided for maximum  outstandings of $10.0 million in short-term 
loans and letters of credit.  That line of credit expired on May 
31, 1997.  In June 1997 the Company entered into a $15.0 million, 
three-year revolving credit facility with the CIT Group/Business 
Credit, Inc.  This facility may be used for direct borrowings and 
letters of credit, and is secured by the Company's inventory, 
receivables and certain other assets.

The Company expects to fund its near-term cash requirements 
principally from its existing cash balances and its revolving 
credit facility.  The Company expects to finance its long-term 
expansion plan with internally and externally generated funds, 
which may include borrowings under future credit facilities, and 
through the sale of equity, equity-related or debt securities.  
There can be no assurance that financing will be available in 
amounts, or at rates or on terms and conditions acceptable to the 
Company.  

The Company anticipates that capital expenditures in Fiscal 1999 
will be approximately $3.2 million, primarily to finance new 
stores.

The Company has available net operating loss carryforwards of 
approximately $21.4 million for income tax purposes.

Seasonality

The Company's operations are highly seasonal and approximately 
45% of its revenues fall within the Company's fourth quarter 
which coincides with the Christmas selling season.  New stores 
are expected to be opened throughout the year, but generally 
before the Christmas selling season, which will make the 
Company's fourth quarter revenues an even greater percentage of 
the total year's revenues.  Operations during the first three 
quarters are not expected to be profitable for the foreseeable 
future.

                              -15-
<PAGE>
Impact of Inflation

The impact of inflation on the Company's results of operations 
has not been significant.  The Company attempts to pass on 
increased costs by increasing product prices over time.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Reference is made to Item 14.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

                          PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information with respect to directors and executive officers of 
the Company is incorporated herein by reference to the 
information set forth under the captions "Election of Directors", 
"Executive Officers", and "Compliance with Section 16(a) of the 
Exchange Act" in the Company's Proxy Statement for its 1998 
Annual Meeting of Stockholders (the "1998 Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION.

Information with respect to executive compensation is 
incorporated herein by reference to the information set forth 
under the captions, "Committees, Meetings, and Director 
Compensation" and "Executive Compensation", excluding the 
information under the captions "Executive Compensation - 
Compensation and Stock Option Committee Report on Executive 
Compensation" and "Executive Compensation - Performance Graph", 
in the Company's 1998 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

Information with respect to security ownership is incorporated 
herein by reference to the information set forth under the 
caption "Security Ownership" in the Company's 1998 Proxy 
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information with respect to certain relationships and related 
transactions is incorporated herein by reference to the 
information, if any, set forth under the caption "Certain 
Relationships and Related Transactions" in the Company's 1998 
Proxy Statement.

                           -16-
<PAGE>

                         PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS 
         ON FORM 8-K.

(a) 1. Financial Statements                             Page

       Independent auditor's report                     F-1

       Consolidated balance sheets at January
         31, 1998 and February 1, 1997                  F-2

       Consolidated statements of operations for
         the years ended January 31, 1998,
         February 1, 1997 and February 3, 1996          F-3

       Consolidated statements of stockholders'
         equity for the years ended January 31,
         1998, February 1, 1997, and February 3,
         1996                                           F-4

       Consolidated statements of cash flows for
         the years ended January 31, 1998, February
         1, 1997,and  February 3, 1996                  F-5

       Notes to consolidated financial statements       F-6

    2.  Schedules

VIII.  Valuation and qualifying accounts (available on
      request)

All other schedules have been omitted because they are not 
applicable or the required information is shown in the financial 
statements or the notes thereto.

The individual financial statements and schedules of Registrant 
have been omitted since consolidated financial statements have 
been filed and Registrant is primarily an operating company and 
all subsidiaries included in the consolidated financial 
statements filed are wholly-owned subsidiaries.

Shareholders may obtain a copy of any exhibit not contained 
herein free of charge by writing to Kenneth S. Betuker, Vice 
President, Chief Financial Officer and Secretary, Noodle 
Kidoodle, Inc., 6801 Jericho Turnpike, Syosset, NY 11791.

                              -17-
<PAGE>
3.  Index to Exhibits

(a)  The following documents are filed as Exhibits to this
     document:

      Exhibit
      Number    Description of Document
<TABLE>
<CAPTION>

<S>      <C>
3.1      Certificate of Incorporation of the Registrant
         currently in effect, with all amendments thereto
         (Incorporated by reference to Exhibit 3.1 to
         Registrant's Form S-1 Registration Statement
         (Commission File No. 33-65029), effective
         February 13, 1996)

3.2      (New York) Certificate of Merger of Noodle
         Kidoodle, Inc., a New York corporation, into
         Noodle Kidoodle, Inc., a Delaware corporation
         (Incorporated by reference to Exhibit 3.2 to
         Registrant's Form S-1 Registration Statement
         (Commission File No. 33-65029), effective
         February 13, 1996)

