SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q   X.QUARTERLY REPORT UNDER SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended September 30, 2010  .TRANSITION REPORT UNDER SECTION 13 OR 15 ( d ) OF THE EXCHANGE ACT  For the transition period from ____________ to____________  Commission File No.0-16056  TRUDY CORPORATION (Exact name of Registrant as specified in its charter)  Delaware06-1007765(State or Other Jurisdiction of(I.R.S. Employer Identification No.)incorporation or organization)  1810 E. Sahara Ave, Suite 1517 Las Vegas, NV 89104 (Address of Principal Executive Offices)  (702) 622-9046 (Registrants telephone number, including area code)  N/A (Former name, former address and former fiscal year, if changed since last report)  Indicate by check mark whether the Registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  . No  X.  Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.  (Check one):  Large accelerated filer  .  Accelerated filer  .   Non-accelerated filer  .  Smaller reporting company  X.  Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  . No  X.  APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS  Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Not applicable.  APPLICABLE ONLY TO CORPORATE ISSUERS  Indicate the number of shares outstanding of each of the Registrants classes of common stock, as of the latest practicable date:  December 2, 2010 Common Stock, $.0001 par value: 700,862,912 shares    PART I   Item 1.  Financial Statements  The Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant.        2    INDEXPAGE
NUMBERPART I.  FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Balance Sheets  September 30, 2010 and March 31, 20104Unaudited Statements of Operations for the three and six months ended September 30, 2010 and September 30, 2009and the period from entering the development stage (September 4,2010) through September 30, 20105Unaudited Consolidated Statements of Cash Flows for the six months ended September 30, 2010 and September 30, 2009 and the period from entering the development stage (September 4, 2010) through September 30, 20106Notes to Financial Statements (unaudited)7Item 2. Management's Discussion and Analysis12Item 3. Quantitative and Qualitative Disclosures about Market Risk16Item 4. Controls and Procedures16PART II.  OTHER INFORMATIONItem 1. Legal Proceedings17Item 2. Changes in Securities17Item 3. Defaults upon Senior Securities17Item 4. Removed and Reserved17Item 5. Other Information17Item 6. Exhibits18Signatures18   3   Trudy Corporation (A Development Stage Company) Unaudited Balance Sheets September 30, 2010 and March 31, 2010  September 30,March 31,20102010AssetsCurrent assetsCash and cash equivalents$38,399$-Prepaid expenses and other current assets1,021-Total current assets39,420-Current assets held for saleCash and cash equivalents-94,954Accounts receivable, net-994,945Inventory, net-1,390,503Prepaid expenses and other current assets-169,762Total current assets held for sale-2,650,164Equipment, net165,000-Assets held for saleEquipment, net-68,161Royalty advances, net-247,436Prepublication costs and other assets, net-452,700Intangible Assets, net-327,586Total other assets held for sale-1,095,883Total assets$204,420$3,746,047Current liabilitiesConvertible note payable - Third Party165,000-Note payable38,399-Accounts payable and accrued expenses6,720-Total Current liabilities210,119-Current liabilities associated with assets held for saleNotes payable - Bank-710,706Notes payable - Third Parties-429,251Notes payable - Related parties-2,680,701Accounts payable, related parties-93,553Accounts payable and accrued expenses-1,504,240Deferred Revenue-224,355Royalties and commissions payable-424,011Total Current liabilities associated with assets held for sale-6,066,817Total liabilities210,1196,066,817CommitmentsShareholders' deficitCommon stock - $ 0.0001 par value, 850,000,000 shares authorized, 700,862,912 issued and outstanding at September 30, 2010 and March 31, 2010, respectively70,08770,087Paid-in capital10,400,4267,246,419Deficit accumulated during development stage(6,005)-Deficit accumulated before entering development stage(10,470,207)(9,637,276)Total shareholders' deficit(5,699)(2,320,770)Total liabilities and shareholders' deficit$204,420$3,746,047 The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements.  4    Trudy Corporation (A Development Stage Company) Unaudited Statements of Operations For the three and six months ended September 30, 2010 and 2009  Period fromThree Month PeriodSix Month PeriodSeptember 4, 2010Ended September 30,Ended September 30,through2010200920102009September 30, 2010Net sales$-$-$-$-$-Cost of sales-----Gross profit-----Operating expenses:Selling, general and administrative5,400-5,400-5,400Loss from operations(5,400)-(5,400)-(5,400)Other expense(605)-(605)-(605)Net loss before discontinued operations(6,005)(6,005)(6,005)Loss from discontinued operations(591,450)(360,457)(832,931)(562,342)-Net Loss$(597,455)$(360,457)$(838,938)$(562,342)(6,005)Basic & diluted net loss per share from continuing operations$-$-$-$-Basic & diluted net loss per share from discontinued operations$-$-$-$-Basic & diluted net loss per share$-$-$-$-Weighted average number of shares outstanding700,862,912700,862,912700,862,912700,862,912       The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements.  