SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB


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


                    For the Quarter Ended September 30, 2004

                           Commission File No. 0-16056


                                TRUDY CORPORATION
                                 353 Main Avenue
                                Norwalk, CT 06851


                      Incorporated in the State of DELAWARE
                      Federal Identification No. 06-1007765


                            Telephone: (203) 846-2274


  Trudy Corporation has filed all reports required to be filed by section 13 or
   15 (d) of the Securities Act of 1934 during the preceding twelve months and
       has been subject to such filing requirements for the past 90 days.


                              SHARES OUTSTANDING AT
                                December 10, 2004
                Common Stock, $.001 par value: 442,460,249 shares

<PAGE>

                                                                           PAGE
INDEX                                                                     NUMBER
-----                                                                     ------

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements                                                 3

         Consolidated Balance Sheet - September 30, 2004 (unaudited)          3

         Consolidated Statements of Operations (unaudited) for the
           three months and six months ended September 30, 2004 and
           September 30, 2003 (unaudited)                                     4

         Consolidated Statements of Cash Flows (unaudited) for six
           months ended September 30, 2004 and September 30, 2003
           (unaudited)                                                        5

         Consolidated Statement of Shareholders' Deficit (unaudited)
           from April 1, 2004 through September 30, 2004                      6

         Notes to Financial Statements (unaudited)                            7

Item 2.  Management's Discussion and Analysis of Financials
         Condition and Results of Operations                                 13


                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                   23

Item 2.  Changes in Securities                                               23

Item 3.  Defaults upon Senior Securities                                     23

Item 4.  Submission of Matters to a Vote of Security Holders                 23

Item 5.  Other Information                                                   23

Item 6.  Exhibits and Reports on Form 8-K                                    23

                                       2
<PAGE>

                        Trudy Corporation and Subsidiary
                           Consolidated Balance Sheet


                                                                   September 30,
                                                                       2004
                                                                   -------------
                                                                    (Unaudited)
Assets
Current assets:
  Cash and cash equivalents                                        $     87,010
  Accounts receivable, net                                            1,207,483
  Inventories                                                         1,087,868
  Prepaid expenses and other current assets                             107,425
                                                                   ------------

     Total current assets                                             2,489,785

Other assets:
  Equipment, net                                                         39,694
  Royalty advances, net                                                 175,620
  Pre-publication costs and other assets, net                           495,629
                                                                   ------------

     Total other assets                                                 710,943

                                                                   ------------
     Total assets                                                  $  3,200,728
                                                                   ============

Liabilities and shareholders' equity

Current liabilities:
  Notes payable - bank                                             $  1,312,049
  Notes payable - shareholder / officer and related parties           1,474,690
  Current portion of long term debt                                      14,801
  Accounts payable and accrued expenses                               1,068,780
  Royalties and commissions payable                                     421,180
                                                                   ------------
     Total current liabilities                                        4,291,500

Long-term liabilities:
  Due to The Chart Studio (Pty) Ltd.                                    338,644
  Notes payable to bank                                                 366,999
                                                                   ------------
     Total long-term liabilities                                        705,643

                                                                   ------------
     Total liabilities                                                4,997,143

Minority interest                                                            --

Shareholders' equity:
  Common stock: $.0001 par value                                         44,246
  Additional paid-in capital                                          5,125,167
  Accumulated equity / (deficit)                                     (6,965,828)
                                                                   ------------
     Total shareholders' equity                                      (1,796,415)
                                                                   ------------
     Total liabilities and shareholders' equity                    $  3,200,728
                                                                   ============

                                        3
<PAGE>
<TABLE>
<CAPTION>
                                          Trudy Corporation and Subsidiary
                                        Consolidating Statement of Operations


                                                           Three Month Period                 Six Month Period
                                                           Ended September 30,               Ended September 30,
                                                      -----------------------------     -----------------------------
                                                          2004             2003             2004             2003
                                                      ------------     ------------     ------------     ------------
                                                      (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)

<S>                                                   <C>              <C>              <C>              <C>
Net Sales                                             $  2,001,689     $    995,186     $  2,859,624     $  1,704,920

Cost of Sales                                            1,024,083          689,541        1,462,414        1,146,875
                                                      ------------     ------------     ------------     ------------
Gross Profit                                               977,606          305,645        1,397,210          558,045

Operating expenses
  Selling, general and administrative                      716,798          692,403        1,357,642        1,173,474
                                                      ------------     ------------     ------------     ------------

Income/(loss) from operations                              260,808         (386,758)          39,568         (615,429)

Other income (expense)
  Interest, net                                            (38,613)          47,753          (73,985)          20,300
  Royalties, net                                            (2,686)           2,579            5,262           10,522
  Other income/(expense)                                     1,840             (617)           7,568             (555)
                                                      ------------     ------------     ------------     ------------

Other income/(expense):                                    (39,459)          49,715          (61,155)          30,267
                                                      ------------     ------------     ------------     ------------

Income/(loss) before minority interest                     221,349         (337,043)         (21,587)        (585,162)
  Minority interest income/(expense)                            --            1,626              551              527
                                                      ------------     ------------     ------------     ------------
Net income/(loss)                                          221,349         (335,417)         (21,036)        (584,635)
                                                      ============     ============     ============     ============

Basic and diluted net income/(loss) loss per share    $         --     $         --     $         --     $         --
                                                      ============     ============     ============     ============

Weighted average number of shares outstanding          442,460,249      442,460,249      442,460,249      442,460,249
                                                      ============     ============     ============     ============
</TABLE>

                                        4
<PAGE>
<TABLE>
<CAPTION>
                                   Trudy Corporation and Subsidiary
                                 Consolidated Statement of Cash Flows