3.3      Agreement and Plan of Merger of Noodle Kidoodle,
         Inc., a New York corporation, and Noodle
         Kidoodle, Inc., a Delaware corporation
         (Incorporated by reference to Exhibit 3.3 to
         Registrant's Form S-1 Registration Statement
         (Commission File No. 33-65029), effective
         February 13, 1996)

3.4      By-laws of Registrant (Incorporated by reference
         to Exhibit 3.4 to Registrant's Form S-1
         Registration Statement(Commission File No. 33-
         65029), effective February 13, 1996)

3.5      (Delaware) Certificate of Merger of Noodle
         Kidoodle, Inc., a New York corporation into
         Noodle Kidoodle, Inc., a Delaware corporation
         (Incorporated by reference to Exhibit 3.5 to
         Registrant's Form S-1 Registration Statement
         (Commission File No. 33-65029), effective
         February 13, 1996)

3.6      Plan of Merger of C.W.P.W., Inc., a Michigan
         corporation, into Noodle Kidoodle, Inc., a
         Delaware corporation (Incorporated by reference  
         to Registrant's Annual Report on Form 10-K for 
         fiscal year ended February 1, 1997.)

3.7      Certificate of Ownership and Merger of C.W.P.W.,
         Inc., a Michigan corporation, into Noodle
         Kidoodle, Inc., a Delaware corporation 
         (Incorporated by reference to Registrant's 
         Annual Report on Form 10-K for fiscal year ended 
         February 1, 1997.)

                               -18-
<PAGE>
3.8      Amended and Restated By-Laws dated November 12, 
         1997 (Incorporated by reference to Exhibit 3.4 
         to Registrant's Form S-1 Registration Statement 
         (Commission File No. 33-65029), effective 
         February 13, 1996 and Registrant's Report on  
         Form 8-K dated November 21, 1997)


4.1      Rights Agreement, dated as of May 6, 1988,
         between Registrant and Manufacturers Hanover
         Trust Company, as Rights Agent (Incorporated by
         reference to Registrant's Report on Form 8-K
         dated May 6, 1988 and the exhibits filed
         therewith)

4.2      First Amendment to Rights Agreement dated as of
         November 22, 1991 (Incorporated by reference to
         Registrant's Report on Form 8-K, dated November
         22, 1991, and the exhibits filed therewith)

10.1     Stock Incentive Plan and Outside Directors Stock
         Option Plan, dated April 26, 1994 (Incorporated
         by reference to Registrant's Form S-8
         Registration Statement (Commission File No. 33-
         82104), effective July 26, 1994 and the exhibits
         filed therewith)

10.2*    Employment Agreement by and between Registrant
         and Stanley Greenman dated as of February 1,
         1998.

10.3*    Employment Agreement by and between Registrant
         and Stewart Katz dated as of February 1, 1998.

10.4     Non-Contributory Insured Medical Reimbursement
         Plan (Incorporated by reference to Exhibit 10.05
         to Registrant's Annual Report on Form 10-K for
         the fiscal year ended January 30, 1993)

10.5     Agreement and Plan of Merger dated February 1,
         1994 by and between Registrant and certain
         wholly-owned subsidiaries of the Registrant
         (Incorporated by reference to Exhibit 10.08 to
         Registrant's Annual Report on Form 10-K for
         fiscal year ended January 29, 1994)

10.6     Amendment to Outside Directors Stock Option Plan,
         dated December 13, 1995 (Incorporated by
         reference to Exhibit 10.6 to Registrant's Form S-
         1 Registration Statement (Commission File No. 33-
         65029), effective February 13, 1996)

                            -19-
<PAGE>
10.7     Purchase and Sale Agreement - Farmingdale  
         Facility (Incorporated by reference to 
         Registrant's Annual Report on Form 10-K for the 
         fiscal year ended February 1, 1997)

27.0*    Financial Data Schedule
</TABLE>

(b)  The following documents are filed as Schedules to
    this Document:

     Schedule
     Number        Description of Document

     VIII          Valuation and Qualifying Accounts for the
                   Fiscal Years Ended January 31, 1998, February
                   1, 1997 and February 3, 1996

(b)  Reports on Form 8-K

    The Registrant filed a report on Form 8-K on November 21, 
    1997, reporting the amendment and restatement of the By-Laws 
    of the Company.


    * Filed herewith

                                -20-
<PAGE>
                        SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the Registrant has duly 
caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

                                 NOODLE KIDOODLE, INC.
                                 (Registrant)

April 29, 1998              BY:  /s/Stanley Greenman
                                 Stanley Greenman
                                 Chairman of the Board,
                                 Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act 
of 1934, this report has been signed below by the following 
persons on behalf of the Registrant and in the capacities 
and on the date indicated.