5    Trudy Corporation (A Development Stage Company) Unaudited Statements of Cash Flows  20102009September 4, 2010 throughSeptember 30, 2010Cash Flows From Operating ActivitiesNet loss$(838,936)$-$(6,005)Adjustments to reconcile net loss to net cashused in operating activities:Loss from discontinued operations832,931---Changes in operating assets and liabilities:Prepaid expenses and other current assets(1,021)(1,021)Accounts payable and accrued expenses7,0267,026Net cash (used) / provided by operating activities---Investing activities:Purchases of property and equipment---Pre-publication and royalty advances---Net cash (used) / provided by investing activities---Financing activities:Borrowings on debt---Net cash provided/(used) by financing activities---Discontinued OperationsNet cash used in operating activities(292,495)(396,887)-Net cash used in investing activities(66,461)(56,335)-Net cash used in financing activities302,401597,255-Net cash used in discontinued operations(56,555)144,033-Net increase / (decrease) in cash and cash equivalents(56,555)144,033-Cash and cash equivalents at beginning of period94,954122,73938,399Cash and cash equivalents at end of period$38,399$266,772$38,399Cash paid for interest$39,337$31,733$-Cash paid for income taxes$-$-$-Non-cash transactionsPurchase of fixed assets with conv. NP$165,000$-$165,000Disposal transaction$6,324,099$-$-    The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements.  6    TRUDY CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED)  1. Description of Business and Basis of Presentation  On September 3, 2010 the Company closed on its previously-announced transaction and sold substantially all of its assets to MMAC, LLC, a Delaware limited liability company (MMAC), which also assumed certain liabilities of Trudy.  Please refer to Note 2 and the Form 8-K filed with the SEC on September 16, 2010.  On September 3, 2010 a group of Trudy shareholders including three Directors and one other employee of the Company sold a controlling interest of Trudy for total consideration of $1.00 to an individual in a private transaction who appointed new management and elected a new Board of Directors. Recognizing this transaction the Companys Board of Directors and senior management resigned effective September 3, 2010.  Prior to September 3, 2010, Trudy Corporation (hereinafter referred to as the Company), published children's books, eBooks and audiobooks and designed, manufactured and marketed plush stuffed toys, childrens instruments and musical electronics for sale directly to consumers in the United States and to domestic and international retail and wholesale customers. The Company's products were sold under the trade names (i.e. imprints) of Studio Mouse, Soundprints, Little Soundprints, Fetching Books, Music for Little People and BeBop. This line of business for the Company ceased on September 3, 2010 as a result of the sale of substantially all of its assets and certain assumed liabilities to MMAC.  Commencing on September 4, 2010 the Companys new line of business is pursuing contracts for engineering projects to design, build and own projects for re-development in war torn areas as well as re-construction in areas hit by natural disasters.  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-Q 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 and six month periods ended September 30, 2010 are not  indicative of the results that may be expected for the year ending March 31, 2011 as the Companys new line of business will ensue.  For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended March 31, 2010.  Going Concern  The Company has suffered recurring losses from operations and has a deficiency in net assets. Such factors continue to raise substantial doubt about the Companys ability to continue as a going concern.  Development Stage  As of September 4, 2010, Trudy is a development stage company with no current operating results and, accordingly, there is no basis on which to evaluate our ability to achieve our business objective.  There is an extremely limited basis upon which to evaluate our ability to achieve our business objective of pursuing contracts for engineering projects to design, build and own projects for re-development in war torn areas as well as re-construction in areas hit by natural disasters. Trudy will not generate any significant revenues or income until, at the earliest, after the consummation of a business combination or transaction.  