10-Q 1 trudy_q-123108.txt FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2008 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 ( d ) OF THE EXCHANGE ACT For the transition period from ____________ to____________ Commission File No. 0-16056 TRUDY CORPORATION (Exact name of Registrant as specified in its charter) Delaware 06-1007765 ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 353 Main Avenue Norwalk, CT 06851 ---------------------------------------- (Address of Principal Executive Offices) (203) 846-2274 ---------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Not applicable. APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: February 19, 2009 Common Stock, $.0001 par value: 645,007,356 shares INDEX PAGE NUMBER ----- ----------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet - December 31, 2008 (unaudited) 3 Consolidated Statements of Operations (unaudited) for the three and nine months ended December 31, 2008 and December 31, 2007 (unaudited) 4 Consolidated Statements of Cash Flows (unaudited) for the nine months ended December 31, 2008 and December 31, 2007 (unaudited) 5 Consolidated Statement of Shareholders' Deficit (unaudited) from April 1, 2008 through December 31, 2007 6 Notes to Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 26 Item 2. Changes in Securities 26 Item 3. Defaults upon Senior Securities 26 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5. Other Information 27 Item 6. Exhibits and Reports on Form 8-K 27 2 PART I ------ Item 1. Financial Statements The Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant.
Trudy Corporation Balance Sheet December 31, 2008 Period Ended December 31, ---------------------------- 2008 2007 ------------ ------------ (Unaudited) (Unaudited) Assets Current assets Cash and cash equivalents $ 48,239 $ 1,087 Accounts receivable, net 1,534,000 1,903,304 Inventory, net 1,664,590 1,518,706 Prepaid expenses and other current assets 151,850 98,390 ------------ ------------ Total current assets 3,398,679 3,521,488 Equipment, net 72,514 70,387 Royalty advances, net 257,686 223,544 Prepublication costs and other assets, net 449,793 526,549 Intangible Assets, net 408,348 -- ------------ ------------ Total Other assets 1,188,341 820,480 ------------ ------------ Total assets $ 4,587,020 $ 4,341,968 ============ ============ Current liabilities Notes payable - Bank & related parties $ 2,714,449 $ 1,504,180 Current portion, long term debt -- 15,520 Accounts payable and accrued expenses 1,765,002 1,496,968 Deferred Revenue 172,242 238,063 Royalties and commissions payable 436,658 471,368 ------------ ------------ Total Current liabilities 5,088,351 3,726,100 Long term liabilities Long term debt, net of current portion -- 468,902 ------------ ------------ Total long term liabilities -- 468,902 ------------ ------------ Total liabilities 5,088,351 4,195,002 Commitments Shareholders' deficit Common stock - par value 64,501 61,257 Paid-in capital 7,046,236 6,931,881 Accumulated deficit (7,612,068) (6,846,172) ------------ ------------ Total shareholders' deficit (501,331) 146,966 ------------ ------------ Total liabilities and shareholders' deficit 4,587,020 $ 4,341,968 ============ ============
The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements. 3
Trudy Corporation Statement of Operations For the Quarters Ended December 31, 2008 & December 31, 2007 Three Month Period Nine Month Period Ended December 31, Ended December 31, ------------------------------ ------------------------------ 2008 2007 2008 2007 ------------- ------------- ------------- ------------- (unaudited) (unaudited) (unaudited) (unaudited) Net product sales 1,784,142 1,628,573 4,883,419 4,454,942 Royalty sales -- 39,847 17,242 67,964 ------------- ------------- ------------- ------------- Net Sales 1,784,142 1,668,420 4,900,661 4,522,906 Cost of sales 1,002,447 1,015,268 2,867,161 2,631,294 ------------- ------------- ------------- ------------- Gross profit 781,695 653,152 2,033,500 1,891,612 Operating expenses: Selling, general and administrative 810,559 708,638 2,364,118 2,198,419 ------------- ------------- ------------- ------------- Income/(loss) from operations (28,864) (55,486) (330,618) (306,807) Other income/(expense) Interest, net (28,430) (34,401) (102,128) (103,033) Other income, net (1,861) 24,511 18,415 40,721 Gain on debt extinguishment 55,000 -- 55,000 -- ------------- ------------- ------------- ------------- Other expense 24,709 (9,890) (28,713) (62,312) ------------- ------------- ------------- ------------- Net income/(loss) $ (4,155) $ (65,376) $ (359,331) $ (369,119) ============= ============= ============= ============= Basic and diluted net income/(loss) loss per share $ -- $ -- $ -- $ -- ============= ============= ============= ============= Weighted average number of shares outstanding 643,760,617 612,566,330 637,300,231 612,566,330 ============= ============= ============= =============
The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements. 4