/s/Stanley Greenman              /s/Robin Farkas
Stanley Greenman                 Robin Farkas, Director
Chairman of the Board,
Chief Executive Officer,
and Treasurer                    /s/Lester Greenman
(Principal Executive Officer)    Lester Greenman, Director


/s/Stewart Katz                  /s/Joseph Madenberg
Stewart Katz, President,         Joseph Madenberg, Director
Chief Operating Officer,
Assistant Secretary and Director
                                 /s/Melvin C. Redman
                                 Melvin C. Redman, Director
/s/Kenneth S. Betuker
Kenneth S. Betuker
Vice President,                  /s/Barry W. Ridings
Chief Financial Officer          Barry W. Ridings, Director
and Secretary
(Principal Financial and
Accounting Officer)              /s/Robert Stokvis
                                 Robert Stokvis, Director



                              -21-

<PAGE>












                INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors of Noodle 
Kidoodle, Inc.

We have audited the accompanying consolidated balance sheets 
of Noodle Kidoodle, Inc. and Subsidiaries as of January 31, 
1998 and February 1, 1997 and the related consolidated 
statements of operations, stockholders' equity, and cash 
flows for each of the three years in the period ended 
January 31, 1998.  These financial statements are the 
responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally 
accepted auditing standards.  Those standards require that 
we plan and perform the audit to obtain reasonable assurance 
about whether the financial statements are free of material 
misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the 
financial statements.  An audit also includes assessing the 
accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial 
statement presentation.  We believe that our audits provide 
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above 
present fairly, in all material respects, the consolidated 
financial position of Noodle Kidoodle, Inc. and Subsidiaries 
as of January 31, 1998 and February 1, 1997 and the results 
of their operations and cash flows for each of the years in 
the three year period ended January 31, 1998 in conformity 
with generally accepted accounting principles.  



Janover Rubinroit, LLC



/s/ Janover Rubinroit, LLC
Garden City, New York
March 17, 1998

                               F-1 
<PAGE> 
<TABLE>
                 NOODLE KIDOODLE, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
                 January 31, 1998 and February 1, 1997 
<CAPTION>
                                                 January 31, February 1,
                                                    1998        1997
                                             (In thousands except share data)
                                ASSETS

<S>                                               <C>         <C>
Current assets:
 Cash and cash equivalents                        $11,099     $11,333
 Merchandise inventories                           16,821      17,318
 Prepaid expenses and other current assets          3,024       2,752

  Total current assets                             30,944      31,403

Property, plant and equipment at cost              24,820      23,687
 Less accumulated depreciation                      6,306       4,104
                                                   18,514      19,583

Other assets                                           23          50

Total Assets                                      $49,481     $51,036
</TABLE>
<TABLE>
<CAPTION>
                  LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                               <C>         <C>
Current liabilities:
 Current maturities of long-term debt             $    20     $    18
 Trade accounts payable                             6,048       5,049
 Accrued expenses and taxes                         7,726       7,092
 Net liabilities of discontinued operations         1,173       2,425

  Total current liabilities                        14,967      14,584

Long-term debt                                        733         753

Commitments and contingencies                           -           -

Stockholders' equity:
 Preferred stock-authorized 1,000,000 shares,
  par value $.001 (none issued)                         -           -
 Common stock-authorized 15,000,000 shares,
  par value $.001; issued 8,503,901 shares              9           9
 Capital in excess of par value                    43,063      43,063
 Accumulated deficit                               (5,499)     (3,581)
                                                   37,573      39,491
 Less treasury stock, at cost, 924,261 shares       3,792       3,792

  Total stockholders' equity                       33,781      35,699

Total Liabilities and Stockholders' Equity        $49,481     $51,036






     The accompanying notes are an integral part of the financial statements.
</TABLE>
                                     F-2
<PAGE>
<TABLE>
                         NOODLE KIDOODLE, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                For the Fiscal Years Ended
                January 31, 1998, February 1, 1997 and February 3, 1996
<CAPTION>


                                            January 31,    February 1,    February 3,
                                               1998           1997           1996
                                              (In thousands except share data)

<S>                                          <C>            <C>            <C>      
Net sales                                    $81,664        $59,410        $32,143

Costs and expenses:
 Cost of products sold including
  buying and warehousing costs                50,388         36,542         19,825
 Selling and administrative expenses          33,552         31,124         17,680
 Provision for restructured operations             -              -            500
                                              83,940         67,666         38,005

 Operating loss                               (2,276)        (8,256)        (5,862)
Interest income                                  448            839            633
Interest expense                                 (90)           (75)           (43)
 Loss from continuing operations
  before income taxes                         (1,918)        (7,492)        (5,272)
Income taxes (benefit)                             -              -              -

 Net loss from continuing operations          (1,918)        (7,492)        (5,272)

Discontinued operations:
 Loss (no income tax)                              -              -         (1,914)
 Operating loss of $7,305  including gain 
  from disposal of assets and income taxes
  of $1,602                                        -              -         (7,145)

 Net loss from discontinued operations             -              -         (9,059)

 Net loss                                    $(1,918)       $(7,492)      $(14,331)

Basic and diluted loss per share:
 Continuing operations                       $  (.25)       $ (1.00)      $   (.99)
 Discontinued operations                           -              -          (1.70)

