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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2004

or

[   ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________.

Commission file number:  0-22663


THE MIDDLETON DOLL COMPANY
(Exact name of registrant as specified in its charter)


Wisconsin

39-1364345
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)


W239 N1700 Busse Road
Waukesha, Wisconsin

53188-1160
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:  (262) 523-4300


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 an accelerated filer (as defined in Rule 12b-2 of the Act).      Yes                      No      X   

On August 13, 2004, there were 3,727,589 shares outstanding of the Registrant's common stock, 6-2/3 cents par value.



THE MIDDLETON DOLL COMPANY

FORM 10-Q INDEX

PART 1 FINANCIAL INFORMATION  

   Item 1		 Financial Statements  

    		Consolidated Balance Sheets as of June 30, 2004 (Unaudited) and
    December 31, 2003 3 

    		Consolidated Statements of Operations - For the Three Months and Six Months
    Ended June 30, 2004 and 2003 (Unaudited) 5 

    		Consolidated Statements of Changes in Shareholders' Equity - For the Six
    Months Ended June 30, 2004 and 2003 (Unaudited) 7 

    		Consolidated Statements of Cash Flows - For the Six Months Ended
    June 30, 2004 and 2003 (Unaudited) 8 

    		Notes to the Consolidated Financial Statements (Unaudited) 9 

   Item 2		 Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 

   Item 3		 Quantitative and Qualitative Disclosure About Market Risk 24 

   Item 4		 Controls and Procedures 24 


PART II		 OTHER INFORMATION  

   Item 1		 Legal Proceedings 25 
   Item 2
Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity 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 25 

   Item 6		 Exhibits and Reports on Form 8-K 26 

    		Signatures 27 

    		Exhibit Index 28 


2


THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

June 30,
2004
December 31,
2003
(Unaudited)
ASSETS            
Consumer Products   
Cash and cash equivalents   $ 144,963   $ 697,558  
Accounts receivable, net of allowance of  
   $187,061 and $555,738 as of June 30, 2004  
   and December 31, 2003, respectively    902,060    2,168,935  
Inventory, net    5,054,189    5,419,216  
Prepaid inventory    147,774    142,695  
Prepaid corporate taxes    29,438    36,219  
Other prepaid expenses    225,274    285,034  
   Total current assets    6,503,698    8,749,657  
Property and equipment, net of accumulated  
   depreciation of $4,104,769 and $3,670,257 as of  
   June 30, 2004 and December 31, 2003, respectively    3,316,002    3,677,998  
Deferred income taxes    2,685,224    2,685,224  
Goodwill    506,145    506,145  
   Total Consumer Products Assets     13,011,069    15,619,024  

Financial Services 		  
Cash and cash equivalents    602,344    654,846  
Interest receivable    239,173    252,268  
Rent receivable, net of allowance of $150,000  
   as of June 30, 2004 and December 31, 2003    52,088    112,055  
Loans    40,295,382    52,285,926  
Leased properties:  
   Buildings, net of accumulated depreciation of  
   $3,143,848 and $2,796,495 as of June 30,  
   2004 and December 31, 2003, respectively    26,602,291    26,945,144  
   Land    3,862,730    3,862,730  
      Total leased properties    30,465,021    30,807,874  
Property and equipment, net of accumulated  
   depreciation of $744,236 and $736,003 as of  
   June 30, 2004 and December 31, 2003, respectively    7,295    15,529  
Other assets    821,665    2,456,815  
   Total Financial Services Assets     72,482,968    86,585,313  
   Total Assets    $ 85,494,037   $ 102,204,337  

3


THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)

June 30,
2004
December 31,
2003
(Unaudited)
LIABILITIES, MINORITY INTEREST,            
AND SHAREHOLDERS' EQUITY   
Consumer Products  
Accounts payable    495,747    599,024  
Accrued salaries    293,084    219,608  
Accrued liabilities    430,048    647,471  
   Total Consumer Products Liabilities     1,218,879    1,466,103  