                                                                             For the six months
                                                                             ended September 30,
                                                                        -----------------------------
                                                                            2004             2003
                                                                        ------------     ------------
                                                                        (Unaudited)      (Unaudited)

<S>                                                                     <C>              <C>
Cash Flows From Operating Activities
Net loss before minority interest                                       $    (21,036)    $   (584,635)
Adjustments to reconcile net loss/(income) before minority interest
  to net cash used in operating activities:
    Depreciation                                                              18,881           48,491
    Amortization of pre-publication costs                                     89,169           27,506
    Amortization of organization costs                                            --              542
    Provision for losses on accounts receivable                               24,834         (153,500)
    Provision for promotional allowance                                        99,183               --
    Provision for slow moving inventory                                       (9,544)          18,000
    Provision for sales returns                                              (28,998)              --
    Minority interest                                                           (551)            (527)
    Contributed compensation                                                  26,250           52,501
    Imputed interest on long-term loan                                        12,426           11,531

Changes in operating assets and liabilities:
    Decrease (Increase) in accounts receivable                              (547,027)         404,473
    (Decrease in Due to Chart Studio (Pty) Ltd.                                   --           (8,025)
    Decrease (Increase) in inventories                                        59,468          (14,337)
    (Increase) Decrease in prepaid expenses and other current assets          63,418          (34,404)
    Increase (Decrease) in accounts payable and accrued expenses             222,839         (135,858)
    Increase (Decrease) in royalties and commissions payable                 162,907           11,110
                                                                        ------------     ------------
Net cash provided /(used) used by operating activities                       172,219         (357,132)

Investing activities:
    Purchases of property and equipment                                       (3,329)         (14,732)
    Pre-publication and royalty advances                                    (205,426)         (81,877)
                                                                        ------------     ------------
Net cash provided/(used) by investing activities                            (208,755)         (96,609)

Financing activities:
    Proceeds from short-term debt                                            145,977               --
    Repayments of short-term debt                                                 --               --
    Repayments to related parties                                            (71,684)         (30,913)
    Proceeds from related parties                                                 --          247,970
                                                                        ------------     ------------
Net cash provided/(used) by financing activities                              74,293          217,057
                                                                        ------------     ------------

Net increase (decrease) in cash and cash equivalents                          37,757         (236,684)
Cash and cash equivalents at beginning of period                              49,253          345,182
                                                                        ------------     ------------
                                                                        ------------     ------------
Cash and cash equivalents at end of period                              $     87,010     $    108,498
                                                                        ============     ============

Cash paid for interest                                                  $     51,690     $     31,357
Cash paid for income taxes                                              $         --     $         --
</TABLE>

                                        5
<PAGE>
<TABLE>
<CAPTION>
                                               Trudy Corporation
                                     Statement of Shareholders' Deficiency
                                 For the Six Months Ended September 30, 2004


                                                                                                     Total
                                         Common Stock             Additional                      Shareholders'
                                 ----------------------------      Paid-In       Accumulated       (Deficit)
                                    Shares          Amount         Capital          Deficit          Equity
                                 ------------    ------------    ------------    ------------     ------------

<S>                              <C>                   <C>       <C>             <C>              <C>
Balance at March 31, 2004        $442,460,249          44,246    $  5,098,917    $ (6,944,793)    $ (1,801,630)

Contributed compensation                   --              --          26,250              --           26,250

Net loss (unaudited)                       --              --              --        (242,384)        (242,384)

                                 ------------    ------------    ------------    ------------     ------------
Balance at June 30, 2004          442,460,249          44,246       5,125,167      (7,187,177)      (2,017,764)
                                 ============    ============    ============    ============     ============

Net loss (unaudited)                       --              --              --         221,349          221,349

                                 ------------    ------------    ------------    ------------     ------------
Balance at September 30, 2004     442,460,249          44,246       5,125,167      (6,965,828)      (1,796,415)
                                 ============    ============    ============    ============     ============
</TABLE>

                                        6
<PAGE>

                        TRUDY CORPORATION AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   Description of Business and Basis of Presentation

Trudy Corporation and its subsidiary, Studio Mouse, LLC (the "Subsidiary")
(Trudy Corporation and the Subsidiary referred to collectively as the
`Company'), publish children's books and audiobooks and design, manufacture and
market plush stuffed animals for sale to both retail and wholesale customers,
both domestically and internationally. The Company's product is sold under the
trade names of both Soundprints and Studio Mouse.

The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended September 30, 2004 are not necessarily indicative of the results that may
be expected for the year ending March 31, 2005. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-KSB for the year ended March 31, 2004.

The Company has incurred operating losses in the past four years, and has a
deficiency in net assets. The Company's revenues have increased from $1,447,931
in 2001, to $3,392,808 in 2002 and to $4,405,006 in 2003. However, revenues
declined to $3,904,866 in the year ended March 31, 2004. During this time the
Company had been funded by a principal shareholder/officer. As of February 2004,
the Company had received a line of credit and a term loan from its Bank.

The Company's ultimate ability to continue as a going concern is dependent upon
the continued market acceptance of its products, the ability of its vendors to
supply products in a timely manner, an increase in revenues coupled with
continuing licensing support from its primary licensors, Disney Licensed
Publishing, an imprint of Disney Children's Book Group, LLC ("Disney"), the
Smithsonian Institution and WGBH Educational Foundation, as well as positive
cash flow. The Company believes that continued improvement in its sales and its
ability to borrow money from its bank will be sufficient to allow the Company to
continue in operation.


2.   Summary of Significant Accounting Policies

Principles of Consolidation

Investments in 20% to 50% owned equities are accounted for by the equity method.
Ownership interests in excess of 50% are accounted for in consolidation.