Trudy Corporation Statements of Shareholders' Equity Quarter ended December 31, 2008 Common Stock Additional Total ---------------------------- Paid-in Accumulated Shareholders' Shares Amount Capital Deficit Equity ------------ ------------ ------------ ------------ ------------ Balance at March 31, 2008 (audited) 641,307,356 $ 64,131 $ 7,035,506 $ (7,252,737) $ (153,100) Net loss (unaudited) -- -- -- (218,556) (218,556) ------------ ------------ ------------ ------------ ------------ Balance at June 30, 2008 (unaudited) 641,307,356 $ 64,131 $ 7,035,506 $ (7,471,293) $ (371,656) ============ ============ ============ ============ ============ Net loss (unaudited) (136,620) (136,620) ------------ ------------ ------------ ------------ ------------ Balance at September 30, 2008 641,307,356 $ 64,131 $ 7,035,506 $ (7,607,913) $ (508,276) ============ ============ ============ ============ ============ Stock-based Compensation 3,700,000 $ 370 $ 10,730 11,100 Net loss (unaudited) (4,155) (4,155) ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2008 645,007,356 $ 64,501 $ 7,046,236 $ (7,612,068) $ (501,331) ============ ============ ============ ============ ============
The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements. 5
Trudy Corporation Statements of Cash Flows For the Nine Months Ended December 31, ---------------------------- 2009 2008 ------------ ------------ (unaudited) (unaudited) Cash Flows From Operating Activities Net loss $ (359,331) $ (369,119) Adjustments to reconcile net loss to net cash provided by / (used in) operating activities: Depreciation 13,566 11,646 Amortization of pre-publication costs 184,888 206,231 Amortization of intangibles 41,652 0 Provision for losses on accounts receivable 27 800 Provision for promotional allowance (27,000) (30,500) Provision for slow moving inventory (108,000) (45,000) Provision for sales returns (571,114) (177,759) Board Compensation 11,100 0 Gain on debt extinguishment (55,000) 0 Consulting fee 0 54,688 Changes in operating assets and liabilities: Decrease / (increase) in accounts receivable 606,362 (45,600) Increase in inventories (32,623) (11,894) Decrease in prepaid expenses and other current assets 10,071 19,811 Increase in accounts payable and accrued expenses 339,623 109,480 Increase in deferred revenue 138,241 238,063 Increase / (decrease) in royalties and commissions payable 84,260 (2,779) ------------ ------------ Net cash used by operating activities 276,722 (41,932) Investing activities: Purchases of property and equipment (21,170) (27,590) Pre-publication and royalty advances (231,446) (225,982) ------------ ------------ Net cash provided by investing activities (252,616) (253,572) Financing activities: Net change in note payable, bank (162,992) 178,201 Repayments to related parties (44,760) (37,363) Proceeds from related parties 210,629 150,000 ------------ ------------ Net cash provided/(used) by financing activities 2,877 290,838 ------------ ------------ Net increase / (decrease) in cash and cash equivalents 26,983 (4,666) Cash and cash equivalents at beginning of period 21,256 5,753 ------------ ------------ Cash and cash equivalents at end of period $ 48,239 $ 1,087 ============ ============ Cash paid for interest $ 54,859 $ 103,917 Cash paid for income taxes $ -- $ --
The accompanying summary of significant accounting policies and notes to financial statements are an integral part of the consolidated financial statements. 6 TRUDY CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. Description of Business and Basis of Presentation Trudy Corporation (hereinafter referred to as the `Company'), publishes children's books, eBooks and audiobooks and designs, manufactures and markets plush stuffed toys, children's instruments and musical electronics for sale directly to consumers in the United States and to domestic and international retail and wholesale customers. The Company's products are sold under the trade names (i.e. imprints) of Studio Mouse, Soundprints, Little Soundprints, Fetching Books, Music for Little People and BeBop. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended December 31, 2008 are not necessarily indicative of the results that may be expected for the year ending March 31, 2009. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended March 31, 2008. 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. 7 Credit Risk The Company transacts business on a credit basis with its customers. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its trade accounts receivable credit risk exposure is limited. The Company does not require collateral or other security to support credit sales, but provides an allowance for bad debts based on historical experience and specifically identified risks. The Company also obtains credit insurance on customers when it is deemed warranted. Inventories Inventories, which consist principally of finished goods, are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company reviews its inventory for obsolescence and provides for obsolescence when the inventory is deemed to be unsaleable over a reasonable time. Equipment Equipment is stated at cost. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets which range from three to seven years for machinery and equipment, and furniture and fixtures, and from one to three years for computer software and hardware. Fair Value of Financial Instruments The Company has the following financial instruments: cash and cash equivalents, accounts receivable, inventories, prepaid expenses, accounts payable and accrued expenses, notes payable and long-term debt. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and notes payable approximate their fair value based on the liquidity of these 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, an imprint of Disney Book Group, LLC, (formerly Disney Children's Book Group, LLC) ("Disney"). The intangible asset is being amortized on a straight line basis over a three year period. 8 Intangible Assets related to Music for Little People are amortized on a straight line basis over their estimated useful lives. Long-Lived Assets In accordance with Financial Accounting Standards Board Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management performs ongoing business reviews and evaluates impairment indicators based on qualitative and quantitative factors. If it is determined that the carrying amount of an asset cannot be fully recovered, an impairment loss is recognized. Revenue Revenues are recorded in accordance with SEC Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements." Revenues from product sales are recognized in the period when persuasive evidence of an arrangement with the customer exists, the products are shipped and title has transferred to the customer, all significant obligations have been delivered, and collection is considered probable. Since many of the product shipments are accompanied with the right of return, a provision for estimated returns on these sales is made at the time of sale, in accordance with Statement of Financial Accounting Standards No. 48, "Revenue Recognition When Right of Return Exists", based on historical experience. 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. 9 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. Due to changes in the Company's business, effective December 31, 2006, royalty revenue is presented as a component of net sales. All periods presented conform with this presentation. Income Taxes Income taxes are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The statement employs an asset and liability approach for financial accounting and reporting of deferred income taxes. Generally, SFAS 109 allows for recognition of deferred tax assets in the current period for the future benefit of net operating loss carryforwards and items for which expenses have been recognized for financial statement purposes but will be deductible for tax purposes in future periods. A valuation allowance is recognized, if on the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 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. 10 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. 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 $82,697 and $10,861 for the three month periods ended December 31, 2008 and 2007, respectively. Advertising expense related to catalogs and brochures was $101,278 and $21,372 for the nine month periods ended December 31, 2008 and 2007, respectively. Other advertising expense was $11,997 for the three month period ended December 31, 2008, there was no expense in the prior quarter. Other advertising expense was $38,599 for the nine month periods ended December 31, 2008 , again there was no expense for the nine months ended December 31, 2007. 3. Acquisition: Music for Little People On March 7, 2008 the Company purchased certain assets from the children's audio publisher and distributor, Musical Kidz LLC, pertaining to its mail-order and ecommerce divisions. Musical Kidz is the publisher of children's music distributed on the record label, Music for Little People (MFLP). The Company did not purchase any assets related to Musical Kidz, LLC's record label. The total purchase price of the selected assets was $550,000. The Company received $100,000 in inventory and $450,000 in intangible assets such as direct mail catalog files; images; graphics and text used in direct mail catalogs, flyers, mailing websites; mailing lists; e-mail lists; all MFLP websites; and licensing agreements for MFLP and Bebop, Musical Kidz, LLC's branded line of musical instruments. 11 4. Inventories Inventories consist of the following:
December 31, March 31, 2008 2008 ------------ ------------ Raw Materials $ 33,860 $ 35,726 Finished Goods 1,797,730 1,763,241 Reserve for Obsolescence (167,000) (275,000) ------------ ------------ Inventory $ 1,664,590 $ 1,523,967 ============ ============
