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 December 31, 2007

                           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
                                February 19, 2008
               Common Stock, $.0001 par value: 612,566,330 shares

                                  Page 1 of 27

<PAGE>

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

                  PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

   Consolidated Balance Sheet - December 31, 2007 (unaudited)                  3

   Consolidated Statements of Operations (unaudited) for the three and
   nine months ended December 31, 2007 and December 31, 2006 (unaudited)       4

   Consolidated Statement of Shareholders' Deficit (unaudited) from
   April 1, 2007 through December 31, 2007                                     5

   Consolidated Statements of Cash Flows (unaudited) for the nine months
   ended December 31, 2007 and December 31, 2006 (unaudited)                   6

   Notes to Financial Statements (unaudited)                                   7

Item 2. Management's Discussion and Analysis                                  14

                   PART II. OTHER INFORMATION

Item 1. Legal Proceedings                                                     25

Item 2. Changes in Securities                                                 25

Item 3. Defaults upon Senior Securities                                       25

Item 4. Submission of Matters to a Vote of Security Holders                   25

Item 5. Other Information                                                     26

Item 6. Exhibits and Reports on Form 8-K                                      26

                                  Page 2 of 27

<PAGE>

                                Trudy Corporation
                                  Balance Sheet
                                December 31, 2007

Assets                                                              (Unaudited)

Current assets
   Cash and cash equivalents                                       $      1,087
   Accounts receivable, net                                           1,903,304
   Inventory, net                                                     1,518,706
   Prepaid expenses and other current assets                             98,390
                                                                   ------------

      Total current assets                                            3,521,488

   Equipment, net                                                        70,387
   Royalty advances, net                                                223,544
   Prepublication costs and other assets, net                           526,549
                                                                   ------------

   Total Other assets                                                   820,480
                                                                   ------------

      Total assets                                                 $  4,341,968
                                                                   ============

Current liabilities
   Notes payable - Bank & related parties                          $  1,504,180
   Current portion, long term debt                                       15,520
   Accounts payable and accrued expenses                              1,496,968
   Deferred Revenue                                                     238,063
   Royalties and commissions payable                                    471,368
                                                                   ------------

Total Current liabilities                                             3,726,100

Long term liabilities
   Long term debt, net of current portion                               468,902
                                                                   ------------

Total long term liabilities                                             468,902
                                                                   ------------

Total liabilities                                                     4,195,002

Commitments

Shareholders' equity
   Common stock - par value                                              61,257
   Paid-in capital                                                    6,931,881
   Accumulated deficit                                               (6,846,172)

Total shareholders' equity                                              146,966
                                                                   ------------

Total liabilities and shareholders' equity                         $  4,341,968
                                                                   ============

    The accompanying summary of significant accounting policies and notes to
     financial statements are an integral part of the consolidated financial
                                   statements.

                                  Page 3 of 27

<PAGE>

                                Trudy Corporation
                             Statement of Operations
 For the Three & Nine Month Periods Ended December 31, 2007 & December 31, 2006

<TABLE>
<CAPTION>
                                                               Three Month Period               Nine Month Period
                                                               Ended December 31,               Ended December 31,
                                                          ------------------------------   ------------------------------
                                                               2007            2006             2007            2006
                                                          --------------  --------------   --------------  --------------
                                                           (unaudited)     (unaudited)      (unaudited)     (unaudited)
<S>                                                       <C>             <C>              <C>             <C>
Net product sales                                             1,628,573       1,779,371        4,454,942       4,123,471
Royalty sales                                                    39,847         143,147           67,964         203,912
                                                          -------------   -------------    -------------   -------------

Net Sales                                                     1,668,420       1,922,518        4,522,906       4,327,383

Cost of sales                                                 1,015,268         940,308        2,631,294       2,387,737
                                                          -------------   -------------    -------------   -------------

Gross profit                                                    653,152         982,210        1,891,612       1,939,646

Operating expenses:
   Selling, general and administrative                          708,638         838,914        2,198,419       2,014,979
                                                          -------------   -------------    -------------   -------------

Income/(loss) from operations                                   (55,486)        143,296         (306,807)        (75,334)

Other income/(expense)
   Interest, net                                                (34,401)        (34,438)        (103,033)       (107,590)
   Other income, net                                             24,511           2,675           40,721          (6,560)
                                                          -------------   -------------    -------------   -------------

Other expense                                                    (9,890)        (31,763)         (62,312)       (114,150)
                                                          -------------   -------------    -------------   -------------

Net income/(loss)                                         $     (65,376)  $     111,533    $    (369,119)  $    (189,484)
                                                          =============   =============    =============   =============

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

Weighted average number of shares outstanding               612,566,330     594,614,225      612,566,330     527,045,398
                                                          =============   =============    =============   =============
</TABLE>

    The accompanying summary of significant accounting policies and notes to
     financial statements are an integral part of the consolidated financial
                                   statements.

