Forward-looking Statements:

Forward-looking statements in this Form 10-Q including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements made in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements -- our ability to successfully develop our brands and proprietary products through internal development, licensing and/or mergers and acquisitions.
Additional factors include, but are not limited to, the size and growth of the market for our products, competition, pricing pressures, market acceptance of our products, the effect of economic conditions, intellectual property rights, the results of financing efforts, risks in product development and other risks identified in this report and our other periodic filings with the Securities and Exchange Commission.

Strategic Update

With the acquisition of BE Overseas which brought a new management team and culture, the Company is focusing its efforts on building market share for its current line of award winning educational toy brands. Management will work to strengthen the Company's presence in the educational toy and children's segment while strategically transforming the Company from a one segment consumer product toy company to a global holding company, that builds profitability and shareholder value in established and growth stage consumer product companies.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The Company believes it can develop unique untapped opportunity by maximizing its existing customer relationships through its established and unique multi-level channels of distribution. The Company's award winning toy products have sold over 1.5 million units annually creating strong consumer acceptance and allowing additional market penetration with brand extensions and new product introductions.

Today, in its 30th year, the Company has reshaped itself to strengthen its eight core quality consumer toy brands: Curiosity Kits®; I Dig™ Excavation Adventures; Jay Jay the Jet Plane Wooden Adventure System™; Play & Store™; Space Voyagers®; Kidz Workshop™; Climb@Tron™; and Woodkits™. These toy lines include premium wooden toys, action figures, play-sets, activity kits, crafts and various other playthings with strategic emphasis on non-violent, educational and fun topics such as crafts, space, dinosaurs, science and nature.

Management believes the path to maximizing our current market position encompasses the following assets and operational strengths:

· Accountable brand management philosophy

· Eight award winning educational toy brands

· 35,000 sq ft distribution center

· Outsourced/scalable manufacturing process

· Leverage over 1.5 million units sold annually with cross-selling materials

· Currently sold in 2,000+ retail stores across USA

· 500+ location-based edutainment venues: Museums, Zoos, Aquariums, Theme-parks & Attractions

· Specialty & Department Retail Chains: Toy's R' Us, Barnes & Noble, JoAnn's, Michaels, Lowes, Home Depot, JC Penney's, Target, and others

Our operational focus for executing this strategy will be based on the following priorities:

· Maximize existing relationships with retailers while opening new channels

· Re-allocate resources to support our sales channel priorities

· Promote all products to all customer segments to generate additional revenue opportunities

· Become a recognized leader in the Educational toy children's segment

· Create a multi-media on-line experience for our consumers to entertain, educate and generate revenue

· Build targeted retailer and consumer programs to maximize selling opportunities year round

· Find other opportunities in the consumer products segment that can take advantage of existing infrastructure

· Capitalize on business development through the BE acquisition

Results of Operations:
Three Months and Nine Months Ended September 30, 2008 Compared With Three Months and Nine Months Ended September 30, 2007

The following should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain items appearing in our statements of operations.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

                                      Three Months      Three Months       Nine Months        Nine Months
                                          Ended             Ended             Ended              Ended
                                      September 30,     September 30,      September30,      September 30,
                                          2008               2007              2008               2007
Net Sales                                  100.0%            100.0%             100.0%            100.0%
Cost of Sales                              80.7%              59.2%             70.7%              58.6%
Gross Profit                               19.3%              40.8%             29.3%              41.4%
Selling Expense                            31.5%              21.3%             34.1%              26.2%
General and Administrative Expense         44.8%              43.0%             61.6%              45.5%
Total Operating Expense                    76.3%              64.3%             95.7%              71.7%
Loss from Operations                      (57.0%)            (23.6%)           (66.4%)            (30.3%)
Other Income (Expense)                     (9.3%)             7.8%              (7.7%)             0.7%
Loss before income taxes                  (66.3%)            (31.4%)           (74.1%)            (29.6%)
Income Taxes                                1.3%                -                0.6%                -
Net Loss                                  (67.6%)            (31.4%)           (74.7%)            (29.6%)

Net sales for the three months ended September 30, 2008 were $1,733,100 compared with net sales of $1,684,900 for the three months ended September 30, 2007. Net sales for the nine months ended September 30, 2008 were $4,067,800 compared with net sales of $4,486,900 for the nine months ended September 30, 2007. The increase of $48,200 for the three-month period and decrease of $419,100 for the nine month period equates to 2.9% and 9.3% respectively. Management attributes the $48,200 increase for the three month period to an increase in Curiosity Kits sales resulting from shipments of new product received during the quarter largely offset by a decrease in I Dig sales. The $419,900 decrease in net sales for the nine month period, is principally attributable to a decrease in Curiosity Kits sales resulting from a transition to new product packaging being available for shipment starting in June and a decrease in I Dig sales. At the beginning of the 2008 fiscal period slow moving and overstocked items represented a significant portion of the Company's inventory. As a result of improved purchasing procedures and disposing of slow moving product at approximately net realizable values, management has significantly reduced the levels of these overstocked items.