                                        7
<PAGE>

Estimates

The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosures. On an
ongoing basis, the Company evaluates its estimates and judgments based on
historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

Credit Risk

The Company transacts business on a credit basis with its customers. The Company
routinely assesses the financial strength of its customers and, as a
consequence, believes that its trade accounts receivable credit risk exposure is
limited. The Company does not require collateral or other security to support
credit sales, but provides an allowance for bad debts based on historical
experience and specifically identified risks. The Company also obtains credit
insurance on customers when it is deemed warranted.

Inventories

Inventories, which consist principally of finished goods, are stated at the
lower of cost or market. Cost is determined using the first-in, first-out
method. The Company reviews its inventory for obsolescence and provides for
obsolescence when the inventory is deemed to be unsaleable over a reasonable
time.

Equipment

Equipment is stated at cost. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets which range
from three to seven years for machinery and equipment, and furniture and
fixtures, and from one to three years for computer software and hardware.

Fair Value of Financial Instruments

The Company has the following financial instruments: cash and cash equivalents,
accounts receivable, inventories, prepaid expenses, accounts payable and accrued
expenses, notes payable and long-term debt. The carrying value of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses, and
notes payable approximate their fair value based on the liquidity of these

                                       8
<PAGE>

financial instruments or based on their short-term nature. The carrying value of
long-term debt approximates fair market value based on the market interest rates
available to the Company for debt of similar risk and maturities.

Pre-Publication Costs

Pre-publication costs are deferred and amortized on an accelerated method over
their expected revenue generating lives.

Long-Lived Assets

In accordance with Financial Accounting Standards Board Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the Company
reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Management performs ongoing business reviews and evaluates
impairment indicators based on qualitative and quantitative factors. If it is
determined that the carrying amount of an asset cannot be fully recovered, an
impairment loss is recognized.

Revenue

Revenues are recorded in accordance with SEC Staff Accounting Bulletin No. 101
"Revenue Recognition in Financial Statements."

Revenues from product sales are recognized in the period when persuasive
evidence of an arrangement with the customer exists, the products are shipped
and title has transferred to the customer, all significant obligations have been
delivered, and collection is considered probable. Since many of the product
shipments are accompanied with the right of return, a provision for estimated
returns on these sales is made at the time of sale, in accordance with Statement
of Financial Accounting Standards No. 48, "Revenue Recognition When Right of
Return Exists", based on historical experience.

Royalties

The Company records royalty revenue as earned and provides for its royalty
expense at the time the royalty income is recorded. Royalty advances are
recorded as earned when such advances represent a nonrefundable guarantee and
there are no obligations to perform services. Advance royalty payments are
recorded as expense when such advance represents a nonrefundable guarantee.

Subsidiary Licensing Rights

Depending upon the terms of its various licensing agreements, the Company can
lease its intellectual property rights to another party. The associated income
is recorded as either advances against royalties or royalties. The associated
expenses due to the authors, illustrators or licensors are a percentage of such
income for use of their text, illustrations, content or imprimaturs.

                                       9
<PAGE>


Income Taxes

Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The
statement employs an asset and liability approach for financial accounting and
reporting of deferred income taxes. Generally, SFAS 109 allows for recognition
of deferred tax assets in the current period for the future benefit of net
operating loss carryforwards and items for which expenses have been recognized
for financial statement purposes but will be deductible for tax purposes in
future periods. A valuation allowance is recognized, if on the weight of the
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.

No provision or liability for federal income taxes has been included in the
Company's financial statements in relation to the income of Studio Mouse. As a
limited liability company, it is not subject to income taxes. However, its
equity owners are taxed on their proportionate share of Studio Mouse's taxable
income.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options. Under APB 25, to the extent that
the exercise price of the Company's employee stock options equals management's
estimate of the fair value of the underlying stock on the date of grant, no
compensation expense is recognized.

Deferred expense on stock and options issued to officers and directors for
services or other consideration to be received in the future are offset against
equity and are amortized to expense over the period of benefit.

The Company periodically issues shares of its common stock to employees. Shares
issued for services are valued at the Company's estimate of fair value of the
common stock at the date of issuance.

Income/Loss Per Share Computation

Income/loss per share is computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share," (Statement 128).
Basic earnings per share is computed by dividing net income/loss by the weighted
average number of outstanding common shares. Diluted earnings per share is
computed using the weighted average number of outstanding common shares and
common share equivalents during the period. Dilutive common share equivalents
consist of employee stock options using the treasury method and dilutive
convertible securities, if any, using the if-converted method. The assumed
exercise of stock options would not have an effect on earnings per share in
either fiscal year 2005 or 2004.

Comprehensive Loss

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income"
(Statement 130). Statement 130 establishes rules for the reporting and display
of comprehensive income and its components. Comprehensive loss for the Company
is the same as net loss for all periods presented.

                                       10
<PAGE>

Segments of an Enterprise and Related Information

The Company has adopted the FASB's SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (Statement 131). Statement 131
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company has determined it has no reportable segments under Statement 131.

Advertising

Advertising costs are expensed as incurred, except for catalogs and brochures
which are all amortized over the period benefited not to exceed the publication
date of the new brochure or twelve months, whichever is less. The Company
provides cooperative advertising allowances to certain customers. These
allowances are accounted for in accordance with the requirements of Emerging
Issues Task Force Statement No. 01-9, "Accounting for Consideration Given by a
Vendor to a Customer".

Advertising expense related to catalogs and brochures was $28,314 and $102,408
for the three month periods ended September 30, 2004 and 2003, respectively. For
the six month periods ended September 30, 2004 and 2003, advertising expense
related to catalogs and brochures was $92,900 and $162,321, respectively.