 Net loss per share                          $  (.25)       $ (1.00)      $  (2.69)















     The accompanying notes are an integral part of the financial statements.
</TABLE>
                                  F-3
<PAGE>
<TABLE>
                          NOODLE KIDOODLE, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                For the Fiscal Years Ended
                 January 31, 1998, February 1, 1997, and February 3, 1996
                                   (In thousands)
<CAPTION>
                                                   Capital in  Retained   Treasury Stock
                                     Common Stock   Excess of  Earnings     (at Cost)
                                    Shares  Amount  Par Value  (Deficit)  Shares   Amount


<S>                                 <C>    <C>       <C>        <C.        <C>    <C>     
Balance - January 28, 1995          6,185  $  619    $25,801    $18,242     924   $ 3,792
 Exercise of stock options            115      12        529          -       -         -
 Change in par value of
  common stock                          -    (625)       625          -       -         -
 Net loss for the year                  -       -          -    (14,331)      -         -

Balance - February 3, 1996          6,300       6     26,955      3,911     924     3,792
 Common stock offering, net         2,180       3     16,007          -       -         -
 Exercise of stock options             24       -        101          -       -         -
 Net loss for the year                  -       -          -     (7,492)      -         -

Balance - February 1, 1997          8,504       9     43,063     (3,581)    924     3,792
 Net loss for the year                  -       -          -     (1,918)      -         -

Balance - January 31, 1998          8,504  $    9    $43,063    $(5,499)    924   $ 3,792























    The accompanying notes are an integral part of the financial statements.
</TABLE>
                                    F-4
<PAGE>
<TABLE>
                         NOODLE KIDOODLE, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the Fiscal Years Ended
               January 31, 1998, February 1, 1997 and February 3, 1996
                                  (In thousands)
<CAPTION>
                                              January 31,     February 1,     February 3,
                                                 1998            1997            1996

<S>                                            <C>             <C>             <C>
Cash flows from operating activities:
 Net loss from continuing operations           $(1,918)        $(7,492)        $(5,272)
 Adjustments to reconcile to net cash
  provided (used):
    Depreciation                                 2,490           1,926           1,028
    Restructuring charges - non-cash portion         -               -             500
    Loss on disposal of fixtures and equipment     243             327               -
    Decrease (increase) in non-cash
     working capital accounts:
      Merchandise inventories                      497          (6,990)         (5,998)
      Prepaid expenses and other current assets   (272)            291             (63)
      Trade accounts payable                       999            (234)          3,021
      Accrued expenses and taxes                   634           2,734            (497) 

 Net cash provided by (used in) continuing
  operations                                     2,673          (9,438)         (7,281)

 Net loss from discontinued
  operations                                         -               -          (9,059)
 Adjustments to reconcile to net cash
  provided (used):
   Decrease (increase) in non-cash working
   capital accounts and other                   (1,252)         (1,585)         21,187
 Net cash provided by (used in)
  discontinued operations                       (1,252)         (1,585)         12,128

 Net cash provided by (used in) operating
  activities                                     1,421         (11,023)          4,847

Cash flows from investing activities:
 Proceeds from sales of property - 
  discontinued operations                            -           7,594               -
 Property additions:
   Continuing operations                        (1,664)         (9,397)         (8,877)
   Discontinued operations                           -               -             (86)
 Other                                              27               5               3

 Net cash used in investing activities          (1,637)         (1,798)         (8,960)

Cash flows from financing activities:
 Proceeds from sale of common stock                  -          16,010               -
 Increase in long-term debt                          -             780               -
 Maturities of long-term debt                      (18)             (9)            (64)
 Exercise of employee options                        -             101             541

  Net cash provided by (used in) financing
  activities                                       (18)         16,882             477
 Net increase (decrease) in cash and cash
  equivalents                                     (234)          4,061          (3,636)
 Cash and cash equivalents - beginning of year  11,333           7,272          10,908

 Cash and cash equivalents - end of year       $11,099         $11,333         $ 7,272

Supplemental cash flow information:
 Net cash paid (received) during the year for:
  Interest expense                             $    91         $    75         $    43
  Income taxes, net                                  -               -          (1,512)

    The accompanying notes are an integral part of the financial statements.
</TABLE>

                                 F-5
<PAGE>
             NOODLE KIDOODLE, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:

The following summary of the Company's major accounting policies is 
presented to assist in the interpretation of the financial statements.

Principles of consolidation
The consolidated financial statements include the accounts of the parent 
company and all subsidiary companies.  All significant intercompany 
balances and transactions are eliminated in consolidation.  The Company and 
its subsidiaries are on a 52-53 week accounting period ending on the 
Saturday closest to January 31.  Fiscal 1998 and 1997 each contained 52 
weeks and Fiscal 1996 contained 53 weeks.

Description of business
The Company is a specialty retailer of a broad assortment of educationally 
oriented, creative and non-violent children's products, including toys, 
books, games, video and audio tapes, computer software, crafts, and other 
learning products.