                                  Page 4 of 27

<PAGE>

                                Trudy Corporation
                         Changes in Shareholders' Equity
                         Quarter ended December 31, 2007

<TABLE>
<CAPTION>
                                                      Common Stock
                                              ---------------------------   Additional Paid-in   Accumulated    Total Shareholders'
                                                 Shares         Amount           Capital           Deficit             Equity
                                              ------------   ------------   ------------------   -------------  --------------------
<S>                                           <C>            <C>            <C>                  <C>            <C>
Balance at March 31, 2007 (audited)            612,556,330   $     61,257   $        6,931,881   $ (6,477,051)  $           516,087

Net loss (unaudited)                                     -              -                    -       (440,625)             (440,625)

                                              ------------   ------------   ------------------   ------------   -------------------
Balance at June 30, 2007 (unaudited)           612,556,330   $     61,257   $        6,931,881   $ (6,917,676)  $            75,462
                                              ============   ============   ==================   ============   ===================

Net income (unaudited)                                                                                136,880               136,880

                                              ------------   ------------   ------------------   ------------   -------------------
Balance at September 30, 2007 (unaudited)      612,556,330   $     61,257   $        6,931,881   $ (6,780,796)  $           212,342
                                              ============   ============   ==================   ============   ===================

Net loss (unaudited)                                                                                  (65,376)              (65,376)

                                              ------------   ------------   ------------------   ------------   -------------------
Balance at December 31, 2007 (unaudited)       612,556,330   $     61,257   $        6,931,881   $ (6,846,172)  $           146,966
                                              ============   ============   ==================   ============   ===================
</TABLE>

    The accompanying summary of significant accounting policies and notes to
     financial statements are an integral part of the consolidated financial
                                   statements.

                                  Page 5 of 27

<PAGE>

                        Trudy Corporation and Subsidiary
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                           For the NIne Months Ended
                                                                                 December 31,
                                                                           --------------------------
                                                                               2007          2006
                                                                           -----------   ------------
                                                                           (unaudited)   (unaudited)
<S>                                                                        <C>           <C>
Cash Flows From Operating Activities
Net loss                                                                   $  (369,119)  $  (189,484)
Adjustments to reconcile net loss to net cash
used in operating activities:
   Depreciation                                                                 11,646        12,684
   Amortization of pre-publication costs                                       206,231       101,251
   Provision for losses on accounts receivable                                     800        39,268
   Provision for promotional allowance                                         (30,500)      (14,048)
   Provision for slow moving inventory                                         (45,000)       15,000
   Provision for sales returns                                                (177,759)     (367,984)
   Consulting fee                                                                    0        22,697
   Board Compensation                                                                0         5,600
   Consulting fee                                                               54,688        43,750
   Interest expense                                                                  0         5,798

Changes in operating assets and liabilities:
   (Increase) / Decrease in accounts receivable                                (45,600)       40,032
   (Increase) / Decrease in inventories                                        (11,894)      155,354
   (Increase) / Decrease in prepaid expenses and other current assets           19,811       (13,738)
   (Decrease) / Increase in accounts payable and accrued expenses              109,480      (114,431)
   (Decrease) / Increase in deferred revenue                                   238,063        52,442
   (Decrease) / Increase in royalties and commissions payable                   (2,779)       54,424
                                                                           -----------   -----------
Net cash used by operating activities                                          (41,932)     (151,385)

Investing activities:
   Purchases of property and equipment                                         (27,590)      (48,645)
   Pre-publication and royalty advances                                       (225,982)      (77,198)
                                                                           -----------   -----------
Net cash (used) / provided by investing activities                            (253,572)     (125,843)

Financing activities:
   Net change in note payable, bank                                            178,201        56,484
   Repayments to related parties                                               (37,363)      (37,365)
   Proceeds from related parties                                               150,000       260,000
                                                                           -----------   -----------
Net cash provided by financing activities                                      290,838       279,119
                                                                           -----------   -----------

Net increase / (decrease) in cash and cash equivalents                          (4,666)        1,891
Cash and cash equivalents at beginning of period                                 5,753        10,461
                                                                           -----------   -----------
Cash and cash equivalents at end of period                                 $     1,087   $    12,352
                                                                           ===========   ===========

Cash paid for interest                                                     $   103,917   $    90,276
Cash paid for income taxes                                                 $         -   $         -
</TABLE>

    The accompanying summary of significant accounting policies and notes to
     financial statements are an integral part of the consolidated financial
                                   statements.

                                  Page 6 of 27

<PAGE>

                                TRUDY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. Description of Business and Basis of Presentation

Trudy  Corporation  (hereinafter  referred  to  as  the  'Company'),   publishes
children's  books and  audiobooks  and designs,  manufactures  and markets plush
stuffed  animals for sale to domestic  and  international  retail and  wholesale
customers. The Company's products are sold under the trade names (i.e. imprints)
of Studio Mouse, Soundprints, Little Soundprints and Fetching Books.

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 nine month period
ended December 31, 2007 are not  necessarily  indicative of the results that may
be expected for the year ending March 31, 2008. 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, 2007.

2. Summary of Significant Accounting Policies

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 and 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.

                                  Page 7 of 27

<PAGE>

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
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.

Intangible Assets

As a result of the merger of Studio Mouse, LLC into the Company  effective March
31, 2005, an  intangible  asset was recorded as a result of the premium paid due
to the non-exclusive  license granted by Disney Licensed Publishing  ("Disney"),
an imprint of Disney Book Group,  LLC,  (formerly Disney  Children's Book Group,
LLC).  The intangible  asset is being  amortized on a straight line basis over a
three year period.

