SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q



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




                      For Quarter Ended September 30, 1997

                           Commission File No. 0-16056



                                TRUDY CORPORATION
                                 353 MAIN AVENUE
                              NORWALK, CONN. 06851



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


                            Telephone: (203) 846-2274


Trudy Corporation has filed 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 year.


                              SHARES OUTSTANDING AT
                               September 30, 1997

Common Stock, $.0001 par value                                324,457,249 shares

<PAGE>

                                TRUDY CORPORATION


INDEX                                                                      PAGE
                                                                          NUMBER

PART I.  FINANCIAL INFORMATION


  Unaudited Balance Sheets - June 30, and
      September 30, 1997 ...............................................     2

  Unaudited Statements of Operations - Three months ended and six 
      months ended September 30, 1996 and September 30, 1997  ..........     3

  Unaudited Statements of Cash Flows - Three months ended
      September 30, 1996 and September 30, 1997 ........................     4

  Note to Unaudited Financial Statements ...............................     5

  Management's Discussion and Analysis  ................................    6,7


PART II.  OTHER INFORMATION  ...........................................     7

SIGNATURES .............................................................     8


<PAGE>
<TABLE>
<CAPTION>

                                         TRUDY CORPORATION
                                     BALANCE SHEET - UNAUDITED

                                                                    Sept 30              June 30
                                                                     1997                 1997
        ASSETS                                                    (unaudited)          (unaudited)
                                                                  -----------          -----------
<S>                                                               <C>                  <C>        
 Current assets:
   Cash                                                           $    20,556          $       231
   Accounts receivable, net
     (June 30, 56,267; Sept 30, 62,639)                             1,247,460              397,448
   Inventories                                                      1,886,864            1,550,387
   Prepaid expenses                                                   426,937              110,767
   Deferred income taxes                                               40,000               40,000
                                                                  -----------          -----------
Total current assets                                                3,621,816            2,098,833
                                                                  -----------          -----------

Net property, plant and equipment                                      77,527               69,899

 Other assets:
   Deferred income taxes                                              216,000              216,000
  Pre-publication expenses                                            391,280              391,123
                                                                  -----------          -----------

 Total Assets                                                     $ 4,306,623          $ 2,775,855
                                                                  ===========          ===========

        LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
   Note payable                                                     1,390,373              671,979
   Current portion of notes to related parties                        375,990              362,443
   Current portion of long-term debt                                   11,369               13,000
   Accounts payable & accrued expenses                                897,133              372,018
                                                                  -----------          -----------
Total current liabilities                                           2,674,865            1,419,440

 Notes payable to related parties                                     156,210              153,676
  Long-term debt, net of current portion                               49,463               25,313
                                                                  -----------          -----------

Total liabilities                                                   2,880,538            1,598,429
                                                                  -----------          -----------

 Stockholders' equity:
   Common stock, par value $.0001;
   850,000,000 shares authorized;
   324,457,249 shares issued and  outstanding                          32,446               32,446
   Capital in excess of par value                                   3,993,698            3,993,698
   Deficit                                                         (2,600,059)          (2,848,718)
                                                                  -----------          -----------
              Total stockholders' equity                            1,426,085            1,177,426
                                                                  -----------          -----------
Total liabilities and stockholders' equity                        $ 4,306,623          $ 2,775,855
                                                                  ===========          ===========
</TABLE>

                                 SEE NOTES TO FINANCIAL STATEMENTS

                                                 2
<PAGE>
<TABLE>
<CAPTION>

                                             TRUDY CORPORATION
                                          STATEMENT OF OPERATIONS
                                                (UNAUDITED)




                                                Three Months Ended                Six Months Ended
                                         ------------------------------    ------------------------------
                                          September 30     September 30    September  30    September  30
                                              1997            1996             1997              1996
                                         -------------    -------------    -------------    -------------
<S>                                      <C>              <C>              <C>              <C>          
Net sales                                $   1,581,553    $   1,180,598    $   2,257,408    $   2,171,306
                                         -------------    -------------    -------------    -------------