5. Notes Payable, Bank and Related Parties
December 31, March 31, 2008 2008 ------------ ------------ 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). $ 563,706 $ 715,206 Note payable, bank, 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). (Mr. Burnham paid off this note and replaced it with a note with interest payable monthly at Libor plus 1.25%). 0 100,000 Various notes payable, to principal shareholder (William W. Burnham, Chairman of the Board) due on demand. Interest is payable monthly at LIBOR + 1.25%. 1,915,450 1,648,329 Note payable, bank, payable in monthly installments of $2,713 including interest at 7%. 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. 235,293 246,785 Note payable, affiliate, payable in monthly installments of $1,252. The note is unsecured. 0 1,252 ---------------------------- Total $ 2,714,449 $ 2,711,572 ============================
12 6. Income Taxes
The components of income tax (benefit) are as follows: December 31, 2008 December 31, 2007 ---------------------------- ---------------------------- Current Deferred Current Deferred ---------------------------- ---------------------------- Income tax expense (benefit) before application of operating loss carryforwards $ 0 $ (143,700) $ 0 $ (142,100) Income tax expense (benefit) of operating loss carryforwards 0 0 0 0 Change in valuation allowance 0 143,700 0 142,100 ---------------------------- ---------------------------- Income tax expense (benefit) $ 0 $ 0 $ 0 $ 0 ============================ ============================
The deferred taxes are comprised of the following at December 31, 2008: Net operating loss carryforwards $ 1,408,000 Reserves and allowances 571,000 Total deferred tax assets 1,979,000 Less valuation allowance (1,979,000) ------------ 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, 2008, 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 and a principal shareholder, Peter Ogilvie, a former Director and Officer of the Company, and Fred M. Filoon, a Director of the Company. The Company has executed a lease that expires April 30, 2011. Rent expense totaled $31,350 and $23,743 for the three months ended December 31, 2008 and 2007, respectively. Rent expense totaled $87,848 and $71,228 for the nine months ended December 31, 2008 and 2007, respectively. As of December 31, 2008, the Company has borrowings from related parties of $1,915,450. Interest to related parties totaled $14,127 and $12,354 for the three months ended December 31, 2008 and 2007, respectively. Interest to related parties totaled $54,859 and $35,709 for the nine months ended December 31, 2008 and 2007, respectively. Repayments to related parties totaled $20,720 for the three months ended December 31, 2008 and $43,508 for the nine months ended December 31, 2008. There were no loan repayments to related parties for the three or nine months periods ended December 31, 2007. 13 Guarantor fees for Mr. Burnham for the three months ended December 31, 2008 were $3,627. Guarantor fees for Mr. Burnham for the three months ended December 31, 2007 were $4,968. Guarantor fees for Mr. Burnham for the nine months ended December 31, 2008 were $8,842 versus $14,830 for the prior nine months. 8. Non-cash Investing and Financing Activities For the quarter ended December 31, 2008 the Company recorded $11,100 in fees paid to Board Members and certain employees. The Company paid in newly issued shares of Common Stock out of the 850,000,000 shares authorized. 9. Debt Extinguishment On June 13, 2006 the Company executed a Mutual General Release (the "Mutual Release") with Chart Studio Publishing (PTY) Ltd, Johannesburg, South Africa for the alleged $444,852 indebtedness that was due to Chart Studio on August 20, 2007. As of March 31, 2006 the Company had accrued $371,819 of the total amount due August 20, 2007. Under the terms of the Mutual Release, Trudy was required to pay to Chart Studio $80,000 in aggregate. As a result of the Mutual Release, the Company and Chart Studio agreed to extinguish any and all debts or obligations between them which existed on or before the date of the Mutual Release. In November, 2006, Chart Studio filed for liquidation in South Africa. On December 19, 2006, the Company announced that it had been advised that the assets in liquidation had been sold at auction by a Court-appointed Liquidator to a successful bidder from Capetown, South Africa. The Company had maintained a balance due of $55,000 to Chart Studio and at December 31, 2008 the Company recognized a $55,000 gain on debt extinguishment. The Company has been indemnified against any claims from a principal shareholder/officer. 