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.

                                  Page 8 of 27

<PAGE>

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.  Returned product is resold when
possible.  Historically,  a portion of returned product is deemed unsaleable and
is destroyed.

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.

Government Taxes

Product  sales  are  presented  net of  sales  tax  collected  and  remitted  to
governmental authorities.

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.

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.

                                  Page 9 of 27

<PAGE>

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.

Stock-Based Compensation

In December  2004,  the FASB issued SFAS No. 123R,  "Share-Based  Payment" (SFAS
123R),  replacing SFAS 123 and superseding  Accounting  Principles Board Opinion
No. 25,  "Accounting for Stock Issued to Employees" (APB 25). SFAS 123R requires
public  companies  to recognize  compensation  expense for the cost of awards of
equity  compensation  effective for fiscal years  beginning  after July 1, 2005.
This compensation cost will be measured as the fair value of the award estimated
using an option-pricing model on the grant date. The provisions of SFAS No. 123R
were effective for Trudy on April 1, 2006. The adoption of SFAS No. 123R did not
have a material  impact on the  financial  statements  since the  Company has no
outstanding stock options.

The Company  periodically  issues  shares of its common  stock to  employees  as
grants.  Shares issued for services are valued either at the Company's  estimate
of the fair value of the common  stock at the date of  issuance  or based on the
market price 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.

Comprehensive Income (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 income (loss) for the
Company is the same as net income (loss) for all periods presented.

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.

                                  Page 10 of 27

<PAGE>

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 $10,861 and $12,258
for the three month  periods  ended  December  31, 2007 and 2006,  respectively.
Advertising  expense  related to catalogs and brochures was $21,372 and $ 24,686
for the nine month periods ended December 31, 2007 and 2006, respectively.

Other advertising expense for the quarter ended December 31, 2007 was nil versus
$356 for the three month  period ended  December  31,  2006.  There was no other
advertising  expense for the nine months ended  December 31, 2007 versus  $1,262
for the nine month period ended December 31, 2006.

3. Inventories

Inventories consist of the following:

Raw Materials                                             $    40,083
Finished Goods                                              1,753,623
Reserve for Obsolescence                                     (275,000)
                                                          -----------
Inventory                                                 $ 1,518,706
                                                          ===========

4. Notes Payable, Bank and Related Parties

      A revolving line of credit totaling $850,000 due on demand.
      Interest is payable monthly equal to the Wall Street
      Journal reported prime rate plus 1.0%. 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)                   $   622,206

      Note payable, bank, due on demand with a maturity of March
      31, 2008. Interest is payable monthly equal to the Wall
      Street Journal reported prime rate plus 1.0%. 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)                       100,000

      Note payable, bank, due on demand. Interest is payable
      monthly at LIBOR plus 75 basis points. The note is secured
      by a personal guarantee of a principal shareholder (William
      W. Burnham, Chairman of the Board)                                626,965

      Note payable to a principal shareholder (William W.
      Burnham, Chairman of the Board) due August 31, 2008.
      Interest is payable monthly at 30 day LIBOR plus 1.00%.           150,000

      Note payable, affiliate, payable in monthly installments of
      $1,252. The note is unsecured.                                      5,009
                                                                    -----------

            Total                                                   $ 1,504,180
                                                                    ===========

                                  Page 11 of 27

<PAGE>

5. Long term debt

      Note payable, bank, payable in monthly installments of
      $2,713 including interest at 6.5%. Balance due in February
      2009. The note is secured by all 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).                                                   $   250,513

      Note payable to a principal shareholder (William W.
      Burnham, Chairman of the Board) due April 30, 2009.
      Interest is payable monthly at LIBOR + 1.00%                      233,909

            Less current portion                                        (15,520)
                                                                    -----------
            Total                                                   $   468,902
                                                                    ===========

The scheduled principal payments on long term debt follow:

      Year ending December 31, 2008                                 $    15,520
      Year ending December 31, 2009                                     468,902
                                                                    -----------
            Total                                                   $   484,422
                                                                    ===========

                                  Page 12 of 27

<PAGE>

6. Income Taxes

The components of income tax (benefit) are as follows:

<TABLE>
<CAPTION>
                                                    December 31, 2007      December 31, 2006
                                                  ---------------------   --------------------
                                                  Current    Deferred     Current    Deferred
                                                  ---------------------   --------------------
<S>                                               <C>       <C>           <C>       <C>
Income tax expense (benefit) before application
of operating loss carryforwards                   $     0   $ (125,500)   $     0   $ (75,800)

Income tax expense (benefit) of operating
loss carryforwards                                      0            0          0           0

Change in valuation allowance                           0      125,500          0      75,800
                                                  --------------------    -------------------

Income tax expense (benefit)                      $     0   $        0    $     0   $       0
                                                  ====================    ===================
</TABLE>

The deferred taxes are comprised of the following at December 31, 2007:

   Net operating loss carryforwards                            $  1,411,000
   Reserves and allowances                                          378,000
                                                               ------------