Reclassification  Certain items from prior period financial statements have been reclassified to conform with the current period financial statement presentation. There is no effect on net income, cash flows or stockholders deficit as a result of these reclassifications.  7    2. Discontinued Operations  On September 3, 2010 the Company closed on its previously-announced transaction and sold substantially all of its assets to MMAC, LLC, a Delaware limited liability company (MMAC), which also assumed certain liabilities of Trudy.  The assets sold consisted of Trudys on-going business as a publisher of childrens educational story, novelty and electronic books, audiobooks and plush toys.  The consideration being paid by MMAC for the Companys assets consists of the following: (1) the assumption of substantially all of the secured and unsecured liabilities of the Company, including loans from an affiliate of MMAC to the Company in the principal amount of $545,000 and with the exception of $2.7 million of personal debt owed to a principal shareholder and Chairman of the Company, William W. Burnham (Burnham); and (2) upon the completion of the final calculation of the net asset value of the Company (estimated to be completed approximately 90-120 days from the closing) an equity interest in MMAC, estimated to be in the range of 4.75%, subject, however, to possible adjustment upon the final determination of such net asset value. In view of the initial determination at closing of the Companys net asset value, the previously announced Buyer Note from MMAC to Trudy in the principal amount of $225,000 was not issued.  The amount of such consideration was determined by the Company and MMAC in arms length negotiations. Factors taken into consideration in the negotiations included the Companys then current financial condition and future prospects, the Companys results of operations, the value of the Companys assets and the Companys banking and shareholder obligations, together with those of the Companys other creditors, both secured and unsecured.  Upon determination of the final percentage equity interest as described above, MMAC will transfer such equity to the Company which will then transfer it to Burnham in consideration of the cancellation by Burnham of the $2.7 million of personal debt owed by the Company to him. Excepted from cancellation is $50,000 of debt owed to Burnham which will remain outstanding and which will be repaid to Burnham one year following the closing if and to the extent the Company has not spent the $50,000 of cash it will retain at the closing for general corporate purposes. The final percentage equity interest is still to be determined.  At the closing, as required by agreement of the parties, Burnham made a capital contribution to MMAC of cash in the amount of $175,000 and a $25,000 promissory note. Adjustment upward or downward of such $200,000 in the aggregate may be made upon final determination of the net asset value of the Company.  The Company has accrued for all obligations related to the agreement with MMAC, LLC and William W. Burnham as of September 3, 2010. This balance was $38,399 owed to William W. Burnham.  Holders of Trudys common stock did not receive any payment or distribution with respect to their shares pursuant to the sale of substantially all the Companys assets.  The value of the assets sold on September 3, 2010 was $2,895,258 and the liabilities disposed of in the transaction were $3,455,623. The difference of $3,122,884 was recorded to additional paid in capital due to the primary debt relief in the transaction being debt owed to a related party.  In addition, MMAC entered into a new four year lease with Noreast Management, LLC, a company which is 91% owned by Burnham, for the Companys current headquarters on substantially the same terms as the current lease with the Company.  Please refer to the Form 8-K filed with the SEC on September 16, 2010.  Ashley Andersen Zantop (Andersen Zantop), former CEO and President of the Company, Fell Herdeg (Herdeg), former CFO and Secretary of the Company, and Burnham, former Chairman and Director of Corporate Development of the Company, have been retained as employees by MMAC on substantially the same terms as their current employment with the Company. Andersen Zantop will serve as President and CEO of MMAC, Herdeg will serve as CFO of MMAC and Burnham will serve as Director of Corporate Development of MMAC. In addition, Burnham and Andersen Zantop will join the Board of Directors of MMAC.  On September 3, 2010 a group of Trudy shareholders including three Directors and one other employee of the Company sold a controlling interest of Trudy for $1.00 to an individual in a private transaction who appointed new management and elected a new Board of Directors. Recognizing this transaction the Companys Board of Directors and senior management resigned effective September 3, 2010.  