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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 March 31, 2005

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 Exchange Act).

Yes          No    X  

On May 11, 2005, 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 March 31, 2005 (Unaudited) and
December 31, 2004   3

 		 Consolidated Statements of Operations - For the Three Months
Ended March 31, 2005 and 2004 (Unaudited)   5

 		 Consolidated Statements of Changes in Shareholders' Equity - For the Three
Months Ended March 31, 2005 and 2004 (Unaudited)   7

 		 Consolidated Statements of Cash Flows - For the Three Months Ended
March 31, 2005 and 2004 (Unaudited)   8

 		 Notes to the Consolidated Financial Statements (Unaudited)   9

Item 2.		 Management's Discussion and Analysis of Financial Condition and
Results of Operations 11

Item 3.		 Quantitative and Qualitative Disclosure About Market Risk 20

Item 4.		 Controls and Procedures 20

PART II.		 OTHER INFORMATION

Item 1.		 Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21

Item 3.		 Defaults Upon Senior Securities 21

Item 4.		 Submission of Matters to a Vote of Security Holders 21

Item 5.		 Other Information 21

Item 6.		 Exhibits 21

 		 Signatures 22

 		 Exhibit Index 23



2

THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

March 31, 2005
 December 31, 2004
(Unaudited)
ASSETS            
Consumer Products  
Cash and cash equivalents   $ 73,953   $ 17,977  
Accounts receivable, net of allowance of  
   $164,744 and $154,833 as of March 31, 2005  
   and December 31, 2004, respectively    1,368,035    2,081,321  
Inventory, net    4,807,910    4,390,345  
Prepaid inventory    325,751    326,806  
Other prepaid expenses    180,866    265,609  
   Total current assets    6,756,515    7,082,058  
Property and equipment, net of accumulated  
   depreciation of $4,138,713 and $4,185,528 as of  
   March 31, 2005 and December 31, 2004, respectively    6,464,255    6,629,261  
Goodwill    506,145    506,145  
   Total Consumer Products Assets    13,726,915    14,217,464  

Financial Services		  
Cash and cash equivalents    799,679    628,160  
Interest receivable    201,079    231,760  
Loans    27,957,024    32,840,843  
Leased properties:  
   Buildings, net of accumulated depreciation of  
   $2,383,788 and $2,829,319 as of March 31,  
   2005 and December 31, 2004, respectively    15,019,088    19,410,055  
   Land    2,132,359    2,817,388  
      Total leased properties    17,151,447    22,227,443  
Property and equipment, net of accumulated  
   depreciation of $748,711 and $747,029 as of  
   March 31, 2005 and December 31, 2004, respectively    2,820    4,502  
Other assets    544,107    509,450  
   Total Financial Services Assets    46,656,156    56,442,158  
   Total Assets   $ 60,383,071   $ 70,659,622  


3

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

March 31, 2005
 December 31, 2004
(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY		            
Consumer Products  
Short-term borrowings   $ --   $ 220,000  
Accounts payable    988,424    748,352  
Accrued salaries    80,655    125,744  
Accrued liabilities    411,550    493,634  
   Total Consumer Products Liabilities    1,480,629    1,587,730  

Financial Services		  
Commercial paper    5,826,410    7,065,959  
Lines of credit    23,350,000    30,750,000  
State of Wisconsin Investment Board ("SWIB") notes payable    5,500,000    5,666,667  
Loan participations with repurchase options    521,009    1,322,807  
Accrued liabilities    755,787    964,268  
   Total Financial Services Liabilities  
      Excluding Preferred Shares    35,953,206    45,769,701  
Preferred shares subject to mandatory redemption, net    16,854,775    16,854,775  
   Total Financial Services Liabilities    52,807,981    62,624,476  

SHAREHOLDERS' EQUITY		  
Common stock, $0.0667 cents par value, 15,000,000 shares  
   authorized, 4,401,599 shares issued, 3,727,589 shares    293,441    293,441  
   outstanding at March 31, 2005 and December 31, 2004  
Additional paid-in capital    16,604,744    16,604,744  
Accumulated deficit    (4,077,802 )  (3,724,847 )
Treasury stock, 674,010 shares, at cost    (6,725,922 )  (6,725,922 )
   Total Shareholders' Equity    6,094,461    6,447,416  
   Total Liabilities and Shareholders' Equity   $ 60,383,071   $ 70,659,622  