Operating costs and expenses:
   Cost of sales                               849,077          658,797        1,245,363        1,115,414
   Selling, general and administrative         451,585          438,575          819,350          789,622
                                         -------------    -------------    -------------    -------------
                                             1,300,662        1,097,372        2,064,713        1,905,035
                                         -------------    -------------    -------------    -------------

Profit  from operations                        280,891           83,226          192,695          266,271
                                         -------------    -------------    -------------    -------------

Other income (expense):
   Interest expense                            (25,182)          (9,858)         (38,125)          (5,191)
   Other income                                  1,440              934           10,084            1,022
   Other expense (depreciation)                 (2,832)          (3,948)          (5,639)          (9,897)
     Relocation expenses                             0          (68,888)               0         (116,116)
                                         -------------    -------------    -------------    -------------
                                               (26,574)         (81,760)         (33,680)        (130,182)

Profit before tax                              254,317            1,466          159,015          136,089

Provision for income tax                         5,658                0            5,658                0

Net profit (loss)                        $     248,659    $       1,466    $     153,357    $     136,089


Deficit - beginning of period               (2,848,718)      (2,970,470)      (2,753,416)      (3,105,093)
                                         -------------    -------------    -------------    -------------
Deficit - end of period                     (2,600,059)      (2,969,004)      (2,600,059)      (2,969,004)
                                         =============    =============    =============    =============


Net profit/(loss) per share              $     .000766    $    0.000005    $    0.000473    $    0.000427
                                         =============    =============    =============    =============

Weighted average number of
   shares outstanding                      324,457,249      318,457,249      324,457,249      318,457,249
                                         =============    =============    =============    =============
</TABLE>

                                     SEE NOTES TO FINANCIAL STATEMENTS

                                                     3
<PAGE>
<TABLE>
<CAPTION>


                                        TRUDY CORPORATION
                                     STATEMENT OF CASH FLOWS
                                           (UNAUDITED)


                                                                   Six Months ended Sept. 30
                                                               --------------------------------
                                                                   1997                1996
                                                               -----------          -----------
<S>                                                            <C>                  <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net Profit                                                $   153,357          $   136,089
                                                               -----------          -----------

     Adjustments  to  reconcile  net  profit  to  net
               cash  used  in  operating activities:

            Depreciation and amortization                           15,025                9,897
            Provision for losses on accounts receivable              7,639               10,712

     Changes in assets and liabilities:
            Accounts receivable                                 (1,081,402)             154,799
            Inventories                                           (482,274)            (129,164)
            Prepaid expenses and other current assets             (357,447)             (77,833)
            Accounts payable and accrued expenses                  529,085             (361,644)
                                                               -----------          -----------

     Net cash  (used)/provided in operating activities          (1,216,017)            (257,144)
                                                               -----------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Pre-publication and royalty advances                          (49,507)              (7,898)
     Dispositions/(additions) to property, plant & equipment       (17,602)             119,064
                                                               -----------          -----------

    Net cash provided by (used in) investing activities            (67,109)             111,166
                                                               -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Net proceeds from loans  - short term                       1,275,377              106,649
     Proceeds/(payment) of long term debt                           25,365               (7,222)
                                                               -----------          -----------
            Net cash provided by financing activities            1,300,742               99,427
                                                               -----------          -----------

     Net increase (decrease) in cash                                17,616              (46,551)
     Cash, beginning of period                                       2,939              145,202
                                                               -----------          -----------
     Cash, end of period                                       $    20,555          $    98,651
                                                               ===========          ===========
</TABLE>

                               SEE NOTES TO FINANCIAL STATEMENTS

                                               4
<PAGE>

                                TRUDY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.  Basis of Presentation:

         The accompanying  unaudited financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information 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 generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the three months ended  September 30, 1997 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  March  31,  1998.  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, 1997.



                                        5

<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS


RESULTS OF OPERATIONS


REVENUES

Trudy  Corporation's  revenues for the first six months of Fiscal 1998 increased
4.0% to $ 2,257,408  compared to revenues of $ 2,171,306 in the first six months
of Fiscal  1997.  This  increase in revenues  is  attributable  to a broad based
increase  in sales  through all  channels,  as well as the impact of mailing the
mail order catalog  roughly three weeks earlier this year.  Sales for the second
quarter were up by 34.0% to  $1,581,553  compared to sales of  $1,180,598 in the
previous  fiscal year. The dramatic sales growth is largely the result of timing
issues, such that one customer ordered product later in the season than in prior
years,  thereby  expanding  second quarter sales at the expense of first quarter
sales.