There were no other advertising expenses for the three month periods ended
September 30, 2004 versus $5,600 for the three months ended September 30, 2003.
For the six month periods ended September 30, 2004 and 2003, other advertising
expense was $876 and $14,600, respectively.


3.   Inventories

Inventories consist of the following:

         Raw Materials                      $      7,132
         Finished Goods                        1,080,736
                                            ------------
         Inventory Value                    $  1,087,868
                                            ============


4.   Notes Payable, Bank

Notes payable, bank includes the following:

                                       11
<PAGE>

         A revolving line of credit totaling $750,000 through
         February 2005. Interest is payable monthly equal to the
         Wall Street Journal prime rate plus 1.5%. Borrowings are
         subject to a borrowing base equal to 80% of eligible
         accounts receivable. The note is also secured by all of
         the assets of the Company, a mortgage on the Company's
         premises and a personal guarantee of the majority
         shareholder.                                               $   668,565

         Note payable, bank, due on demand. Interest is payable
         monthly at LIBOR plus 1%. The note is secured by a
         personal guarantee of the majority shareholder.                643,484
                                                                    -----------
                                                Total               $ 1,312,049
                                                                    ===========

5.   Notes payable related parties/shareholders:

         Various notes payable to the president/shareholder due
         January, 2005. Interest payable monthly at 2.5%.           $    75,690

         Notes payable to the president/shareholder due in
         January 2007. The shareholder has the right to demand
         payment earlier. Interest is payable monthly at 2.5%.          945,000

         Notes payable, shareholder, payable at various dates
         between January 2005 and January 2007. The shareholder
         has the right to demand payment earlier. Interest is
         payable at specified maturity dates at 5% per annum.           454,000
                                                                    -----------
                                                Total               $ 1,474,690
                                                                    ===========


6.   Long term debt:

Notes payable to related parties consist of the following:

         Note payable, bank, payable in monthly installments of
         $2,713 including interest at 7%. Balance due in February
         2007. The note is secured by all assets of the Company,
         a mortgage on the Company's premises and a personal
         guarantee of the majority shareholder.                     $   293,312

         Note payable, affiliate, payable in monthly installments
         of $801 with interest imputed at 8%. The note is
         unsecured.                                                      88,488

         Less current portion                                           (14,801)
                                                                    -----------
                                                Total               $   366,999
                                                                    ===========

                                       12
<PAGE>

The scheduled principal payments on long term debt follow:

         Year ending March 31, 2005             $    14,376
         Year ending March 31, 2006                  15,448
         Year ending March 31, 2007                  16,603
         Year ending March 31, 2008                  17,780
         Year ending March 31, 2009                 249,542
         There after                                 68,051
                                                -----------
                      Total                     $   381,800
                                                ===========


7.   Income Taxes

The Company has net operating loss carryforwards, on a fiscal year basis,
approximating $5,330,000, which expire as follows:

         2004                                   $    27,000
         2005                                       157,000
         2006                                     1,246,000
         2007                                       324,000
         2008                                       258,000
         Thereafter                               3,318,000
                                                -----------
                                                $ 5,330,000
                                                ===========

Because of the current uncertainty of realizing benefits of the tax
carryforward, a valuation allowance, all related to the net operating loss
carryforward, equal to the tax benefits for deferred taxes has been established.
The full realization of the tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate taxable income during the
carryforward period.

The net operating loss benefits could be reduced if there is a "382 Change of
Ownership".


Item 2.  Management's Discussion and Analysis of Financials
         Condition and Results of Operations

NET SALES. Consolidated net sales for the three months ended September 30, 2004
and September 30, 2003 were $2,001,689 and $995,186, respectively. This
represents an increase of $1,006,503 or 101.1% over the prior quarter a year
ago. For the six months ended September 30, 2004 and 2003, net sales were
$2,859,624 and $1,704,920, respectively. This represents an increase of
$1,154,704, or 67.7%.

For the three months ended September 30, 2004, the increase in net sales is
primarily attributable to sales to the mass market and Canadian book
distributors. Sales to the mass market increased $614,218 to $923,788 versus the


                                       13
<PAGE>

prior fiscal quarter ended September 30, 2003 sales of $309,570, an increase of
nearly 200%. This was primarily as a result of strong sell-in to warehouse clubs
and continued acceptance by the consumer of planogram items in mass
merchandisers such as Target for the Disney licensed product. Sales to
international trade and mass market book distributors increased from $32,845 in
the quarter ended September 30, 2003 to $434,898, an increase of $402,053
primarily as a result of sales to Disney licensees in Australia and South Africa
as well as increased demand for Disney product in Canada. Other notable
increases in revenue came from Soundprints sales of its supplemental library
materials to libraries and library distributors as well as sales to booksellers
and wholesale book distributors.

These broad-based gains were offset by decreases in sales to display marketers
such as Books Are Fun and non-returnable discount retail accounts. Finally,
because the Company chose not to mail a consumer catalog this year, sales were
down $30,689 or 86.3% in the direct mail division.

For the three month period ended September 30, 2004, sales of the Company's
Studio Mouse imprint (i.e. trade name) increased 120% versus the prior year's
comparable quarter. The content published by Studio Mouse is principally titles
from the Mother Goose and Disney licensed properties. Disney titles accounted
for most of Studio Mouse's sales for the quarter ended September 30, 2004. For
the Soundprints imprint, sales increased 20.4% versus the prior year.
Soundprints' content is primarily comprised of Smithsonian, African Wildlife
Foundation, and American Veterinary Medical Association licensed properties.
Sales of Smithsonian licensed product decreased approximately 10% versus the
prior year period. This decrease was partially offset by Soundprints' sales of
Disney licensed product.