10. Subsequent Events On February 4, 2009 the Company announced that it had entered into a Letter of Intent providing for PCS Edventures!.com, Inc. ("PCS"), an Idaho corporation, to acquire substantially all of the assets and assume certain liabilities of Trudy. An 8K with a copy of the Letter of Intent was filed with the SEC on February 9, 2009. Consideration for the asset purchase transaction will be up to $2 million in PCS Common Stock, with the Common Stock being valued at the average per share price over the 10 business day period immediately prior to the Closing, with a minimum valuation of $0.90 per share. The PCS Common Stock will be registered with the Securities and Exchange Commission (the "SEC") and distributed to Trudy shareholders, pro rata, subject to a holdback of certain shares by PCS to guarantee representations and warranties of Trudy, after the Closing. Liabilities of Trudy to be assumed by PCS include accounts payable, licensing obligations and certain shareholder loans of approximately $1,900,000 at Closing. In addition, at Closing, PCS will secure new financing to pay off Trudy's current bank credit line of up to $850,000. The assumed shareholder loans are to be paid off in full over two years. Ashley Andersen Zantop, CEO and President of Trudy, and all other key Trudy employees will be retained as employees by PCS, while William W. Burnham, Chairman of Trudy, will join the Board of Directors of PCS. The Closing is subject to various conditions outlined in the Letter of Intent, including PCS's completion of a satisfactory "due diligence" examination of Trudy, at which time a definitive agreement will be executed. 14 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 2009 increased 6.9% versus the comparable quarter of fiscal 2008. This is primarily a result of revenue from Domestic Mass Market Distributors and the Company's Music For Little People direct-to-consumer business, purchased in March of 2008. The Company's profit margin increased from 39.1% in the prior year to 43.8% in the current year, primarily as a result of decreased product costs. The three month period resulted in a net loss of $4,155 versus a net loss of 65,376 for the prior year. Three months ended December 31, 2008 As noted above, net sales for the third quarter of fiscal 2009 increased 6.9% versus the prior year. Sales from the Company's Music For Little People product line were 31.9% of sales for the current quarter. The Company acquired certain assets, which included Music For Little People (MFLP) direct-to-consumer business related assets from Musical Kidz, LLC in March, 2008. As a result there were no sales in these sales channels in the prior year. Sales of Disney-licensed products as a percentage of total Company sales decreased from 52.2% to 27.7% for the quarter versus the comparable quarter a year ago as a result of a decline in international mass market sales and a decline in domestic discount retailer. Smithsonian-licensed product sales decreased from 29.3% of Company sales to 22.3%. Percentage of Sales by license and/or product line for the quarters ended December 31, -------------------------------------- License 2008 2007 ----------------------------------------------------------------------- Disney 27.7% 52.2% Music For Little People (MFLP) 31.9 0.0 Proprietary 16.1 9.0 Smithsonian 22.3 29.3 Sesame Workshop 1.5 5.9 All other 0.5 3.6 -------------------------------------- Total 100.0 100.0 ====================================== 15
Sales increases, net of provisions for returns, for the three months ended December 31, ---------------------------- Sales channel 2008 2007 Variance % change --------------------------------------------------------------------------------------------------- Direct Response (MFLP) $ 403,466 $ 0 $ 403,466 NMF Internet Accounts (MFLP) 269,161 0 269,161 NMF Direct- to- Consumer (returnable) 191,687 70,475 121,212 172.0%
Direct response Music For Little People sales were $403,466 in the current quarter, sales that were generated through the Company's website and stimulated by a 400,000-copy catalog mailing and advertising through Google Ad Words. There were no sales in the prior year as the Company purchased the assets of Music For Little People in March, 2008. Music For Little People also generated revenue through Amazon.com, the internet distributor as an Amazon.com third-party vendor. Sales generated in this manner were $269,161 for the current quarter. Direct-to-consumer (returnable distributor) sales increased $121,212 from $70,475 in the prior quarter to $191,687 in the current quarter as the Company continued to enjoy favorable response from consumers in it first major home shopping network initiative as a result of positive testing of Smithsonian book and plush sets in 2007, and the addition of two new sets, created in conjunction with the African Wildlife Foundation and the American Veterinary Medical Association. Several other channels of trade experienced increased sales including domestic mass market distributors, military bases, and international direct-to-consumer distributors. As the North American economy contracted worldwide, consumers turned to low-priced retailers to purchase their seasonal products. 16