4

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

For the Three Months
Ended March 31,
2005
 2004
Consumer Products            
Net sales   $ 2,908,898   $ 2,824,048  
Cost of goods sold    1,661,842    1,730,324  
Gross profit    1,247,056    1,093,724  

Operating expenses		  
   Sales and marketing    844,840    667,381  
   New product development    223,058    183,179  
   General and administrative    1,003,934    1,032,132  
      Total operating expenses    2,071,832    1,882,692  
Net operating loss    (824,776 )  (788,968 )

Other income (expense)		  
   Interest expense    (1,181 )  (108 )
   Other income, net    39,959    82,841  
      Net other income    38,778    82,733  

Loss before income taxes, minority		  
   interest and intercompany charges    (785,998 )  (706,235 )

Minority interest in losses of subsidiaries		    --    10,008  
Loss before intercompany charges -  
   Consumer Products    (785,998 )  (696,227 )

Financial Services		  
Revenues  
   Interest on loans    459,235    663,222  
   Rental income    534,849    715,459  
   Gain on sale of leased properties    769,424    --  
   Other income    12,428    12,545  
      Total revenues    1,775,936    1,391,226  

Expenses		  
   Interest expense    454,884    600,708  
   Depreciation expense    101,758    180,598  
   Management fee expense    205,693    226,557  
   Other operating expenses    148,080    181,797  
      Total expenses    910,415    1,189,660  
   Income before income taxes and  
      intercompany revenue    865,521    201,566  
Less: applicable income tax expense    (206,203 )  --  

Income before intercompany revenue		  
   - Financial Services   $ 659,318   $ 201,566  

5

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

For the Three Months
Ended March 31,
2005
 2004
Total Company            

Income (loss) before income taxes,		  
minority interest and intercompany activity  
   Consumer products   $ (785,998 ) $ (706,235 )
   Financial services    865,521    201,566  
      Total company    79,523    (504,669 )
Income tax expense    (206,203 )  --  
Minority interest in losses of subsidiaries    --    10,008  

Net loss		    (126,680 )  (494,661 )
Preferred stock dividends    (226,275 )  (226,275 )
Loss applicable to common shareholders   $ (352,955 ) $ (720,936 )

Basic loss per common share		   $ (0.09 ) $ (0.19 )
Diluted loss per common share   $ (0.09 ) $ (0.19 )
Weighted average shares outstanding    3,727,589    3,727,589  

Segment Reconciliation		  

Consumer Products		  
   Loss before intercompany charges   $ (785,998 ) $ (696,227 )
   Interest expense to parent    (214,181 )  (112,718 )
   Rent expense to parent    --    (73,230 )
   Management fees to parent    --    (114,000 )
Total segment net loss    (1,000,179 )  (996,175 )

Financial Services		  
   Income before intercompany revenue    659,318    201,566  
   Interest income from subsidiary    214,181    112,718  
   Rent income from subsidiary    --    73,230  
   Management fees from subsidiary    --    114,000  
Total segment net income    873,499    501,514  

Net Loss		   $ (126,680 ) $ (494,661 )

6

THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’EQUITY
(Unaudited)

Common
Stock
 Additional
Paid-In
Capital
 Retained
Earnings
(Accumulated
Deficit)
 Common
Treasury
Stock
 Total

BALANCES,		                        
December 31, 2003   $ 293,441   $ 16,604,744   $ 781,147   $ (6,725,922 ) $ 10,953,410  
   Net loss three months  
   ended March 31, 2004    --    --    (494,661 )  --    (494,661 )
Cash dividends on  
   preferred stock    --    --    (226,275 )  --    (226,275 )
Cash dividends on  
   common stock    --    --    (372,756 )  --    (372,756 )

BALANCES,		  
March 31, 2004   $ 293,441   $ 16,604,744   $ (312,545 ) $ (6,725,922 ) $ 9,859,718  

BALANCES,		  
December 31, 2004   $ 293,441   $ 16,604,744   $ (3,724,847 ) $ (6,725,922 ) $ 6,447,416  

Net loss three months		  
   ended March 31, 2005    --    --    (126,680 )  --    (126,680 )
Cash dividends on  
   preferred stock