Sales of the Company's two new product lines under license from the American
Veterinary Medical association (AVMA) and the African Wildlife Foundation (AWF)
were less than 1% and 2% of sales, respectively. These two product lines were
introduced in the current fiscal year and thus there were no sales in the prior
fiscal year.

In the quarter ended September 30, 2004, Disney-licensed product sales accounted
for approximately 75.0% of the Company's total sales, versus 47.5% of sales for
the prior year. Sales of product under license with the Smithsonian Institution
and distributed by the Company's Soundprints division (and certain titles and
formats distributed by Studio Mouse in fiscal year 2003) decreased from 32.6% of
net sales in the prior fiscal year's quarter to 12.1% in the current quarter
ended September 30, 2004.

For the three month period ended September 30, 2004, 43.0% of the Company's
sales were to one warehouse club distributor, versus 7.0% of total sales in the
prior year period.

For the six month period, the increase in net sales is primarily attributable to
sales to the mass market, international mass market distributors and
international trade book distributors. Sales to the U.S. mass market increased
$640,343 from $318,833 in the prior year to $959,176 for the six months ended
September 30, 2004 or an increase of 200%. Sales to international trade book
distributors increased $356,813 from $32,845 to $389,658 for the six months
ended September 30, 2004. The increase is again primarily attributable to
increased sales of Disney-licensed product to a Canadian distributor, as well as
some sales to Disney licensees outside of North America. International mass
market distributor sales were $89,874 in the current year. These sales, to
international distributors, though not significant, demonstrated an increased
propensity for European and some Asian customers to purchase American products
made attractive by the weaker U.S. dollar. There were no sales to any accounts
in this division in the prior year.

                                       14
<PAGE>

Sales increases to school and library distributors, close-out accounts and
miscellaneous accounts were also offset by sales declines to book distributors,
direct response catalog customers, non-returnable discount retailers, and
website orders.

For the six month period ended September 30, 2004, net sales from the Company's
Studio Mouse imprint increased nearly 100% versus the prior year's comparable
six month period. Sales for Soundprints' products increased almost 15% versus
the prior year six month period largely as a result of sales of Smithsonian
licensed product which grew approximately 28% versus the prior year period
spurred on by strong school and library sales.

For the six month period ended September 30, 2004, Disney-licensed product sales
accounted for 64.9% of the Company's total sales, versus 31.3% of sales for the
prior year. Sales of product under license with the Smithsonian Institution and
distributed by the Company's Soundprints division (and certain titles and
formats distributed by Studio Mouse in fiscal year 2003) decreased from 33.6% of
net sales in the prior fiscal year's quarter to 19.7% in the current six month
period.

For the six month period ended September 30, 2004, 36.4% of the Company's sales
were to one warehouse club distributor, versus 7.7% of total sales in the prior
year period.


COST OF SALES. The Company's consolidated cost of sales for the quarter ended
September 30, 2004 increased $334,542 from $689,541 in the prior year's quarter
to $1,024,083 in the current year's quarter, an increase of 48.5%. However, cost
of sales as a percentage of net sales decreased from 69.3% to 51.2% in the
current fiscal year. The decrease is largely attributable to the fixed cost
nature of the company's warehouse operations from quarter to quarter and greater
sales of high gross margin product versus the prior year's quarter.

Direct product costs for the quarter increased 53.2% versus the prior year's
quarter, from $478,890 to $733,704, an increase of $254,814. As a percentage of
net sales, direct product costs decreased from 48.1% in the prior fiscal year to
36.7% in the current quarter. The decrease in direct product costs is a result
of the Company's continuing efforts to locate book printers and plush suppliers
with lower manufacturing costs. The decreased cost of sales were also a result
of revenue of Disney-licensed product which, on average, command higher
suggested retail selling prices and, therefore, higher gross margins. Also,
direct product costs declined company-wide because as pointed out above,
Disney-licensed products were 75.0% of total company sales in the three month
period ended September 30, 2004 versus 47.5% for the comparable period a year
ago.

Indirect product costs for the quarter ended September 30, 2004 increased
$79,728 from $210,651 to $290,379, an increase of 37.8%. As a percentage of net
sales, indirect product costs decreased from 21.2% in the prior fiscal year to
14.5% in the current quarter. Indirect product costs are comprised of warehouse,
labor, supplies, amortization of pre-publication materials and product
development.

For the quarter ended December 31, 2003 management revised its estimate of the
average expected life of its publications based on current historical sales
patterns. As a result, in the quarter ended September 30, 2004 amortization
expenses increased $42,712 to $55,980 from $13,268 in the prior year.

                                       15
<PAGE>

Design costs increased $18,288 from $2,950 in the prior quarter to $21,238 in
the quarter ended September 30, 2004. This is primarily attributable to costs
related to sub-contracted design work. Freight costs increased from 2003 to
2004, from $25,147 to $40,230, respectively, an increase of $15,083, largely as
a result of revenue increases. Other smaller cost increases were slightly offset
by a decrease in inventory obsolescence.

For the six months ended September 30, 2004, the Company's consolidated cost of
sales increased $315,539 from $1,146,875 in the prior year period to $1,462,414
in the current year, an increase of 27.5%. Cost of sales as a percentage of net
sales decreased from 67.3% to 51.1% in the current fiscal year.

Direct product costs for the six month period ended September 30, 2004 increased
21.6% versus the prior year period, from $793,098 to $964,685, an increase of
$171,587. As a percentage of net sales, direct product costs decreased from
46.5% in the prior fiscal year to 33.7% in the current six month period. The
decrease in direct product costs again are a result of both the Company's
continuing efforts to locate book printers and plush suppliers with lower
manufacturing costs and the greater share that the higher margin Disney-licensed
products are of the entire company product mix.