Sales decreases, net of provisions for returns, for the three months ended December 31, ---------------------------- Sales channel 2008 2007 Variance % change --------------------------------------------------------------------------------------------------- Book Clubs $ 0 124,603 $ (124,603) NMF International Mass Market Distributors 223,373 343,126 (119,753) -34.9% Non-returnable Discount Retailers 39,010 136,001 (96,991) -71.3 Domestic Warehouse Club Distributors (returnable & non-returnable) 4,020 95,167 (91,147) -95.8 Domestic Book Retailers 12,436 74,472 (62,036) -83.3
In the December 2007 quarter there was a one-time sale of $124,603 to a school book club that was not repeated in the current fiscal year quarter. In the December 2007 there was also a one-time sale of $101,808 to a warehouse club distributor that was not repeated in the current fiscal year quarter. The warehouse club distributor, Advanced Marketing Services, filed for bankruptcy on December 29, 2006, and was later purchased by the book distributor Baker & Taylor. Sales to non-returnable discount retailers declined $96,991 as a result of a non-repeating order from the prior year that was not received in the current quarter. For International Mass Market Distributors, sales decreased $119,753 to $223,373 as the Company's Latin American distributor put orders on hold with the Company as a result of the slumping Mexican economy. For domestic book retailers, the Company's credit insurance program for the second largest book chain was cancelled and the Company had to cease shipping orders on open account to this chain. Several other traditional channels of trade for books experienced decreased sales including non-returnable discount retailers, domestic book distributors, international trade book retailers and school & library distributors. Nine months ended December 31, 2008 Net sales for the first nine months of fiscal 2009 increased 8.4% versus the prior year. Sales of Disney-licensed products as a percentage of total Company sales, decreased from 51.9% to 44.9% for the nine month period versus the comparable period a year ago. Sesame Workshop-licensed product sales were 2.2% 17 of Company revenue versus 9.3% in the prior nine month period. Smithsonian-licensed product sales as a share of total revenue were virtually unchanged. Sales from the Company's Music For Little People product line were 19.1% of sales for the nine months. The Company acquired certain assets of Music For Little People in March, 2008. As a result there were no sales in the prior year. Percentage of Sales by license and/or product line for the nine months ended December 31, -------------------------------------- License 2008 2007 ----------------------------------------------------------------------- Disney 44.9% 51.9% Smithsonian 22.0 22.1 Music For Little People 19.1 0.0 Proprietary 11.1 14.1 Sesame Workshop 2.2 9.3 All other 0.7 2.6 -------------------------------------- Total 100.0 100.0 ======================================
Sales increases, net of provisions for returns, for the nine months ended December 31, ---------------------------- Sales channel 2008 2007 Variance % change --------------------------------------------------------------------------------------------------- Direct Response (MFLP) $ 561,473 $ 0 $ 561,773 NMF Internet Accounts (MFLP) 459,640 0 459,640 NMF Direct- to- Consumer (returnable) 514,574 116,413 398,161 NMF
Music For Little People sales generated by the Company's website were $561,473 in the current year. There were no sales to this division in the prior year since the Company purchased Music for Little People in March, 2008. Music For Little People internet account sales were $459,640 in the current quarter, largely generated by its internet distributor, Amazon.com. There were no sales in the prior year as the Company purchased the Music for Little People direct-to-consumer assets in March, 2008. Overall, for the first nine months Music for Little People generated revenue of $1,021,113 in sales direct to the consumer largely moving the Company towards one of its stated goal of decreasing returnable sales as a percentage of total sales. Direct-to-consumer returnable sales increased by $398,162 to $514,574 for the nine months ending December 31, 2008 versus the comparable period a year ago as a result of roll-out orders from a major television home shopping channel that emanated from successful product testing a year ago. 18 Domestic mass market distributor sales were almost double the prior year's nine month period. It appears that consumers are moving away from traditional retailers and towards the big box retailers who are advertising best prices in this tough economy. Consequently the Company has more Plan-o-gram items in with the Big Box stores than in the past. Other channels of trade experienced increased sales including domestic warehouse club distributors, military bases, close out accounts, international mass market retailers, international subsidiary rights sales and international direct-to-consumer book distributor sales.