8     Assets Held for Sale  Since substantially all of the Company was sold prior to the quarter ended September 30, 2010, the assets, liabilities and results of operations have been shown separately as discontinued operations on the accompanying balance sheets and statements of operations. Assets and liabilities of discontinued operations consisted of the following:  September 30,March 31,20102010ASSETSCurrent AssetsAssets held for saleCash and cash equivalents$0$94,954Accounts receivable, net0994,945Inventory, net01,390,503Prepaid expenses and other current assets0169,762Total current assets02,650,164Assets held for saleEquipment, net068,161Royalty advances, net0247,436Prepublication and other assets, net0452,700Prepaid acquisitions0327,586Total other assets01,095,883Total assets$0$3,746,047LIABILITIESCurrent liabilitiesCurrent liabilities associated with assets held for saleNotes payable  Bank$0$710,706Notes payable  Third party0429,251Notes payable  Related parties02,680,701Accounts Payable  related parties093,553Accounts Payable and accrued expenses01,504,240Deferred Revenue0224,355Royalties and commissions payable0424,011Total Current Liabilities$0$6,066,817  Net Sales for the six months ended September 30, 2010 and 2009 were $1,696,177 and $2,418,985, respectively.  No gain was recorded on the disposal transaction due to the excess debt relief compared to the carrying value of the disposed assets on the sales transaction being from a related party. The value of the net assets sold on September 3, 2010 was $2,895,258. The liabilities disposed of in the transaction were $3,455,623. The difference of $3,122,884 was recorded to additional paid in capital due to the primary debt relief in the transaction being debt owed to a related party.   9   a.   Inventories  Inventories consist of the following:  September 30,March 31,20102010Raw Materials$0$32,462Finished Goods01,636,004Reserve for Obsolescence0(277,963)Inventory$0$1,390,503  b. Notes Payable, Bank and Related Parties  September 30,March 31,20102010A revolving line of credit totaling $850,000. Interest is payable monthly equal to the Wall Street Journal reported prime rate plus 2.0% with interest rate not to be less than 7.5%. 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 a principal shareholder (William W. Burnham, Chairman of the Board).$0$710,706Various notes payable, to principal shareholder (William W. Burnham, Chairman of the Board) due on demand. Interest is payable monthly at LIBOR + 1.25%.02,680,701Notes payable, third party, due upon termination of the Asset Purchase Agreement. Interest accrues monthly at 7.0% on any unpaid principal and accrued interest.0429,251Total$0$3,820,658  3. Continuing Operations.  a. Notes Payable  September 30,March 31,20102010Note payable, third party, due March 3, 2011. Interest accrues at an annual rate of 15.0% on any unpaid principal and accrued interest. Convertible in 6 months at par value. No beneficial conversion feature or derivative liability was recorded for this note at inception or at September 30, 2010 due to it not yet being convertible.$165,000$0Note payable, third party, due September 3, 2010. The note does not bear any interest rate and is payable on or before December 31, 2010.38,3990Total$203,399$0   10   b. Equipment  The Company owns $165,000 in scaffolding equipment that will be used on the outside of buildings under construction to support the workers on the build.  The expected useful life of the equipment is 20 years and the equipment will be placed in service on October 1, 2010.  The equipment will be rented out to projects on a monthly or daily rental basis.  4.  Recently Issued Accounting Pronouncements  In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30  Receivable  Loans and Debt Securities Acquired with Deteriorated Credit Quality (Subtopic 310-30). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, ReceivablesTroubled Debt Restructurings by Creditors.  The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  The amendments are to be applied prospectively. Early adoption is permitted. The adoption of this ASU did not have a material impact on our financial statements.  In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements. Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated. This ASU is effective upon the issuance of this ASU. The adoption of this ASU did not have a material impact on our financial statements.  In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.  In June 2009, the Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Codification (the ASC). The ASC has become the single source of non-governmental accounting principles generally accepted in the United States (GAAP) recognized by the FASB in the preparation of financial statements. The Company adopted the ASC as of July 1, 2009. The ASC does not change GAAP and did not have an effect on the Companys financial position, results of operations or cash flows.  