Financial Services 		  
Commercial paper    33,762,722    34,002,000  
Lines of credit    12,615,000    19,225,000  
Direct pay letter of credit obligation    2,400,000    2,600,000  
State of Wisconsin Investment Board notes payable    6,000,000    8,333,333  
Loan participations with repurchase options    1,614,598    6,289,827  
Other borrowings    1,320,000    1,320,000  
Accrued liabilities    1,065,204    1,131,103  
   Total Financial Services Liabilities   
      Other Than Preferred Shares     58,777,524    72,901,263  
Preferred shares subject to mandatory redemption, net    16,854,775    16,854,775  
   Total Financial Services Liabilities     16,854,775    16,854,775  

MINORITY INTEREST 		  
   Minority interest in subsidiaries    8,333    28,786  

SHAREHOLDERS' EQUITY 		  
Common stock, 6 2/3 cents par value,  
   15,000,000 shares authorized, 4,401,599 shares issued    293,441    293,441  
Additional paid-in capital    16,604,744    16,604,744  
Retained earnings (accumulated deficit)    (1,537,737 )  781,147  
Treasury stock, 674,010 shares, at cost    (6,725,922 )  (6,725,922 )
   Total Shareholders' Equity     8,634,526    10,953,410  
   Total Liabilities, Minority Interest,   
   and Shareholders' Equity    $ 26,716,513   $ 29,303,074  




4


THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2004
2003
2004
2003
Consumer Products                    
Net sales   $ 2,733,153   $ 3,306,943   $ 5,557,201   $ 7,218,811  
Cost of goods sold    2,241,051    2,333,407    4,156,294    4,540,806  
Gross profit    492,102    973,536    1,400,907    2,678,005  
Operating expenses  
   Sales and marketing    222,475    760,956    704,937    1,579,144  
   New product development    184,006    174,911    367,185    380,046  
   General and administrative    1,070,968    1,051,054    2,103,100    2,217,127  
      Total operating expenses    1,477,449    1,986,921    3,175,222    4,176,317  

Net operating loss		    (985,347 )  (1,013,385 )  (1,774,315 )  (1,498,312 )

Other income (expense)		  
   Interest expense    --    --    (108 )  (3,896 )
   Other income, net    6,927    5,569    89,768    14,678  
      Net other income    6,927    5,569    89,660    10,782  

Loss before income taxes, minority		  
   interest and intercompany charges    (978,420 )  (1,007,816 )  (1,684,655 )  (1,487,530 )
Income tax benefit    --    403,126    --    595,012  
Minority interest in losses of subsidiaries    10,444    8,585    20,452    13,457  
Loss Before Intercompany   
   Charges - Consumer Products     (967,976 )  (596,105 )  (1,664,203 )  (879,061 )
Financial Services   
Revenues  
   Interest on loans    567,549    880,596    1,230,771    1,807,968  
   Rental income    813,563    849,440    1,529,022    1,660,894  
   Gain on sale of leased properties    --    --    --    303,570  
   Gain on termination of interest rate swaps    --    --    --    484,304  
   Other income    11,790    77,285    24,335    90,258  
      Total revenues    1,392,902    1,807,321    2,784,128    4,346,994  
Expenses  
   Interest expense    479,784    772,841    1,080,492    1,570,798  
   Depreciation expense    181,134    197,887    355,587    387,004  
   Management fee expense    228,217    238,023    454,774    484,466  
   Other operating expenses    161,954    204,144    349,896    412,085  
      Total expenses    1,051,089    1,412,895    2,240,749    2,854,353  
Income before income taxes and  
      intercompany revenue    341,813    394,426    543,379    1,492,641  
Income tax expense    --    --    --    (107,499 )
Income Before Intercompany Revenue   
   - Financial Services    $ 341,813   $ 394,426   $ 543,379   $ 1,385,142  

5


THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS – (Continued)
(Unaudited)

For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2004
2003
2004
2003
Total Company                    

Income (loss) before income taxes,		  
minority interest and intercompany activity  
   Consumer products   $ (978,420 ) $ (1,007,816 ) $ (1,684,655 ) $ (1,487,530 )
   Financial services    341,813    394,426    543,379    1,492,641  
      Total company    (636,607 )  (613,390 )  (1,141,276 )  5,111  
Income tax benefit    --    461,485    --    678,785  
Minority interest in losses of subsidiaries    10,444    8,585    20,452    13,457  

Net income (loss)		    (626,163 )  (143,320 )  (1,120,824 )  697,353