   Total deferred tax assets                                      1,789,000
   Less valuation allowance                                      (1,789,000)
                                                               ------------

   Net deferred tax assets                                     $          0
                                                               ============

The deferred tax asset represents expected future tax savings resulting from the
Company's reserves and allowances  expensed for financial reporting purposes but
not for tax purposes and net operating  loss  carryforwards.  As of December 31,
2007, the Company has a net operating loss  carryforward of  approximately  $4.0
million for federal  income tax purposes  which expire at various  dates through
2027. Utilization of these benefits is primarily subject to the extent of future
earnings of the Company, and may be limited by, among other things,  shareholder
changes,  including the possible issuance by the Company of additional shares in
one or more  financing  transactions.  The Company has  established  a valuation
allowance  for the portion of possible  tax savings not likely to be realized by
the end of the carryforward period.

7. Related Party Transactions

The Company is involved  in several  transactions  with  existing  officers  and
shareholders  of  the  Company  and  entities  which  are  controlled  by  these
individuals,  collectively "related parties". The following is a summary of this
activity:

The Main Avenue property leased by the Company is owned by a Connecticut limited
liability company,  Noreast Management LLC, which is owned jointly by William W.
Burnham,  the  Chairman of the Company,  Peter  Ogilvie,  a former  Director and
Officer of the  Company,  and Fred M. Filoon,  a Director of the  Company.

                                  Page 13 of 27

<PAGE>

Rent expense totaled $23,743 and $23,943 for the three months ended December 31,
2007 and 2006,  respectively.  Rent expense  totaled $71,228 for the each of the
nine month periods ended December 31, 2007 and 2006, respectively.

In November,  2006 the Company  borrowed  $260,000 from William W. Burnham,  the
Chairman of the Company and the principal shareholder. The terms of the note can
be found in Note 5 to the financial statements.

In December,  2007 the Company  borrowed an additional  $150,000 from William W.
Burnham.  The  terms  of  the  note  can be  found  in  Note 4 to the  financial
statements.

Interest to related  parties  totaled  $12,354  and $2,873 for the three  months
ended  December  31, 2007 and 2006,  respectively.  Interest to related  parties
totaled  $35,709 and $17,938 for the nine  months  ended  December  31, 2007 and
2006, respectively.

The Board of Directors authorized in June, 2006 that William W. Burnham would be
paid a fee,  quarterly,  for his  personal  guarantees  of the  Company's  debt.
Guarantor  fees paid to Mr. Burnham for the three months ended December 31, 2007
were $4,968 versus $5,011 for the prior three months. Guarantor fees paid to Mr.
Burnham for the nine months ended  December 31, 2007 were $14,830 versus $14,099
for the prior nine months.

The Company has re-engaged  Delta Capital  Group,  Inc. to assist in identifying
and negotiating with possible financing sources. Mr. Bradford Mead, President of
Delta Capital Group, is a member of the Board of Directors.


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

NET SALES.

Overview

Net Sales for the Company's  December  Quarter of fiscal 2008 decreased 13.2% to
$1,668,420 versus  $1,922,518 in the comparable  quarter of fiscal 2007. This is
primarily a result of revenue  decreases among  international  and domestic mass
market distributors,  domestic warehouse club distributors and subsidiary rights
revenue.   The  decreases  were  primarily  from  sales  of  Disney  and  Sesame
Workshop-licensed  products as well as subsidiary  rights sales of the Company's
proprietary  product.  The Company's  profit margin  decreased from 51.1% in the
prior year to 39.1% in the current  year.  The three month period  resulted in a
net loss of $65,376  versus net income of  $111,533  for the same  period in the
prior year.

Three months ended December 31, 2007

As noted above,  net sales for the third quarter of fiscal 2008 decreased  13.2%
versus the prior year.  These  decreases were partially the result of timing for
orders  shipped to the  Company's  international  mass market  distributors  and
domestic  warehouse club  distributors for which the order backlog is strong for
the  balance of the fiscal  year.  These  decreases  were also a result of lower
subsidiary  rights  sales,  related to such a sub rights sale  completed  in the
quarter ended December 31, 2006 that did not repeat in the same quarter in 2007.

                                  Page 14 of 27

<PAGE>

Sales  of  Disney-licensed  products  as a  percentage  of total  Company  sales
decreased from 73.1% to 52.2% for the quarter  versus the  comparable  quarter a
year ago. Sesame Workshop-licensed product sales were 5.9% of Company revenue in
the current quarter versus 6.9% in the prior year.  Smithsonian-licensed product
sales  increased  from 8.6% of Company  sales to 29.3% as a result of the strong
introduction  of new book and audio  titles  as well as a series  of  pre-school
educational novelty books. In addition,  a new channel of trade was successfully
opened through a sale of bundled  Smithsonian-licensed  book, audio and toy sets
on a home shopping channel.

The  Company's  proprietary  products  maintained an  approximate  9.0% share of
revenue for the quarter versus the comparable quarter a year ago.