Cash and cash equivalents
All highly liquid investments purchased with a maturity of three months or 
less are considered to be cash equivalents.  The Company places its 
temporary cash investments in high grade instruments with high credit 
quality financial institutions and, by policy, limits the amount of credit 
exposure to any one financial institution.

Inventories
Inventories are stated at the lower of cost (first-in, first-out) or 
market.

Earnings per share
Effective December 15, 1997, the Financial Accounting Standards Board 
issued Statement No. 128, "Earnings per Share".  Statement No. 128 replaced 
the previously reported primary and fully diluted earnings per share with 
basic and diluted earnings per share.  Under the new requirements for 
calculating earnings per share, the dilutive effect of stock options will 
be excluded from basic earnings per share but included in the computation 
of diluted earnings per share.  All earnings per share amounts have been 
restated as required to comply with Statement No. 128.


Property, plant and equipment
Plant and equipment is stated at cost and is depreciated on a straight-line 
basis over estimated useful lives.  Repairs and maintenance are charged to 
expense as incurred; renewals and betterments, which significantly extend 
the useful lives of existing plant and equipment, are capitalized.

Leasehold improvements are amortized over the terms of the respective 
leases or over their useful lives, whichever is shorter.  Useful lives of 
other plant and equipment vary among the classifications, but range for 
buildings and improvements from 10-40 years and for fixtures and equipment 
from 4-10 years.

                               F-6
<PAGE>
Pre-opening expenses
Costs incurred in the opening of new stores are amortized over the first 
twelve months of Operations.

Income taxes
Deferred taxes provided under SFAS No. 109 result principally from 
temporary differences in depreciation, capitalized inventory costs, 
restructuring charges, and allowance for doubtful accounts.

Use of estimates
The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities at 
the date of the financial statements and the reported amounts of revenue 
and expense during the reporting period.  Actual results could differ from 
those estimates.

Fair value disclosures
The carrying amounts of cash and cash equivalents, other current assets, 
accounts payable and other current liabilities approximates fair value 
because of the short term maturity of these instruments.  The stated value 
of long-term debt, including current maturities, approximates fair value.


NOTE 2 - DISCONTINUED OPERATIONS:

On August 30, 1995, the Company adopted a formal plan to discontinue its 
wholesale business segment.  The plan provided for the sale of two of the 
Company's distribution centers and the disposition through sale or 
liquidation of substantially all of the operating assets of such segment.

The operations and net liabilities of the wholesale business segment are 
being accounted for as a discontinued operation, and accordingly, its 
operating results and net liabilities are reported in this manner in all 
periods presented in the accompanying consolidated financial statements.

In connection with discontinuing its wholesale operations, the Company 
recorded a provision of $7.1 million in the fiscal quarter ended July 29, 
1995 for (i) estimated gains or losses on the sale or liquidation of 
wholesale assets and (ii) estimated losses until such disposal or 
liquidation is completed.








                                  F-7
<PAGE>

Summary of operating results from discontinued operations are as follows:
<TABLE>
<CAPTION>
                                     Fiscal Year Ended
                                         February 3,
                                            1996
                                       (In thousands)

<S>                                    <C>
Net sales                                 $51,931
Gross profit                                9,726
Operating loss                             (1,914)
Provision for discontinued
 operations                                (7,145)
Net loss                                   (9,059)
</TABLE>
Net liabilities of this segment at January 31, 1998 and February 1, 1997 
consisted principally of accounts payable, accrued expenses and capitalized 
lease obligations of $2,350,000 and $3,712,000, respectively, less accounts 
receivable and properties of $1,177,000, and $1,287,000, respectively.



NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
                                  Fiscal Years Ended
                              January 31,    February 1,
                                 1998           1997
                                    (In thousands)

<S>                            <C>             <C>
Land                           $   272         $   272
Building and improvements        1,734           1,665
Fixtures and equipment          11,511          10,735
Leasehold improvements          11,303          11,015
                                24,820          23,687

Less accumulated depreciation   (6,306)         (4,104)
                               $18,514         $19,583
</TABLE>

                                      F-8
<PAGE>
NOTE 4 - ACCRUED EXPENSES AND TAXES:
<TABLE>
<CAPTION>
                                 Fiscal Years Ended
                             January 31,     February 1,
                                1998            1997
                                    (In thousands)

<S>                           <C>              <C>
Payroll and related benefits   $1,082          $  752
Rent and occupancy              1,802           1,532
Insurance                         472             312
Advertising                       845             466
Restructuring charges             697           1,424
Fixtures and equipment            206             602
Other                           2,622           2,004

                               $7,726          $7,092
</TABLE>

                                    F-9
<PAGE>
NOTE 5 - LONG-TERM DEBT:

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                    Fiscal Years Ended
                                 January 31,  February 1,
                                    1998         1997
                                      (In thousands)

<S>                              <C>           <C>
Revolving credit facility          $  -         $  -

8% unsecured promissory note,
 due in quarterly installments
 through 2016                       753          771
                                    753          771
Less current maturities              20           18

                                   $733         $753
</TABLE>
The Company has a revolving credit agreement which provides for maximum 
borrowings of $15 million until June 27, 2000.   Borrowings may not exceed 
certain percentages of, and are collateralized by, inventories, 
receivables, and certain other assets.  The agreement provides for an 
annual collateral management fee and a commitment fee on the unused portion 
of the commitment.  Outstanding borrowings bear interest, at the option of 
the Company, based on the prime rate or LIBOR.  The agreement contains 
certain covenants which among other items, limits the payment of cash 
dividends when borrowings under the agreement are outstanding.