Indirect product costs for the six month period ended September 30, 2004 and
2003 increased $143,953 from $353,777 to $497,730, respectively, an increase of
40.7%. As a percentage of net sales, indirect product costs decreased from 20.8%
in the prior fiscal year to 17.4% in the current quarter. For the six month
period the increase is primarily attributable to increases in amortization,
warehouse salaries, freight and sub-contracted design costs.

Amortization expenses increased $63,626 from $27,505 in the six month period
ended September 30, 2003 to $91,131 in the current year to date period.
Sub-contracted design costs increased $22,443 from $2,950 for the prior year
period to $25,393 in the period ended September 30, 2004. Both these costs were
a result of the twofold increase in new Soundprints titles for fall 2004 and the
threefold increase in new Disney titles. Freight costs increased from 2003 to
2004, from $48,084 to $70,940, respectively, an increase of $22,856. This is as
a result of the increased level of sales. Lastly, warehouse salaries increased
27.4% from $88,073 for the six months ended September 30, 2003 to $112,235 for
the six months ended September 30, 2004, an increase of $24,162. This was
primarily attributable overtime pay to handle the general increase in shipping
volume, processing returns and general wage increases.

Editorial salaries also increased $19,967 from $74,046 in the prior year six
month period to $94,013 in the year to date period ended June 30, 2004, an
increase of 27.0%. This increase is a result of new hiring to support the
increase in new titles for the Fall to include Disney-licensed publications and
a new publishing program entitled PEEP and the Big Wide World, licensed to
Soundprints by WGBH Educational Foundation.


GROSS PROFIT. As a result of positive changes in net sales and cost of sales,
the Company's gross profit for the quarter ended September 30, 2004 increased
219.9% to $977,606 versus the prior quarter's gross profit of $305,645. The
Company's gross margin increased from 30.7% in the prior year's quarter to 48.8%
in the quarter ended September 30, 2004.

                                       16
<PAGE>

Gross profit for the six months ended September 30, 2004 increased 150.4% to
$1,397,210 versus the prior year's gross profit of $558,045. The gross margin
increased from 32.7% in the prior year to 48.9% in the six months ended
September 30, 2004.

The current fiscal year's increase in gross profit was a result of an increase
in sales and a decrease in direct and indirect product costs as a percentage of
sales principally from the higher product mix and margin that the
Disney-licensed products return to the company.


SELLING, GENERAL & ADMINISTRATIVE COSTS. The Company's selling, general, and
administrative costs increased 3.5% from $692,403 for the three months ended
September 30, 2003 to $716,798 for the three months ended September 30, 2004. As
a percentage of net sales, selling, general and administrative expenses
decreased from 69.6% of net sales in the quarter ended September 30, 2003 to
35.8% of net sales in the current quarter.

Royalty expenses largely attributable to Disney licensed products were the
single greatest contributor to the increase in selling, general and
administrative costs for the quarter ended September 30, 2004. Versus the prior
year, current quarter royalty expenses increased $123,975 from $160,237 to
$284,212, an increase of 77.4%. Disney-licensed product sales commenced in July
2003 and have increased year over year as the Company expands this product
range.

Legal services increased $25,633 from $705 in the quarter ended September 30,
2003 to $26,338 in the quarter ended September 30, 2004. The increase is
primarily a result of the Company's initiative to seek out its strategic options
for capital restructuring.

Offsetting these increases, catalog expense decreased $74,094 from $102,408 in
the prior year to $28,314 in the current quarter. The Company did not mail a
direct to consumer catalog this fall as a result of the disappointing results
from the prior year's mailing. The Company will reassess its mailing strategy in
the coming year.

Depreciation expense decreased $28,093 versus the prior year's quarter, from
$35,851 to $7,758 in the current quarter ended September 30, 2004. Depreciation
expense for the prior quarter was increased as a result of the retirement of
certain assets that were no longer utilized.

Executive and office salaries decreased $23,774 from $122,314 in the quarter
ended September 30, 2003 to $98,540 in the current quarter ended September 30,
2004, a decrease of 19.4%. Subsequent to June 30, 2004, the chief executive
officer entered into an agreement with the Board of Directors whereby his salary
is reduced to $1 per year. This salary reduction is primarily responsible for
the salary decrease.

Lastly, the provision for bad debt decreased $18,189 to $18,329 in the quarter
ended September 30, 2004 from $36,518 for the same period a year ago. The
current year's allowance for uncollectible accounts was satisfactory for the
amount of aged receivables outstanding. As a result, this expense decreased for
the quarter.

                                       17
<PAGE>

For the six month period ended September 30, 2004, the Company's selling,
general, and administrative costs increased 15.7% from $1,173,474 from the prior
year to $1,357,642 for the current year. As a percentage of net sales, selling,
general and administrative expenses decreased from 68.8% of net sales in 2003,
to 47.5% of net sales in the current year to date period.

Royalty expenses largely attributable to Disney licensed products were again the
single greatest contributor to the increase in selling, general and
administrative costs for the six months ended September 30, 2004. Versus the
prior year, current year royalty expenses increased $177,693 from $193,782 to
$371,475, an increase of 91.7%. Disney-licensed product sales commenced in July
2003 and have increased year over year as the Company expands this product
range.

Legal services increased $48,580 from $1,705 in the six months in the prior year
to $50,285 in the six months ended September 30, 2004. The increase is primarily
attributed to the Company's exploration of its strategic options, including
capital restructuring.