In May 2009, the FASB issued ASC 855-10 entitled Subsequent Events. Companies are now required to disclose the date through which subsequent events have been evaluated by management. This was amended with ASU 2010-09 in February of 2010 to enable companies to not disclose the specific date. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. ASC 855-10 provides that financial statements are considered issued when they are widely distributed for general use and reliance in a form and format that complies with GAAP. ASC 855-10 is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of ASC 855-10 upon inception did not have a significant effect on the Companys financial statements as of that date or for the period then ended. In connection with preparing the accompanying financial statements for the periods ended September 30, 2010 and 2009, management evaluated subsequent events through the date that such financial statements were issued.        11    Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF DISCONTINUED OPERATIONS  NET SALES FROM DISCONTINUED OPERATIONS  Overview  Three months ended September 30, 2010 compared to the 3 months ended September 30, 2009  Net Sales from discontinued operations for the Companys September quarter of fiscal 2011 decreased -54.5% versus the comparable quarter of fiscal 2010. The decline was due to a shortened quarter due to the asset sale on September 3 and a reduction in holiday business from a major customer.  Product costs from discontinued operations increased from 51.6% in the quarter ended September 30, 2009 to 53.1% in the current quarter as a result of an increase in lower margin sales to balance inventories, and continuing increases in manufacturing costs from vendors in China.  The three month period resulted in a net loss from discontinued operations of $591,450 versus a net loss of $360,457 for the prior year. The three month period resulted in a net loss from continuing operations of $6,005.  Six months ended September 30, 2010 compared to the six months ended September 30, 2009  Net Sales from discontinued operations for the first six months of fiscal 2011 decreased -29.9% versus the comparable six months of fiscal 2010 due to a nearly 33% shortened September Quarter due to the September 3 asset sale and certain non repeating orders from certain warehouse club and direct to consumer distributor customers. Product costs from discontinued operations increased from 43.1% for the six months ended September 30, 2009 to 51.9% in the current six month period again as a result of an increase in inventory balancing efforts,  sales at reduced margins and continuing increases in manufacturing costs from vendors in China.  The six month period operations resulted in a net loss from discontinued operations of $832,931 versus a net loss of $562,342 for the prior year. The three month period resulted in a net loss from continuing operations of $6,005.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  As noted above, net sales from discontinued operations of $594,784 for the second quarter of fiscal 2011 decreased -54.5% versus the comparable quarters sales of $1,308,381 a year ago. The decrease was largely due to the shortened sales quarter due to the asset sale on September 3, 2010. Also, several channels of trade experienced decreased sales from discontinued operations for the quarter including, but not limited to direct-to-consumer accounts, domestic warehouse club distributors and direct-to-consumer book distributors.  Six months ended September 30, 2010 compared to the six months ended September 30, 2009  As noted above, net sales from discontinued operations of $1,696,177 for the first six months of fiscal 2011 decreased -29.9% versus the comparable years six month sales of $2,418,985 a year ago.  In addition to the shortened selling period due to the September 3 asset sale, several channels of trade experienced decreased sales from discontinued operations for the six months including, but not limited to direct-to-consumer accounts, domestic warehouse club distributors and direct-to-consumer book distributors.  COST OF SALES FROM DISCONTINUED OPERATIONS.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  The Companys cost of sales from discontinued operations for the quarter ended September 30, 2010 decreased $360,295 from $922,683 in the prior years quarter to $562,388 in the current year, a decrease of 39.0%. Cost of sales from discontinued operations as a percentage of net sales from discontinued operations increased from 70.5% to 94.6% in the current quarter primarily as a result of increased amortization expenses related to the disposal of the assets held for sale, and in smaller part as a result of an increase in direct product costs from the Companys manufacturers in China and lower margin sales to balance inventories.   