Gross profit decreased by $351,600 to $335,300 for the three months ended September 30, 2008, compared with $686,900 for the three months ended September 30, 2007 and decreased as a percent of net sales from 40.8% to 19.3% for the three-month periods ended September 30, 2007 and 2008, respectively. Gross profit decreased by $666,900 to $1,189,900 for the nine months ended September 30, 2008, compared with $1,856,800 for the nine months ended September 30, 2007. Gross profit as a percent of sales decreased from 41.4% to 29.3% for the nine-month periods ended September 30, 2007 and 2008, respectively. The decrease in gross profit percentage was almost entirely attributable to higher amortization of product development costs related to the Curiosity Kits brand and previously mentioned sales programs implemented to improve working capital by disposing of certain quantities of slow moving product at approximately net realizable values.

Selling, general and administrative (SG&A) expenses increased by $238,700 to $1,322,700 for the three month period ended September 30, 2008 from $1,084,000 for the three-month period ended September30, 2007. SG&A expenses increased by $676,700 to $3,893,900 for the nine months ended September 30, 2008 from $3,217,200 for the nine months ended September 30, 2007. These increases in SG&A expenses of 22.0%
for the three month period and 21.0% for the nine month period ended September30, 2008 are attributable primarily to the following:

· An increase in compensation and related benefit costs of $155,100 and $446,900 for the three and nine month periods, respectively, principally as the result of additions of senior financial and sales personnel and an increase in stock based compensation;

· An increase in professional services of $34,700 and $242,800 for the three and nine month periods, respectively, resulting primarily from Sarbanes-Oxley compliance consulting services, legal, investor relations services and recruiting fees;

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

· An increase in bad debt expense of $42,700 and $110,900 for the three and nine month periods, respectively; and

The increase for the nine months ended September 30, 2008 was partially offset by:

· A decrease in brand licensing expense of $44,600;

· A decrease in commission expense of $21,800;

· A decrease in travel expenses of $33,500 and

· A reduction in insurance expense of $15,000

Interest expense related to current debt was $20,800 and $42,200 for the three month periods ended September 30, 2008 and 2007, respectively and $85,900 compared to $100,600 for the nine month periods ended September30, 2008 and 2007, respectively. The $21,400 decrease for the three month period was attributable to a decrease in the lending rate and lower borrowings under the line of credit. The $14,700 decrease for the nine month period was attributable principally to higher borrowings under the line of credit being more than offset by a decrease in the lending rate.

Other income and (expense), net during the three-month periods ended September 30, 2008 and 2007 was ($139,600) and ($90,000), respectively and ($225,900) compared to $132,500 for the nine month periods ended September 30, 2008 and 2007, respectively. The $49,600 change for the three month period and $358,400 change for the nine month period was mainly attributable to unrealized losses from investments in 2008.

Net loss, as a result of the foregoing, was $1,170,900 and $529,300 for the three months ended September 30, 2008 and 2007, respectively and $3,038,900 compared with $1,328,400 for the nine months ended September 30, 2008 and 2007, respectively.

Financial Condition, Liquidity, and Capital Resources:

As of September 30, 2008, we had cash and cash equivalents of $7,800, representing a decrease of $36,600 compared to $44,400 as of December 31, 2007.

After taking account of non-cash items and other adjustments, our cash provided by operations for the nine months ended September 30, 2008 was $448,200. The principal sources of cash from operating activities for the nine months ended September 30, 2008 were from collection of the litigation judgment $3,233,700, net decrease in inventories of $629,700. The principal uses of cash from operating activities for the same period were a decrease of $711,000 in accounts payable, an increase of $466,100 in other assets attributable to capitalized product development costs in addition to an increase of $94,100 in investment securities.

The principle use of cash from investing activities of $29,800 was for molds utilized in toy production.

The use of cash from financing activities of $455,000 resulted from decreases in borrowings under the line of credit of $403,900, decrease in borrowings under investment account of $75,500 and stock repurchases of $32,700, partially offset by proceeds from exercise of warrants and sale of preferred stock of $57,100.

At September 30, 2008, borrowing under our line of credit was $1,556,500, a decrease of $403,900 from $1,960,400 as of December 31, 2007.