Outside services increased $33,061 from the six months ended September 30, 2003
to September 30, 2004, from $21,506 to $54,567, respectively. This is primarily
attributed to engagement fees related to the Company's investment banker
retained to review strategic options for the Company in advance of additional
mandatory financial compliance requirements under the Sarbanes-Oxley Act due to
go into effect March 31, 2005.

Offsetting these increases, catalog expense decreased $69,421 from $162,321 in
the prior year to $92,900 in the current year. Again, the Company did not mail a
direct to consumer catalog this fall as a result of the disappointing results
from the prior year's mailing.

Depreciation expense decreased $29,610 versus the prior year, from $48,491 to
$18,881 in the six months ended September 30, 2004. Depreciation expense for the
prior year was higher as a result of the retirement of certain assets that were
no longer being utilized.

Provision for bad debts also decreased in the current year, from $42,028 in the
prior year to $26,187 in the current year, a decrease of $15,841. The current
year's allowance for uncollectible accounts was satisfactory for the amount of
aged receivables outstanding. As a result, the expense decreased for the
quarter.


INCOME/LOSS FROM OPERATIONS. For the quarter ended September 30, 2004, income
from operations was $260,808 versus a loss of $386,758 for the same quarter the
prior year. This represents an increase of $647,566, primarily attributable to
higher revenues.

For the six month period ended September 30, 2004, the Company's income from
operations was $39,568 versus a loss of $615,429 for the prior year.


INTEREST INCOME/EXPENSE. The Company's interest expense (net) for the quarter
ended September 30, 2004 was $38,613, versus the comparable period a year ago
when there was income of $47,753. The $86,366 difference was attributable to a
one time gain a year ago of income from customer accounts related to recoveries
of bad debts. The expense for the quarter ending September 30, 2004 reflected


                                       18
<PAGE>

interest paid on the company's revolving credit line and debt service of the
shareholders' term loans.

For the six month period ended September 30, 2004 interest expense was $73,985
versus income of $20,300 for the same period a year ago. Once again interest
payments on the Company's revolving credit line and term loan accounts accounted
for this year's expense while a one-time gain in interest income from customer
accounts related to recoveries of bad debts accounted for last year's income for
the similar period.


ROYALTY EXPENSE. The Company's royalty expense (net) for the quarter ended
September 30, 2004 was $2,686 versus the prior quarter's income of $2,579.

For the six month period ended September 30, 2004 the Company's royalty income
(net) was $5,262 versus income $10,522 for the prior year six month period.


OTHER INCOME/EXPENSE. The Company's other income (net) for the quarter ended
September 30, 2004 was $1,840 versus an expense of $617 for the quarter ended
September 30, 2003. The income for the current year is partially attributable to
a one-time gain related to the recoveries of bad debts.

The Company's other income (net) for the six months ended September 30, 2004 was
$7,568 versus an expense of $555 for the quarter ended September 30, 2003. The
income for the current year is partially attributable to a one-time gain related
to the recoveries of bad debts.


INCOME/LOSS BEFORE MINORITY INTEREST. The Company's income before minority
interest for the quarter ended September 30, 2004 was $221,349 compared to a
loss of $337,043 for the quarter ended September 30, 2003.

The Company's loss before minority interest for the six months ended September
30, 2004 was $21,587 compared to a loss of $585,162 for the year to date period
ended September 30, 2003.


NET INCOME/LOSS. As a result of the items discussed above, the Company's net
income for the quarter ended September 30, 2004 was $221,349 compared to a net
loss of $335,417 for the comparable prior quarter.

The Company's net loss for the six months ended September 30, 2004 was $21,036
compared to a net loss of $584,635 for the comparable period the prior year.

                                       19
<PAGE>

Impact of New Accounting Pronouncements
---------------------------------------

The Company is not aware of any recent accounting standards issued, but not yet
required to be adopted by the Company, that would have a material effect on its
financial position or results of operations.


Critical Accounting Estimates
-----------------------------

Management's discussion and analysis of financial condition and results of
operations are based upon the Company's financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosures. On an
ongoing basis, the Company evaluates its estimates and judgments based on
historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The Company annually
reviews its financial reporting and disclosure practices and accounting policies
to ensure that its financial reporting and disclosures provide accurate and
transparent information relative to the current economic and business
environment. The Company believes that of its significant accounting policies
(see summary of significant accounting policies more fully described on Note 2
of notes to our financial statements), the following policies involve a higher
degree of judgment and/or complexity:

Pre-Publication Costs

Pre-publication costs are deferred and amortized on an accelerated method over
their expected revenue generating lives.

Prepaid Catalog Costs

Catalogs and brochures are amortized over the period benefited, not to exceed
the publication date of the subsequent brochure or twelve months, whichever is
less.

Inventory

The company reviews its inventory for obsolescence and provides for obsolescence
when the inventory becomes unsaleable over a reasonable time.

Reserve for Returns

The Company maintains allowances for product returns. These allowances are based
on historical experience and known factors regarding specific information from
customers or a product's known sell-through performance in the marketplace. If
product return rates exceeded the established allowances, additional allowances
would be required.

                                       20
<PAGE>

Liquidity and Capital Resources

It is expected that working capital will continue to be limited to fully
capitalize on new growth opportunities and publication initiatives that are
necessary to achieve profitability. As of December 10, 2004 the Company's
backlog was approximately $764,000.

As a result of the disappointing results reported in the March 31, 2004 Annual
report filed on Form 10-KSB, the Company believes that obtaining approval from
Disney for the renewal of its license whose current term expires on May 31, 2005
may be problematic without additional financial security or capital
restructuring. The Company is currently exploring options in its negotiations
with Disney. Additional financial guarantees would place a substantial burden on
the Company's working capital and thus further limit any new initiatives that
are necessary to maintain growth.