                     Percentage of Sales by license for the quarters ended
                                           December 31,
                     -----------------------------------------------------
    License                      2007                       2006
--------------------------------------------------------------------------

Disney                            52.2%                      73.1%
Smithsonian                       29.3                        8.6
Proprietary                        9.0                        8.5
Sesame Workshop                    5.9                        6.9
All other                          3.6                        2.9
                     -----------------------------------------------------
Total                            100.0                      100.0
                     =====================================================

                             Sales decreases, net of
                             provisions for returns,
                               for the three months
                                ended December 31,
                             -----------------------
       Sales channel              2007        2006      Variance    % change
----------------------------------------------------------------------------

International Mass Market
Distributors                 $  343,126   $  597,173   ($ 254,047)    -42.5%

Domestic Warehouse Club
Distributors (returnable
& non-returnable)                95,167      333,405     (238,238)    -71.5%

Domestic Mass Market
Distributors                     54,388      179,834     (125,446)    -69.8%

Sub rights royalty income        39,847      143,147     (103,300)    -72.2%

For the three months ended December 31, 2007 sales to International  Mass Market
Distributors  declined  $254,047.  The  Company's  backlog  for  this  division,
however, was substantially higher than at December Quarter end a year ago due to
expanded  distribution  coverage of the  Company's  products  to South  American
Spanish language markets by its exclusive Mexican distributor, as well as strong
sales to the Company's distributor in Spain.

                                  Page 15 of 27

<PAGE>

Furthermore, sales to this division for the nine month period ended December 31,
2007 were 13.8% higher than the previous nine month period's sales.

For the three  months  ended  December 31,  2007,  net sales to  returnable  and
non-returnable  domestic warehouse club distributors  declined 71.5% or $238,238
again as a result of the timing of shipments  related to the increased lead time
required for product  safety  testing.  Additional  safety  testing and labeling
mandate  longer lead times prior to shipment,  resulting in scheduled  shipments
moving into  subsequent  quarters.  Sales to these  channels of trade were below
those of the prior year  because  there  have been  notable  disruptions  in the
supply chain as a result of BTMS'  integration  of AMS. The Company  anticipates
that any further  erosion of sales to the warehouse clubs through BTMS should be
offset by sales to other  distributors  that  continue to service and grow their
business within this channel trade.

Sales to domestic mass market  distributors  declined 69.8% from $179,834 in the
prior year to $54,388 in the current  year  primarily as a result again from the
timing of shipments  required to fill seasonal  changeovers in programmed  store
sets, which run from February through August of 2008.

Domestic and international  sub-rights  royalty income decreased $103,300 versus
the prior year's quarter when significant sub-rights revenue was received from a
major  program  sale  to  a  display  marketer.   Such  licensing  programs  are
opportunistic and occur only periodically.

The following  trade sales divisions  returned  increases in sales in the fiscal
year quarter ended December 31, 2007 versus the comparable quarter a year ago.


                               Sales increases, net of
                               provisions for returns,
                                for the three months
                                  ended December 31,
                              --------------------------
     Sales channel                  2007        2006        Variance   % change
-------------------------------------------------------------------------------

Close out Accounts            $    136,001   $     2,684   $ 133,317       NMF

Book Clubs                         124,603             0     124,603       100%

Direct-to-Consumer
(returnable)                        70,475           NMF         NMF       NMF

Direct-to-consumer
Book Distributor                   162,842        68,440      94,402     138.0%

Sales to close out accounts increased $133,317 versus the prior year as a result
of a  concerted  effort by the  Company  to  reduce  inventory  levels  based on
Management's estimate of demand.

Sales to book clubs were $124,603; there were no sales in the prior year to this
channel of trade. Such sales are opportunistic,  occurring periodically, as this
trade channel is dominated by one customer within the United Sates.

                                  Page 16 of 27

<PAGE>

Revenue  from the  returnable  direct-to-consumer  channel  of  trade  increased
$70,475 in the  current  quarter  versus a year ago as a result of a  successful
program through a home shopping network.

Sales to  direct-to-consumer  book  distributors  increased  138.0% to  $162,842
versus the prior year as a result of order timing and increased penetration into
the consumer door-to-door sales category.

Several other channels of trade experienced  increased sales including  domestic
trade book retailers, domestic trade book distributors, international trade book
and toy retailers and  distributors,  schools,  libraries and school and library
distributors.

Nine months ended December 31, 2007

Net sales for the first nine  months of fiscal  2008  increased  4.5% versus the
prior  year.  Sparking  these  increases  were a  significant  sale  to a  major
drugstore chain, large orders from a consumer cataloger and book club, increased
sales to the Company's  domestic book and toy  distributors,  Latin American and
European Spanish-language  distributors as well as the majority of the Company's
other  international  sales divisions.  Sales of  Disney-licensed  products as a
percentage of total Company  sales,  decreased  from 56.5% to 51.9% for the nine
month period versus the comparable  period a year ago. Sesame  Workshop-licensed
product  revenue was 9.3% and 3.6% for the nine month periods ended December 31,
2007 and 2006, respectively.  Smithsonian-licensed  product sales increased from
21.1% of Company sales to 22.1%.