Sales decreases, net of provisions for returns, for the nine months ended December 31, ---------------------------- Sales channel 2008 2007 Variance % change --------------------------------------------------------------------------------------------------- Domestic Supermarkets & Drugstores $ 0 $ 426,429 $ (426,429) NMF International Mass Market Distributors 844,371 1,036,664 (192,293) -18.6% Direct-to-Consumer Book Distributors 412,090 548,943 (136,853) -24.9 Book Clubs 0 124,603 (124,603) NMF
Domestic supermarkets and drugstore sales were $426,429 in the prior nine month period; there were no sales in the current year due to a non-repeating order from a major drug chain in August 2007. Sales to international mass market distributors decreased $192,293 versus the prior year primarily as a result of the global economic contraction, and specifically the contracting retail market in Mexico. Direct-to-consumer book distributor sales declined for the nine month period as well as a result of the cessation of operations of the major display marketer and softening retail sales. In the December 2007 quarter there was a $124,603 sale to a major book club that was not repeated in the current year. Other channels of trade experienced sales decreases including international trade book distributors, domestic toy and gift retailers, domestic toy and gift distributors, and domestic book retailers, non-returnable discount retailers, Canadian book distributors and domestic book distributors. 19 COST OF SALES. Three months ended December 31, 2008 The Company's cost of sales for the quarter ended December 31, 2008 decreased $12,821 from $1,015,268 in the prior year to $1,002,447 in the current year, a decrease of 1.3%, as a result of the decreased direct product costs which more than offset increased warehousing and fulfillment expenses related to Music for Little People. After the purchase of the direct-to-consumer assets of Music for Little People, the Company decided to maintain the existing outsourced fulfillment center in Missouri to avoid disruption of continuity of sales, fulfillment and customer service as it integrated the business into the Company. The Company believes that there are substantial cost savings to be gained once its one year distribution agreement expires in March 2009. Cost of sales as a percentage of net sales decreased from 60.9% to 56.2% in the current quarter as a result of a change in the sales mix, decreased direct product costs from its Asian-sourced books and expansive margins from selling Music for Little People proprietary audio and Be Bop products directly to the consumer. Nine months ended December 31, 2008 The Company's cost of sales for the nine months ended December 31, 2008 increased $235,867 from $2,631,294 in the prior year to $2,867,161 in the current year, an increase of 9.0%, primarily as a result of a 9.2% increase in sales and increased warehousing and fulfillment costs to service distribution of Music for Little People direct-to-consumer products. Cost of sales as a percentage of net sales increased from 58.2% to 58.5% in the current quarter as a result. GROSS PROFIT. Three months ended December 31, 2008 The resulting gross profit for the quarter ended December 31, 2008 increased 19.7% to $781,695 versus the prior quarter's gross profit of $653,152. Gross margin was 43.8% in the current quarter versus 39.1% in the quarter ended December 31, 2007. Nine months ended December 31, 2008 Gross profit for the nine months ended December 31, 2008 increased 7.5% to $2,033,500 versus the prior year's gross profit of $1,891,612. Gross margin was 41.5% in the current year versus 41.8% for the nine months ended December 31, 2007. 20 SELLING, GENERAL & ADMINISTRATIVE COSTS. Three months ended December 31, 2008 The Company's selling, general, and administrative costs increased 14.4% or $101,921 to $810,559 for the three months ended December 31, 2008 versus $708,638 for the three months ended December 31, 2007. As a percentage of net sales, selling, general and administrative expenses increased from 42.5% of net sales from the prior year to 45.4% of net sales in the current fiscal year. The increase in selling, general and administrative expenses as a percentage of net sales was largely due to the mail order printing and associated postage expense attributed to the Music For Little People direct-to-consumer catalog as well as the credit card processing fees charged to process consumer orders. In addition, the Company outsourced customer service to its Missouri fulfillment center to manage inbound consumer internet and mail orders. The catalog and customer service expense was $101,016, essentially the majority of the increase in the Company's total selling, general and administrative costs for the December Quarter 2008. Royalty expenses declined $40,767 to $183,232 for the current December Quarter versus the comparable quarter a year ago or -18.2%. The decline was due to lower licensed product sales to distributors and retailers. Nine months ended December 31, 2008 The Company's selling, general, and administrative costs increased 7.5% or $165,699 to $2,364,118 for the nine months ended December 31, 2008 versus $2,198,419 for the nine months ended December 31, 2007. As a percentage of net sales, selling, general and administrative expenses decreased from 48.6% of net sales from the prior year to 48.2% of net sales in the current year. Again the increase was due to the associated selling and administrative expenses with the acquisition of the Music for Little People direct to consumer assets including catalog expense, credit card processing fees and direct-to-consumer customer service expense. INCOME / LOSS FROM OPERATIONS. Three months ended December 31, 2008 For the quarter ended December 31, 2008, the loss from operations was $28,864 versus a loss of $55,486 for the prior year's quarter. Nine months ended December 31, 2008 For the nine months ended December 31, 2008, the loss from operations was $330,618 versus a loss of $306,807 for the prior year. OTHER INCOME / (EXPENSE). Three months ended December 31, 2008 The Company's other expense for the quarter ended December 31, 2008 was $24,709 versus $9,890 for the quarter ended December 31, 2007. 