The Company continues its relationship with the Delta Capital Group, LLC which
provides assistance in seeking and securing financing while exploring the
Company's strategic options.

Significant restraints continue to be placed on the Company because of the lack
of adequate working capital, especially in the area of accounting services where
expenses related to auditing and legal services for financial compliance are
extraordinarily high as a percentage of the Company's general administrative
costs. It is believed a strategic investor would allow the Company to better
position itself for growth by providing working capital for future publishing
initiatives and even a strategic acquisition.

Expected cash flows from operations supplemented by available lending sources
appear to be adequate in covering the Company's ongoing activities. However, the
Company continues to consider outside funding options in the event that cash
flow does not materialize in line with current expectations or if the possible
renewal of the Disney license requires additional financial guarantees. Although
the Company does not expect to run out of available funds in the coming fiscal
year, it does anticipate the need for working capital will eclipse the limits of
its revolving credit facility if revenue growth is to be maintained and/or if
additional financial guarantees become necessary in conjunction with the renewal
of the Disney license.

For the quarter ended September 30, 2004 one principal shareholder/officer was
repaid $33,113 relating to pre-existing loans. Subsequent to June 30, 2004, the
chief executive officer entered into an agreement with the Board of Directors
whereby his salary is reduced to $1 per year.

The company continues to source products with new vendors in order to lower its
product costs and has done so at favorable terms. In all cases books are
purchased from its overseas vendors at 90 day payment terms on presentation of a
bill of lading. This has allowed the company in some instances to receive
payment from its customers before payment is due to its vendors. Plush toys and
CD's are purchased at slightly less favorable credit terms. However, the Company
has experienced upward cost pressure from its overseas vendors from paper and
board price increases. At the same time the competitive nature of the book
retailing market may preclude the Company from raising prices to absorb product
cost increases thus reducing margins.

On February 5, 2004 the Company closed on bank financing which converted
existing term notes into a revolving line of credit for $750,000 and provided a
term loan of $300,000. As of December 10, 2004 the Company had used
approximately $682,000 of the revolving line of credit.

                                       21
<PAGE>

As previously stated in the Company's Annual Report on Form 10-KSB, for its
fiscal year ended March 31, 2004, the implementation of compliance procedures
required under the Sarbanes-Oxley Act is scheduled to significantly impact the
Company effective with its fiscal year ended March 31, 2005. The costs
associated with such compliance are anticipated to be material.

The Company's ultimate ability to continue as a going concern is dependent upon
the continued market acceptance of its products, the ability of its vendors to
supply products in a timely manner, an increase in revenues coupled with
continuing licensing support from its primary licensors, Disney Licensed
Publishing, an imprint of Disney Children's Book Group, LLC ("Disney"), the
Smithsonian Institution and WGBH Educational Foundation, as well as positive
cash flow. Subject to the comments made above in this section, the Company
believes that continued improvement in its sales and its ability to borrow money
from its bank will be sufficient to allow the Company to continue in operation.


Forward-looking Statements
--------------------------

We have made forward-looking statements in this report that are subject to a
number of risks and uncertainties, including without limitation, those described
in our Annual Report on Form 10-KSB for the year ended March 31, 2004 and other
risks and uncertainties indicated from time to time in our filings with the SEC.
These forward-looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include the information concerning possible or assumed future results
of operations. Also, when we use words such as "believes," "expects,"
"anticipates" or similar expressions, we are making forward-looking statements.
Readers should understand that the following important factors, in addition to
those discussed in the referenced SEC filings, could affect our future financial
results, and could cause actual results to differ materially from those
expressed in our forward-looking statements:

*  The implementation of our strategies;

*  The availability of additional capital;

*  Variations in stock prices and interest rates;

*  Fluctuations in quarterly operating results; and

*  Other risks and uncertainties described in our filings with the SEC.

We make no commitment to disclose any revisions to forward-looking statements,
or any facts, events or circumstances after the date hereof that may bear upon
forward-looking statements.

                                       22
<PAGE>

                            PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

The Company is not a party to any material legal proceedings.


Item 2.  Changes in Securities

None


Item 3.  Defaults upon Senior Securities

None


Item 4.  Submission of Matters to a Vote of Security Holders

None


Item 5.  Other Information

None


Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits
     --------

3a.  Certificate of Incorporation (incorporated by reference to the Company's
     registration statement on Form S-18 (file number 33-14379B)).

3b.  Certificate of Amendment of Certificate of Incorporation (incorporated by
     reference to the Company's registration statement on Form S-18 (file number
     33-14379B)).

3c.  By-laws of Company (incorporated by reference to the Company's registration
     statement on Form S-18 (file number 33-14379B)).

3d.  Certificate of Incorporation of Norwest Manufacturing Company (incorporated
     by reference to the Company's registration statement on Form S-18 (file
     number 33-14379B)).

3e.  Certificate Amending Certificate of Incorporation of Norwest Manufacturing
     Company dated December 5, 1979 (incorporated by reference to the Company's
     registration statement on Form S-18 (file number 33-14379B)).

3f.  Certificate Amending Certificate of Incorporation of Trudy Toys Company,
     Inc. dated March 27, 1984 (incorporated by reference to the Company's
     registration statement on Form S-18 (file number 33-14379B)).

                                       23
<PAGE>

                                   SIGNATURES


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

                                        TRUDY CORPORATION
                                        (REGISTRANT)


Date: December 10, 2004                 By: /s/ WILLIAM W. BURNHAM
                                            ------------------------------------
                                            William W. Burnham,
                                            Chairman and Chief Executive Officer

                                       24