                                      Percentage of Sales by license for the
                                          nine months ended December 31,
                                      --------------------------------------
    License                                 2007                       2006
----------------------------------------------------------------------------

Disney                                      51.9%                      56.5%
Smithsonian                                 22.1                       21.1
Proprietary                                 14.1                       15.6
Sesame Workshop                              9.3                        3.6
All other                                    2.6                        3.2
                                      -------------------------------------
Total                                      100.0                      100.0
                                      =====================================


                               Sales increases, net of
                               provisions for returns,
                                 for the nine months
                                  ended December 31,
                              --------------------------
      Sales channel                 2007          2006      Variance   % change
-------------------------------------------------------------------------------

Domestic Supermarkets and
Drug Stores                   $    426,429   $     1,382   $ 425,047       NMF

Direct-to-consumer book
distributors
(non-returnable)                   548,943       229,448     319,495     139.2%

International Mass Market
Distributors                     1,036,664       910,887     125,777      13.8%

Book Clubs                         124,603         8,802     115,801     131.6%

Direct-to-Consumer
(returnable)                       116,413        14,938     101,475       NMF

                                  Page 17 of 27

<PAGE>

For the  nine  months  end  December  31,  2007,  sales  increases  were  fairly
broad-based with all major channels of trade posting increases as the Company a)
emphasized  non-returnable  accounts and b) increased  and/or improved its sales
representation. Sales to domestic supermarket and drug store chains increased by
$425,047   over  the  prior  year  as  a  result  of  a  sale  of  Disney-   and
Sesame-licensed product and proprietary product in new lower-priced formats.

Sales to non-returnable  direct-to-consumer book distributors increased $319,495
as a  result  of order  timing  and  increased  penetration  into  the  consumer
door-to-door sales category.

International  mass market  distributor sales increased  $125,777 in the current
nine month period as a result of ongoing sales and distribution successes of the
Company's two major Spanish  language  distributors  in Latin America and Spain.
The  distributor in Latin America began to expand  distribution of the Company's
products throughout Spanish-speaking South America in 2007.

Sales to book clubs  increased  $115,801 versus the prior year as a result of an
opportunistic  order from this division's  dominant school book club customer in
the December Quarter, 2007.

Direct-to-consumer  sales increased  $101,475 in the current year as a result of
a) sales to a major consumer  catalog,  which purchased three licensed  products
from Disney and Sesame Workshop in the current year, and b) increased demand for
the Company's products from a major direct-to-consumer marketer.

Sales  also  increased  in many other  divisions  including  but not  limited to
close-outs,  international  trade book, toy and gift retailers and distributors,
domestic  book,  toy  and  gift  distributors,  online  retailers,  schools  and
libraries and school and library distributors.

                                 Sales decreases, net of
                                 provisions for returns,
                                   for the nine months
                                    ended December 31,
                                 -----------------------
      Sales channel                 2007          2006     Variance    % change
-------------------------------------------------------------------------------

Domestic Warehouse Club
Distributors (returnable and
non-returnable)                  $  150,277   $  988,240  ($ 837,963)    -84.8%

Mass Market Distributors            173,481      286,123    (112,642)    -39.4%

                                  Page 18 of 27

<PAGE>

Domestic  returnable  warehouse club distributor sales decreased $837,963 in the
current nine month period.  Purchases of book formats by the clubs can vary from
one quarter to another as purchases  are on a  promotional  basis for a six week
exposure on the clubs'  shelves.  Therefore,  timing of purchases can affect the
Company's  sales from one quarter to another.  In the current  nine month period
the customary  commitment to format and title sales were further  complicated by
the asset purchase of AMS by Baker & Taylor.  In this period,  BTMS has found it
difficult to maintain good distribution  relationships  with all three warehouse
clubs in the  United  Sates,  with most of their  business  now  limited  to the
country's largest club, Costco.

Sales to mass  market  distributors  decreased  $112,642  versus  the prior year
primarily as a result of the timing of plan-o-gram  or store set  commitments to
the Company's new titles.

Several other channels of trade  experienced  declines in the current nine month
period including  specialty  retailers,  international  direct-to-consumer  book
distributors and sales premium and/or private label customers.

COST OF SALES.

Three months ended December 31, 2007

The Company's  cost of sales for the quarter ended  December 31, 2007  increased
$74,960 from  $940,308 in the prior year to  $1,015,268  in the current year, an
increase  of  8.0%,  primarily  as a  result  of  increased  product  costs  and
non-returnable sales which are often accompanied by lower margins. Cost of sales
as a  percentage  of net  sales  increased  from  48.9% to 60.9% in the  current
quarter as a result of a change in the gross  margin mix among  sales  divisions
and greater product costs from Asia where the Company  manufactures  most of its
products,  as well as selling price pressure from the Company's  larger domestic
and  international  customers.  Product  costs  for  the  current  three  months
increased partially as a result of raw materials cost increases passed on to the
Company from its Chinese suppliers.

Nine months ended December 31, 2007

The  Company's  cost of sales  for the  nine  months  ended  December  31,  2007
increased  $243,557  from  $2,387,737  in the prior  year to  $2,631,294  in the
current  year,  an increase of 10.2%,  partially as a result of the 4.5% gain in
sales volume. Cost of sales as a percentage of net sales increased from 55.2% to
58.2% in the  current  year as a result  of a change  in the  sales  mix and the
effort by the Company to increase  non-returnable  sales which often carry lower
margins.  Product  costs for the current  nine months  increased  partially as a
result of raw materials cost  increases  passed on to the Company from its Asian
suppliers and increased selling price pressures created by some of the Company's
larger customers.