Annual maturities of long-term debt during the next five years are $20,000, 
$21,000, $23,000, $25,000 and $26,000.


NOTE 6 - COMMITMENTS AND CONTINGENCIES:

Minimum annual commitments under non-cancelable leases in effect at January 
31, 1998 are as follows (In thousands):
<TABLE>
<CAPTION>

<S>                         <C>
1999                        $ 8,886
2000                          8,918
2001                          8,919
2002                          9,041
2003                          8,831
Thereafter                   35,281

                            $79,876
</TABLE>
At January 31, 1998, the Company and its subsidiaries were lessees of 
office space, stores and transportation equipment under various leases.  In 
addition to fixed rents and rentals based on sales, certain of the leases 
require the payment of taxes and other costs.  Some leases include renewal 
options.

                              F-10
<PAGE>
Rental expense (income) for operating leases was as follows:
<TABLE>
                                  Fiscal Years Ended
                         January 31,  February 1,  February 3,
                            1998         1997         1996
                                    (In thousands)
<CAPTION>

<S>                       <C>           <C>          <C>
Minimum rentals           $6,979        $ 5,430      $3,089
Taxes and other costs      2,637          2,115       1,335
Sublease rentals               -           (295)       (761)

                          $9,616        $ 7,250      $3,663
</TABLE>
Litigation
The Company is not party to any legal proceedings other than claims and 
lawsuits arising in the normal course of its business which, in the opinion 
of the Company's management, are not individually or in the aggregate 
material to its business.

Employment agreements
The Company has employment agreements with certain officers. Those 
agreements provide for minimum salary levels as well as for incentive 
bonuses which are payable if specified performance goals are attained.


NOTE 7 - CAPITAL STOCK:

Common Stock
On February 13, 1996, the Company completed a public offering of 2.18 
million shares (including the over allotment option) of common stock at 
$8.00 per share.  Proceeds from the offering, net of commissions and 
expenses, were approximately $16.0 million. The net proceeds from the 
offering were used primarily to finance the Company's store expansion plans 
as well as for general corporate purposes, including approximately $1.0 
million to improve the Company's MIS systems capabilities.

Preferred stock
The Company has 1,000,000 authorized (non-issued) shares of preferred 
stock, par value $0.001, consisting of 440,000 shares of Series A Junior 
Participating Preferred reserved for use under the Stockholders' Rights 
Plan and the remainder for other unspecified purposes.

Stockholders' rights plan
Each outstanding share of the Company's common stock carries a stock 
purchase right.  Under certain circumstances, as defined in a rights 
agreement, each right may be exercised to purchase 1/100 of a share of 
Series A Junior Participating Preferred Stock for $25.00, subject to 
certain anti-dilution adjustments.  The rights are redeemable by the 
Company or, under certain circumstances, by a third party to whom the 
Company assigns its rights at $.01 each until a person or group acquires 
fifteen percent of the Company's common stock or until they expire on May 
15, 1998.


                                F-11
<PAGE>
NOTE 8 - STOCK OPTIONS:

Stock incentive plan
The Company's Stock Incentive Plan (the "Plan") for key employees and 
consultants, reserves 500,000 shares of common stock for the issuance of 
stock options, stock appreciation rights (SAR's), dividend equivalent 
rights, restricted stock, unrestricted stock and performance shares and is 
administered by the Compensation and Stock Option Committee (the 
"Committee") of the Board of Directors of the Company.

Under the terms of the Plan, options granted may be either non-qualified or 
incentive stock options and the exercise price, determined by the 
Committee, shall be at least 75% (100% in the case of an incentive stock 
option) of the fair market value of a share on the date of grant.  SAR's 
may be granted (subject to specified restrictions) in connection with all 
or any part of, or independently of, any option granted under the Plan.  No 
SAR's, dividend equivalent rights, restricted stock, unrestricted stock or 
performance shares have been granted to date under the Plan.  Options 
granted under the Plan are exercisable in installments; however, no options 
are exercisable within one year or later than ten years from the date of 
grant.

Stock option plan for outside directors
The Company's Outside Directors Stock Option Plan reserves 125,000 shares 
of common stock for the issuance of stock options related to this plan.  
The Stock Option Plan for Outside Directors provides that upon the initial 
election to the Board, each eligible director is granted an option to 
purchase 5,000 shares of common stock and 4,000 shares each year thereafter 
at the fair market value on the date of grant.  The options have a term of 
five years and become exercisable 50% on the first anniversary of the date 
of grant and 50% on the second anniversary of the date of grant.