12   Six months ended September 30, 2010 compared to the six months ended September 30, 2009  The Companys cost of sales from discontinued operations for the six months ended September 30, 2010 decreased $253,433 from $1,547,505 in the prior years six month period to $1,294,072 in the current years six month period, a decrease of 16.4%. Cost of sales from discontinued operations as a percentage of net sales from discontinued operations increased from 63.9% to 76.3% primarily as a result of increased amortization expenses related to the disposal of the assets held for sale, and in smaller part as a result of an increase in direct product costs from the Companys manufacturers in China and lower margin sales to balance inventories.  GROSS PROFIT FROM DISCONTINUED OPERATIONS.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  The resulting gross profit from discontinued operations for the quarter ended September 30, 2010 decreased 91.6% from $385,698 to $32,396. The gross margin was 29.5% in the prior comparable quarter versus 5.4% in the current years quarter.  Six months ended September 30, 2010 compared to the six months ended September 30, 2009  The resulting gross profit from discontinued operations for the six months ended September 30, 2010 decreased 53.9% from $872,518 to $402,105. The gross margin was 36.1% in the prior years comparable six month period versus 23.7% in the current years six month period.  SELLING, GENERAL & ADMINISTRATIVE COSTS FROM DISCONTINUED OPERATIONS.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  The Companys selling, general, and administrative costs from discontinued operations decreased 23.2% or $167,089 to $551,534 for the three months ended September 30, 2010 versus $718,623 for the three months ended September 30, 2009.  As a percentage of net sales from discontinued operations, selling, general and administrative expenses from discontinued operations increased from 54.9% of net sales from discontinued operations from the prior comparable quarter to 92.7% of net sales from discontinued operations in the current fiscal year. This was primarily attributable to increased legal and amortization expenses related to the disposal of the assets held for sale which heretofore were capitalized.  The Companys selling, general, and administrative costs from continuing operations was $5,400.  Six months ended September 30, 2010 compared to the six months ended September 30, 2009  The Companys selling, general, and administrative costs from discontinued operations decreased 20.0% or $274,523 to $1,103,804 for the six months ended September 30, 2010 versus $1,378,327 for the six months ended September 30, 2009.  As a percentage of net sales from discontinued operations, selling, general and administrative expenses from discontinued operations increased from 57.0% of net sales from discontinued operations from the prior years six month period to 65.1% of net sales from discontinued operations in the current years six month period. This was again primarily attributable increased legal and amortization expenses related to the disposal of the assets held for sale which heretofore were capitalized.  The Companys selling, general, and administrative costs from continuing operations was $5,400.  LOSS FROM DISCONTINUED OPERATIONS.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  For the quarter ended September 30, 2010, the loss from discontinued operations prior to other income/expense was $519,139 versus a loss of $332,935 for the prior years quarter.  For the quarter ended September 30, 2010, the loss from continuing operations prior to other income/expense was $5,400.   13   Six months ended September 30, 2010 compared to the six months ended September 30, 2009  For the six months ended September 30, 2010, the loss from discontinued operations prior to other income/expense was $701,699 versus a loss of $505,809 for the prior years comparable six month period.  For the six months ended September 30, 2010, the loss from continuing operations prior to other income/expense was $5,400.  OTHER INCOME/EXPENSE FROM DISCONTINUED OPERATIONS.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  The Companys other expense from discontinued operations for the quarter ended September 30, 2010 was $72,286 versus expense of $27,532 for the quarter ended September 30, 2009. The increase is primarily a result of increased borrowing costs.  The Companys other expense from continuing operations for the quarter ended September 30, 2010 was $605.  Six months ended September 30, 2010 compared to the six months ended September 30, 2009  The Companys other expense from discontinued operations for the six months ended September 30, 2010 was $131,206 versus expense of $56,533 for the six months ended September 30, 2009. The increase is primarily a result of increased borrowing costs.  The Companys other expense from continuing operations for the six months ended September 30, 2010 was $605.  NET LOSS FROM DISCONTINUED OPERATIONS.  Three months ended September 30, 2010 compared to the three months ended September 30, 2009  As a result of the items discussed above, the Companys net loss from discontinued operations for the quarter ended September 30, 2010 was $591,405 compared to a net loss from discontinued operations of $360,457 for the comparable prior quarter.  