                                  Page 19 of 27

<PAGE>

GROSS PROFIT.

Three months ended December 31, 2007

The  resulting  gross profit for the quarter ended  December 31, 2007  decreased
33.5% to $653,152  versus the prior  quarter's  gross profit of $982,210.  Gross
margin  was 39.1% in the  current  quarter  versus  51.1% in the  quarter  ended
December 31,  2006.  The decline was largely due to lower  product  sales versus
fixed warehouse and product development costs, as well as the lack of comparable
very   profitable   subsidiary   rights  sales  for  the  current   quarter  and
non-returnable sales made at lower margins.

Nine months ended December 31, 2007

Gross  profit for the nine months  ended  December  31, 2007  decreased  2.5% to
$1,891,612 versus the prior year's gross profit of $1,939,646.  Gross margin was
41.9% in the current year versus  44.8% for the nine months  ended  December 31,
2006.

SELLING, GENERAL & ADMINISTRATIVE COSTS.

Three months ended December 31, 2007

The Company's selling, general and administrative costs ("SG&A") decreased 15.5%
or $130,276 to $708,638  for the three  months  ended  December  31, 2007 versus
$838,914 for the three months ended  December 31, 2006.  As a percentage  of net
sales,  SG&A  expenses  were  42.5%,  down from  43.6% of net sales in the prior
fiscal year.  The decrease in SG&A  expenses was largely due to decreases in bad
debt provisions, consulting services and royalties.

Nine months ended December 31, 2007

SG&A increased 9.1% or $183,440 to $2,198,419 for the nine months ended December
31, 2007 versus  $2,014,979  for the nine months ended  December  31, 2006.  The
increase is  primarily  attributed  to  increased  royalty  expenses  which were
primarily  due  to  a)  contractual   royalty  obligations  to  the  Smithsonian
Institution  related to a contractual  redistribution  in yearly guarantees from
prior years, as well as b) the increase in royalty  expenses  resulting from the
greater  percentage  of revenue  attributable  to licensed  product sales versus
non-licensed  product  sales.  Decreases in  commission  expenses were offset by
increases in trade show-related expenses.

INCOME / LOSS FROM OPERATIONS.

Three months ended December 31, 2007

For the quarter ended December 31, 2007,  the loss from  operations was $55,486,
or 3.3% of revenue,  versus  income of $143,296,  or 7.5% of  revenues,  for the
prior year's quarter.

Nine months ended December 31, 2007

For the nine months  ended  December  31,  2007,  the loss from  operations  was
$306,807 versus a loss of $75,334 for the prior year.

                                  Page 20 of 27

<PAGE>

OTHER EXPENSE.

Three months ended December 31, 2007

The Company's  other expense for the quarter ended  December 31, 2007 was $9,890
versus $31,763 for the quarter ended  December 31, 2006.  This expense is mostly
made up of  interest  paid to carry the  Company's  bank and  shareholder  debt,
offset in this quarter by income from favorable Canadian currency exchange.

Nine months ended December 31, 2007

The  Company's  other  expense for the nine months  ended  December 31, 2007 was
$62,312  versus  $114,150  for the nine months ended  December 31, 2006.  Again,
interest  expenses which were largely unchanged in the current nine month period
versus a year ago were offset by gains from Canadian currency exchange.

NET INCOME / LOSS.

Three months ended December 31, 2007

As a result of the items discussed above, the Company's net loss for the quarter
ended  December 31, 2007 was $65,376  compared to net income of $111,533 for the
comparable prior quarter.

Nine months ended December 31, 2007

As a result of the items  discussed  above,  the Company's net loss for the nine
months ended  December 31, 2007 was $369,119  compared to a net loss of $189,484
for the comparable prior nine months.

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

In  June  2006,  the  Financial   Accounting   Standards   Board  (FASB)  issued
Interpretation   No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes,  an
Interpretation  of FASB  Statement  No.  109"  (FIN  48),  which  clarifies  the
accounting for uncertainty in tax positions.  FIN 48 requires the recognition of
a tax  position  when it is more likely than not that the tax  position  will be
sustained  upon  examination  by taxing  authorities,  based upon the  technical
merits of the position.  The  provisions of FIN 48 are effective for the Company
on April 1, 2007.  The Company  does not expect the adoption of FIN 48 to have a
material impact on the financial statements.

In September 2006, the FASB issued Statement of Financial  Accounting  Standards
(SFAS) No. 157, "Fair Value  Measurements"  (SFAS 157), which provides  guidance
for using fair value to measure  assets and  liabilities.  SFAS 157 defines fair
value and  establishes a framework for measuring fair value;  however,  SFAS 157
does not expand the use of fair value in any new  circumstances.  The provisions
of SFAS 157 are effective for the Company on April 1, 2008. The Company does not
expect  the  adoption  of SFAS 157 to have a  material  impact on the  financial
statements.

                                  Page 21 of 27

<PAGE>

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.  The Company attempts to resell all returned product whenever
possible.