The following summary sets forth the activity under the Company's stock 
incentive plans:
<TABLE>
<CAPTION>
                                           Fiscal Years Ended
                                 January 31, 1998      February 1, 1997
                                       Weighted Avg.         Weighted Avg.
                               Shares Exercise Price Shares Exercise Price

<S>                            <C>    <C>            <C>    <C>
Outstanding at beginning
 of year                       630,859    $ 5.81     580,359     $ 7.52
Granted                        247,000    $ 3.39     272,000     $ 7.52
Exercised                            -              ( 23,500)    $ 4.34
Terminated                    (358,034)   $ 5.36    (198,000)    $ 9.79
Outstanding at end of
 year                          519,825    $ 4.97     630,859     $ 5.81
Exercisable at end of
 year                          141,406    $ 6.01     312,609     $ 4.77
Available for grant at
 end of year                   128,800               253,500
</TABLE>

                                       F-12
<PAGE>


The Company has adopted the disclosure only provisions of SFAS No. 123, 
"Accounting For Stock Based Compensation", and, accordingly, no 
compensation cost has been recognized for the stock option plans.
The fair value of options at date of grant was estimated using the Black-
Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
                                          Fiscal Years Ended
                              January 31,     February 1,     February 3,
                                 1998            1997            1996

<S>                           <C>             <C>             <C>
Expected life (years)             5                5               5
Risk-free interest rate           6.0%             6.0%            6.5%
Expected volatility              44.7%            45.3%           35.4%
Dividend yield                    0.0%             0.0%            0.0%
</TABLE>
Had compensation for options granted in Fiscal 1998, 1997 and 1996 been 
determined consistent with SFAS No. 123, the Company's net loss and net 
loss per share would approximate the pro-forma amounts indicated below (In 
thousands except share data).
<TABLE>
<CAPTION>
                                          Fiscal Years Ended
                              January 31,     February 1,     February 3,
                                 1998            1997            1996

<S>                           <C>             <C>             <C>
Net loss                       $(2,042)        $(7,558)        $(14,400)
Net loss per share             $  (.27)        $ (1.01)        $  (2.71)
</TABLE>
The effects of applying SFAS No. 123 in this pro-forma disclosure are not 
indicative of future effects.  SFAS No. 123 does not apply to awards prior 
to Fiscal 1996, and additional awards in future years are anticipated.

The weighted average fair value of options granted was $3.25, $4.09, and 
$5.17 for Fiscal 1998, 1997 and 1996 respectively.

NOTE 9 - TAXES ON INCOME:

Income taxes (benefit) consist of the following:
<TABLE>
<CAPTION>
                                    Fiscal Years Ended
                           January 31,  February 1, February 3,
                              1998         1997        1996
                                     (In thousands)

<S>                        <C>          <C>         <C>

Current:
  Federal                    $    -       $    -      $    -
  State and local                 -            -           -

                                  -            -           -
Deferred                          -            -       1,602

                                  -            -       1,602

Discontinued operations           -            -       1,602

Continuing operations        $    -       $    -      $    -


</TABLE>

                                    F-13
<PAGE>
A reconciliation of the statutory federal income tax rate attributable to 
loss from continuing operations to the effective income tax rate is as 
follows:
<TABLE>
<CAPTION>


<S>                                          <C>        <C>        <C>
Federal at statutory rates                   (34)%      (34)%      (34)%
State and local taxes
  net of federal tax benefits                 (4)        (4)        (4)
Losses with no current tax
  benefit                                     38         38         38

                                               -%         -%         -%        
</TABLE>

Deferred income taxes result from temporary differences in the recognition 
of revenue and expense for tax and financial statement purposes.  The 
components of deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
                                         Fiscal Years Ended
                                      January 31,  February 1,
                                         1998         1997
                                           (In thousands)

<S>                                   <C>          <C>
Net operating loss carryforward
 (expiring in 2011-2013)                $ 8,133      $6,760
Capitalizable inventory costs               262         312
Discontinued operations                     641         992
Allowance for doubtful accounts             485         485
Restructured operations and other           597         778

 Gross deferred tax assets               10,118       9,327

Depreciation                               (508)       (433)

 Gross deferred tax liabilities            (508)       (433)

 Net deferred tax assets                  9,610       8,894

Valuation allowance                       9,610       8,894

Net tax assets                          $     -      $    -

</TABLE>

NOTE 10 - EMPLOYEE RETIREMENT PLANS:

The Company has a 401-k savings plan designed to provide additional 
financial security during retirement by providing eligible employees with 
an incentive to make regular savings contributions.  The Company matches 
10% of the first 4% of compensation contributed by the employee.