The order backlog totaled $ 1,041,979 on September 30, 1997, up by 3.1% compared
to last year's backlog of $ 1,010,700 as of September 30, 1996. This increase in
order  backlog  is  not  statistically  significant  and is  attributable  to an
increased order commitment by one major customer as well as a broader acceptance
of the  Company's new  publications  by a diverse  selection of  retailers.  The
entirety of this backlog was shipped in October and November.


PROFIT AND LOSSES

The net profit of $ 248,659 for the second  quarter of Fiscal 1998 compares with
the net profits of $ 1,466 for the Second Quarter of Fiscal 1997. Overhead costs
are  virtually   unchanged  from  the  prior  year,   whereas  sales   increased
dramatically during the three months.  Additionally,  real estate taxes fell due
to concessions negotiated with the City of Norwalk.

For the six months ending  September  30, 1997,  the net profit was $ 153,357 in
contrast to the six month profit of $136,089 in the previous  year. In the prior
year,  both quarters were burdened with  significant  relocation  expenses which
were non-recurring.  The cost of sales rose during the six months, partly due to
lower margins for certain sales,  higher labor costs, and higher amortization of
mail order catalog costs due to an earlier mailing versus a year ago.

Cost of Sales  decreased to a level of 53.7% in the second  quarter  compared to
55.8% for the second quarter of fiscal 1997.  For the six month period,  cost of
sales were 55.2% in FY98 compared with last year when they were 51.4%.

The  Profit  from  Operations  for the  second  quarter  totaled $  280,891,  up
significantly  from a profit of $ 83,226 in the  quarter  ending  September  30,
1996.  Sales  rose $ 401,000  (or 34%) over the prior  year  while cost of sales
increased only $190,000 (or 28.9%).  Operating  profits for the first six months
of Fiscal 1998 totaled $ 192,695, down by 27.6% when compared to the profit of $

                                       6
<PAGE>

266,270 in the prior fiscal year.  Operating  profit margins were 17.8% and 8.5%
respectively  for the latest three and six month  periods of the current  fiscal
year; in the prior year the net margins were 7.0% and 12.3% respectively.

Interest  expense is up over prior year  levels as the Company  borrowed  larger
amounts of working  capital  under the line  earlier in the season.  The earlier
borrowings were necessitated by the need to stock product in advance of shipping
a large customer order which had an earlier shipping date.  Depreciation expense
is down in  FY98  as the  Company  continues  to  dispose  of its  manufacturing
equipment and as a result of the move to a new warehouse/office location.


LIQUIDITY AND CAPITAL RESOURCES

Both inventory and accounts receivable were up substantially from their levels a
year ago, and  inventories  stood at  $1,886,864  at Sept 30, 1997 compared with
$1,550,387  on June 30,  1997.  This 21.7%  increase  is the result of having to
stock merchandise for growing retail sales in the Fall.  Accounts receivable was
up  three  fold  from  June  with $  1,247,460  outstanding  at Sept  30,  1997.
Management  continues to be satisfied with inventory levels and with the quality
of the accounts receivable.

The Company has financed its growth more  recently by increased  reliance on its
bank loan such that  outstandings  totaled $ 1,390,373 at Sept 30, 1997 compared
with $671,979 in June of last year.


                                     PART II

                                OTHER INFORMATION


Items 1-6.     Not Applicable.

                                       7
<PAGE>

                                   SIGNATURES




As required by Section 13 or 15(d) of the  Securities  Exchange Act of 1934, the
President  being  duly  authorized,  has signed  this  report on behalf of TRUDY
CORPORATION.



Date  FEBRUARY 11, 1998             By /s/ WILLIAM W. BURNHAM
                                       ----------------------------
                                           William W. Burnham,
                                           President




                                       8