The Companys net loss from continuing operations for the quarter ended September 30, 2010 was $6,005.  Six months ended September 30, 2010 compared to the six months ended September 30, 2009  As a result of the items discussed above, the Companys net loss from discontinued operations for the six months ended September 30, 2010 was $832,931 compared to a net loss from discontinued operations of $562,342 for the comparable prior year period.  The Companys net loss from continuing operations for the six months ended September 30, 2010 was $6,005.  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 in Note 2 to our financial statements), the following policies involve a higher degree of judgment and/or complexity:  Pre-Publication Costs  Pre-publication costs are title development costs including but not limited to authors, illustrators and other artists, narration, audio production, and studio time for recording and mixing final audio products. These costs are capitalized through the date of publication. At the date of publication the costs begin amortization on an accelerated method over their expected revenue generating lives. The accelerated method is based on historical and future expected sales.   14   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 writes down its inventories for estimated slow moving and obsolete goods based upon historical selling patterns, assumptions about future demand and market conditions. A significant sudden increase in the demand for the Companys products could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory quantities on-hand. Additionally, the Companys estimates of future product demand may prove to be inaccurate, in which case the Company may have understated or overstated the write-down required for excess and obsolete inventory. In the future, if the Companys inventory is determined to be overvalued, it would be required to recognize such costs in its cost of goods sold at the time of such determination. Likewise, if the Company does not properly estimate the lower of cost or market of its inventory and it is therefore determined to be undervalued, it may have over-reported its cost of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Therefore, although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the value of the Companys inventory and its reported operating results.  Liquidity and Capital Resources for Discontinued Operations  For the Period Ended September 30, 2010For the Period Ended March 31, 2010Variance% ChangeNet assets (deficiency)($5,699)($2,320,770)$2,315,07199.8%Working capital (deficiency)(170,699)(3,416,653)3,245,95495.0Accounts payable and  accrued expenses6,7201,504,240(1,497,520)-99.6Royalties and commissions payable0424,011(424,011)-100.0Accounts receivable, net0994,945(994,945)-100.0  The Companys childrens publishing operations, sold as of September 3, 2010, suffered recurring losses from operations and had a deficiency in net assets.  On September 3, 2010 the Company closed on its previously-announced transaction and sold substantially all of its assets to MMAC, LLC, a Delaware limited liability company (MMAC), which also assumed certain liabilities of Trudy.  The assets sold consisted of Trudys on-going business as a publisher of childrens educational story and novelty books, audiobooks and plush toys.  The consideration being paid by MMAC for the Companys assets consists of the following: (1) the assumption of substantially all of the secured and unsecured liabilities of the Company, including loans from an affiliate of MMAC to the Company in the principal amount of $545,000 and with the exception of $2.7 million of personal debt owed to a principal shareholder and Chairman of the Company, William W. Burnham (Burnham); and (2) upon the completion of the final calculation of the net asset value of the Company (estimated to be completed approximately 90-120 days from the closing) an equity interest in MMAC, estimated to be in the range of 4.75%, subject, however, to possible adjustment upon the final determination of such net asset value. In view of the initial determination at closing of the Companys net asset value, the previously announced Buyer Note from MMAC to Trudy in the principal amount of $225,000 was not issued.  The amount of such consideration was determined by the Company and MMAC in arms length negotiations. Factors taken into consideration in the negotiations included the Companys then current financial condition and future prospects, the Companys results of operations, the value of the Companys assets and the Companys banking and shareholder obligations, together with those of the Companys other creditors, both secured and unsecured.   