The Company in the past participated in various multi-employer pension 
plans.  Contributions and costs were determined in accordance with the 

                                 F-14
<PAGE>
provisions of negotiated labor contracts or terms of the plans.  The 
Company does not administer or control the plans.  One of the plans 
covering certain former employees, to which the Company and many other 
employers made contributions, has been terminated.  The Employee Retirement 
Income Security Act ("ERISA") imposes certain liabilities upon employers 
who are contributors to a multi-employer pension plan in the event of 
withdrawal or termination of such a plan.  During the year ended February 
1, 1997 the Company agreed to settle its liability for approximately 
$780,000, payable in quarterly installments over 20 years, plus interest at 
8% per annum.  The liability was provided for in prior periods and was 
charged to discontinued operations in those periods.


NOTE 11 - EARNINGS PER SHARE:

The following table sets forth the computation of basic and diluted loss 
per share:
<TABLE>
<CAPTION>
                                               Fiscal Years Ended
                                     January 31,  February 1,   February 3,
                                        1998         1997          1996
                                       (In thousands except share data)

<S>                                  <C>          <C>           <C>
Numerator
  Net loss from continuing
    operations - numerator for
    basic and diluted loss per
    share                             $ (1,918)    $ (7,492)     $ (5,272)

Denominator
  Denominator for basic loss
    per share - weighted average
    shares                               7,580        7,488         5,320

  Effect of dilutive securities -
    employee stock options                   7          113           178

    Denominator for diluted
      earnings per share -
      weighted average shares
      and dilutive potential
      common shares                      7,587        7,601         5,498

Loss per share:

  Basic                                $  (.25)    $  (1.00)     $   (.99)

  Diluted                              $  (.25)    $  (1.00)     $   (.99)

</TABLE>
In accordance with FASB No. 128, as a result of losses from continuing 
operations, the inclusion of employee stock options were antidilutive and, 
therefore, were not utilized in the computation of diluted earnings per 
share.

                                F-15
<PAGE>
NOTE 12 - INDUSTRY SEGMENTS:

The Company operates substantially in one industry segment which includes 
the retail sales of children's toys and other products.

NOTE 13 - PROVISION FOR RESTRUCTURED OPERATIONS:

On August 10, 1994, the Company announced the closing of stores operating 
under the name Playworld Toy Stores and a provision of $3,900,000 was 
recorded for restructuring costs.  The Company provided an additional 
$500,000 ($.09 per share) in Fiscal 1996 primarily to reflect the closing 
of one additional store that was not anticipated previously.


NOTE 14 - INTERIM FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
                               
                                          First     Second       Third       Fourth
                                         Quarter    Quarter     Quarter     Quarter
                                              (In thousands except share data)

<S>                                      <C>        <C>         <C>         <C>
Fiscal Year Ended January 31, 1998:
  Sales                                  $15,535    $13,654     $15,641     $36,834
  Gross profit                             5,871      5,115       5,942      14,348
  Net income (loss)                      $(2,003)   $(2,719)    $(2,399)    $ 5,203

Net income (loss) per share:
  Basic                                  $  (.26)   $  (.36)    $  (.32)    $   .69 
  Assuming dilution                      $  (.26)   $  (.36)    $  (.32)    $   .69

Weighted Average Shares:
  Basic                                    7,580      7,580       7,580       7,580
  Assuming dilution                        7,580      7,587       7,585       7,594

Fiscal Year Ended February 1, 1997:
  Sales                                  $ 9,113    $ 9,531     $11,845     $28,921
  Gross profit                             3,186      3,446       4,604      11,632
  Net income (loss)                      $(2,693)   $(3,075)    $(2,468)    $   744

Net income (loss) per share:
  Basic                                  $  (.37)   $  (.41)    $  (.33)    $   .10  
  Assuming dilution                      $  (.37)   $  (.41)    $  (.33)    $   .10

Weighted Average Shares:
  Basic                                    7,239      7,558       7,574       7,580
  Assuming dilution                        7,401      7,691       7,692       7,617
</TABLE>

The Company's sales are highly seasonal.  Net income (loss) per share 
calculations for each of the quarters are based on the weighted average 
number of shares outstanding for each period and the sum of the quarters 
may not necessarily be equal to the full year income (loss) per share 
amount.


                                 F-16
<PAGE>                

SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
                                For the Fiscal Years Ended
                 January 31, 1998, February 1, 1997 and February 3, 1996
                                     (In thousands)
<CAPTION>
     Column A              Column B             Column C            Column D     Column E
                                               Additions
                                             (1)         (2)
                         Balance at      Charged to   Charged to   Deductions   Balance at 
                         beginning of    costs and    other                     end of
                         year            expenses     accounts                  year

<S>                     <C>              <C>          <C>          <C>          <C>  
For estimated losses
in collection:

Year ended January 31,
  1998                   $ 1,277         $     -      $     -      $    -     $ 1,277

Year ended February 1,
  1997                   $ 1,277         $     -      $     -      $    -     $ 1,277

Year ended February 3,
  1996                   $   983         $   581      $     -      $  287 (a) $ 1,277

</TABLE>

(a)  Write-offs net of recoveries

All amounts are included in discontinued operations.