21 Nine months ended December 31, 2008 The Company's other expense for the nine months ended December 31, 2008 was $28,713 versus $62,312 for the six months ended December 31, 2007. NET LOSS. Three months ended December 31, 2008 As a result of the items discussed above, the Company's net loss for the quarter ended December 31, 2008 was $4,155 compared to net loss of $65,376 for the comparable prior quarter. Nine months ended December 31, 2008 As a result of the items discussed above, the Company's net loss for the nine months ended December 31, 2008 was $359,331 compared to a net loss of $369,119 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. In February 2007, FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159), which permits entities to choose to measure many financial assets and liabilities at fair value. The fair value option may be applied, subject to certain exceptions, on an instrument by instrument basis; is irrevocable; and is applied only to entire instruments and not to portions of instruments. The provisions of SFAS 159 are effective for us as of April 1, 2008. This does not have a material impact on our financial statements. 22 In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (SFAS 141(R)), which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The Statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for us as of April 1, 2009. The provisions of SFAS 141(R) will impact us only if we are party to a business combination after SFAS 141(R) has been adopted. 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. 23 Liquidity and Capital Resources
For the quarters ended December 31, ---------------------------- 2008 2007 Variance % change --------------------------------------------------------------------------------------------------- Net assets (deficiency) $ (501,331) $ 146,966 $ (648,297) NMF Working capital (deficiency) (1,689,672) (204,612) (1,485,060) NMF Accounts receivable, net 1,534,000 1,903,304 (369,304) -19.4% Accounts payable and accrued expenses 1,765,002 1,496,968 268,034 17.9% Royalties and commissions payable 436,658 471,368 (34,710) -7.4%
At December 31, 2008 the Company had a deficiency of net assets of $501,331 versus net assets of $146,966 at December 31, 2007. Working capital deteriorated by $1,485,060 from a deficiency of $204,612 to a deficiency of $1,689,672 at December 31, 2008. Accounts receivable decreased from $1,903,304 at December 31, 2007 to $1,534,000 at December 31, 2008, a decrease of $369,304. Accounts payable and accrued expenses increased $268,034 versus the prior year from $1,496,968 to $1,765,002 at December 31, 2008. Royalties and commissions payable decreased $34,710 versus the prior year from $471,368 at December 31, 2007 to $436,658 at December 31, 2008 primarily as a result of the sales mix and the decreased level of sales. On March 7, 2008 the Company purchased certain direct-to-consumer and school and library assets from the children's audio publisher, Musical Kidz LLC doing business as Music for Little People. The acquired assets included trademark rights, its mail order catalog, house mailing list, email addresses, and the URLs for Music for Little People (http://www.musicforlittlepeople.com). Musical Kidz is the publisher of children's music distributed on the record label, Music for Little People (MFLP). The Company also purchased $100,000 of inventory (see the Company's Annual Report on Form 10-KSB for the year ended March 31, 2008 for more information). In December, 2008 the Company recorded a $55,000 gain on debt extinguishment. This debt related to a former joint venture partner that filed for bankruptcy in the republic of South Africa. A principal shareholder has indemnified the Company against any future claims from this gain on extinguishment. 24 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 bank credit facility of $850,000, if sales are to be maintained. In addition, the Company can not expect future loans from the Company's principal shareholder. The Company continues to explore alternative financing options in the event that cash flow does not materialize in line with current expectations. On February 4, 2009 the Company announced that it had entered into a Letter of Intent providing for PCS Edventures!.com, Inc. ("PCS"), an Idaho corporation, to acquire substantially all of the assets and assume certain liabilities of Trudy. An 8K with a copy of the Letter of Intent was filed with the SEC on February 9, 2009. As of February 14, 2009, the balance on the Company's revolving line of credit was $789,706 out of $850,000 available. As of December 31, 2008 the balance on the Company's revolving line of credit was $563,706 out of $850,000 available to the Company. This note is due at the end of February, 2009 and the Company is currently in discussions with it Bank. As of February 18, 2009 the Company's backlog was approximately $2,186,500 In the most recent quarter the Company received an additional $103,829 in short-term notes from its principal shareholder (William W. Burnham, Chairman of the Board). These notes are demand notes. 25 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, 2008 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 On January 6, 2009 the Company was sued in the Superior Court of California for breach of contract. The Company and legal counsel are of the opinion that the complaint is without merit and the final resolution of the litigation will not have a material adverse impact on the Company. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None 26 Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits Exhibit No. 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. 27 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, 2009 By: /s/ Ashley C. Andersen Zantop ------------------------------------- Ashley C. Andersen Zantop, President, Chief Executive Officer 28