15   Upon determination of the final percentage equity interest as described above, MMAC will transfer such equity to the Company which will simultaneously transfer it to Burnham in consideration of the cancellation by Burnham of the $2.7 million of personal debt owed by the Company to him. Excepted from cancellation is $50,000 of debt owed to Burnham which will remain outstanding and which will be repaid to Burnham one year following the closing if and to the extent the Company has not spent the $50,000 of cash it will retain at the closing for general corporate purposes. The $38,399 note is the balance remaining and due to Burnham.  At the closing, as required by agreement of the parties, Burnham made a capital contribution to MMAC of cash in the amount of $175,000 and a $25,000 promissory note. Adjustment upward or downward of such $200,000 in the aggregate may be made upon final determination of the net asset value of the Company as of August 26, 2010.  Holders of Trudys common stock did not receive any payment or distribution with respect to their shares pursuant to the sale of substantially all the Companys assets.  In addition, MMAC entered into a new four year lease with Noreast Management, LLC, a company which is 91% owned by Burnham, for the Companys current headquarters on substantially the same terms as the current lease with the Company.  Ashley Andersen Zantop (Andersen Zantop), former CEO and President of the Company, Fell Herdeg (Herdeg), former CFO and Secretary of the Company, and Burnham, former Chairman and Director of Corporate Development of the Company, have been retained as employees by MMAC on substantially the same terms as their current employment with the Company. Andersen Zantop will serve as President and CEO of MMAC, Herdeg will serve as CFO of MMAC and Burnham will serve as Director of Corporate Development of MMAC. In addition, Burnham and Andersen Zantop will join the Board of Directors of MMAC.  Please refer to the Form 8-K filed with the SEC on September 16, 2010.  On September 3, 2010 a group of Trudy shareholders including three Directors and one other employee of the Company sold a controlling interest of Trudy in a private transaction for total consideration of $1.00 to an individual who appointed new management and elected a new Board of Directors. Recognizing this transaction the Companys Board of Directors and senior management resigned effective September 3, 2010.  At September 30, 2010 the Company had a deficiency of net assets of $5,699 versus a deficiency of $2,320,770 at March 31, 2010. Working capital improved by $3,245,954 from a deficiency of $3,416,653 to a deficiency of $170,699 as of September 30, 2010.  Accounts payable and accrued expenses associated with assets held for sale decreased $1,497,520 versus the prior year from $1,504,240 to $6,720 at September 30, 2010. Royalties and commissions payable associated with assets held for sale decreased $424,011 versus the prior year from $424,011 at March 31, 2010 to $0 at September 30, 2010. Accounts receivable held for sale decreased from $994,945 at March 31, 2010 to $0 at September 30, 2010.  Item 3.    Quantitative and Qualitative Disclosures about Market Risk  Not applicable.  Item 4.    Controls and Procedures  There was no change in our internal control over financial reporting during the quarter ended September 30, 2010, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  The Companys Chief Executive Officer and the Chief Financial Officer conducted an evaluation of the Companys critical disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2010. Management updated that evaluation as of September 30, 2010 and identified the following weaknesses:  (i)The Company does not have adequate office and financial staffing in place to effectively control the level of transaction activity and consistently address the complex accounting matters that arise.(ii)A principal shareholder and Director of the Company who is involved in certain functions of the daily operations of the Company, could in theory override normal operating procedures.(iii)The Company currently does not have an Audit Committee.   16   Given the above identified matters, with the change in operations and Management, Management believes that disclosure controls and procedures are now effective and these identified matters have been remedied as of September 30, 2010. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the registrant would be detected.  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-K for the year ended March 31, 2010 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.  PART II OTHER INFORMATION  Item 1. Legal Proceedings  None.  Item 2. Changes in Securities  None.  Item 3. Defaults upon Senior Securities  None.  Item 4. Removed and Reserved  Item 5. Other Information  None.   17    Item 6. Exhibits.  (a)Exhibits3a.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)).31.1Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    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 16, 2010 By: /s/ Stan Larson Stan Larson,  President    18