Liquidity and Capital Resources

                                 For the quarters ended
                                      December 31,
                                ------------------------
                                  2007         2006         Variance   % change
--------------------------------------------------------------------------------

Net assets                      $  146,966   $  343,364    $(196,398)    -57.2%

Working capital (deficiency)      (204,612)    (158,667)     (45,945)    -29.0%

Accounts receivable, net         1,903,304    1,721,007      182,297      10.6%

Accounts payable and
accrued expenses                 1,496,968    1,643,630     (146,662)     (8.9%)

Royalties and commissions
payable                            471,368      370,561      100,807      27.2%

                                  Page 22 of 27

<PAGE>

At December 31, 2007 the Company had net assets of $146,966 versus net assets of
$343,364  at December  31,  2006.  Working  capital  deteriorated  to a $204,612
deficiency at December 31, 2007 versus a $158,664  deficiency as of December 31,
2006.

Accounts receivable increased from $1,721,007 at December 31, 2006 to $1,903,304
at December 31, 2007,  an increase of $182,297  (see  comments  below  regarding
Advanced  Marketing  Services).  Accounts payable and accrued expenses decreased
$146,662  versus the prior year from  $1,643,630  to  $1,496,968 at December 31,
2007.  Royalties and commissions payable increased $98,341 versus the prior year
from $370,561 at December 31, 2006 to $471,368 at December 31, 2007 primarily as
a result of the sales mix and the increased level of sales.

Expected cash flows from operations  supplemented by anticipated lending sources
are forecast to be adequate in covering the Company's  operations.  Although the
Company does not expect to run out of available funds in the coming fiscal year,
it does expect that the need for capital will  continue to eclipse the limits of
its revolving credit facility,  including the amended facility of $850,000,  the
additional bank borrowing of $100,000 and the shareholder  notes of $233,909 and
$150,000,  if planned  revenue is to be realized.  The Company is also currently
negotiating with alternative lenders for an increase of its credit lines.

The  Company  has  engaged  Delta  Capital  Group to assist in  identifying  and
negotiating with possible refinancing sources.

The Company continues to explore alternative financing options in the event that
cash flow does not  materialize  in line with current  expectations.  Additional
working  capital  would  be  required  to  fund  new  growth  opportunities  and
publication  initiatives.  It is believed a strategic or private equity investor
would  allow the  Company to better  position  itself  for  growth by  providing
working  capital  for  future  publishing   initiatives  and  even  a  strategic
acquisition.

Agreement in Principle
----------------------

The Company has reached  agreement in principle to acquire  certain  assets of a
mail-order  and ecommerce  company  related to sales of  children's  educational
audio,  electronics,  musical instruments and complementary third party products
in the  direct-to-consumer  home school and library markets.  Final negotiations
are expected to result in a definitive  agreement and closing on or around March
4, 2008,  with the  closing  subject  to  satisfaction  of  certain  conditions,
including final Trudy Board of Directors' approval.

Among the  assets to be  purchased  are  certain  inventory,  URL's,  mail order
catalogs,  customer mailing lists and e-mail lists, as well as certain trademark
rights  used  in  the   direct-to-consumer   and  library   lines  of  business.
Consideration for the transaction  includes $350,000 in cash,  $200,000 in Trudy
Common Stock and an earn-out  payment in each of the next three years if certain
net income goals are met from the business being  purchased.

                                  Page 23 of 27

<PAGE>

Of the $200,000 in Trudy Common Stock, 20,000,000 shares are to be issued at the
closing  ($100,000  worth,  valued at $.005/share)  and $100,000 worth of Common
Stock is to be issued  on the  first  year's  anniversary  of the  transaction's
closing,  valued at the per share average closing price for the ten (10) trading
days preceding the date of issuance. In addition,  the principal of the acquired
business will be provided a three (3) year  employment  agreement  with Trudy to
manage the direct-to-consumer  sales and marketing for the new line of business,
which will also include Trudy's web site and direct mail catalog  marketed under
the Soundprints  imprint.  The Company is in the process of arranging  financing
for the cash portion of the consideration.

As of February 11, 2008,  the balance on the Company's  revolving line of credit
was $687,205 out of $850,000  available.  As of December 31, 2007 the balance on
the Company's revolving line of credit was $622,206 out of $850,000 available to
the Company.

As of February 19, 2008, the Company's backlog was approximately $1,850,000.

In December  2007,  the Company  borrowed  $150,000 from William W.  Burnham,  a
principal  shareholder  and Chairman of the Board.  The terms of the note can be
found in Note 4 to the financial statements.

                                  Page 24 of 27

<PAGE>

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, 2007 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. Submission of Matters to a Vote of Security Holders

None.

                                  Page 25 of 27

<PAGE>

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)).

31.1  Certification  of Chief Executive  Officer  Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.

31.2  Certification  of Chief Financial  Officer  Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.

32.1  Certification  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.

32.2  Certification  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.

(b) Reports on Form 8-K

      I. None.

                                  Page 26 of 27

<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: February 19, 2008                 By: /s/ Ashley C. Andersen
                                            --------------------------------
                                        Ashley C. Andersen,
                                        President, Chief Executive Officer

                                  Page 27 of 27