UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(Mark One)

(X)      QUARTERLY  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934
                  For the period ended: June 30, 2005

( )      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934
                  For the transition period from __________ to __________

                         Commission File Number: 0-49649
                                                 -------

                          PLAYLOGIC ENTERTAINMENT, INC.
                          -----------------------------
        (Exact name of small business issuer as specified in its charter)

            Delaware                                             23-3083371
            ---------                                            ----------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

Concertgebouwplein 13, 1071 LL Amsterdam, The Netherlands         1071 LL
        (Address of principal executive offices)                 (Zip Code)



                              (011) 31-20-676-0304
                           (Issuer's telephone number)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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. X  Yes    No
                                                                  ---     ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court.    Yes    No
                                             ---     ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                  Class                           Outstanding at August 19, 2005
                  -----                           ------------------------------
Common Stock, par value $.001 per share                  23,063,994 shares

Transitional Small Business Disclosure Format (check one): Yes    No X
                                                              ---   ---


<PAGE>

                          PLAYLOGIC ENTERTAINMENT, INC.
                                   FORM 10-QSB
                                    CONTENTS

PART I -- FINANCIAL INFORMATION                                         Page No.
                                                                        --------

   Item 1.  Financial Statements                                            3

            Consolidated Balance Sheets at June 30, 2005 (unaudited)        3

            Consolidated Statements of Operations and
            Comprehensive Income (unaudited) for the six months
            ended June 30, 2005 and June 30, 2004 and for three
            months ended June 30, 2005 and 2004                             4

            Consolidated  Statements of Cash Flows  (unaudited)  for the
            six months ended June 30, 2005 and 2004                         5

            Notes to Consolidated Financial Statements                      6

   Item 2.  Management's Discussion and Analysis                            15

   Item 3.  Controls and Procedures                                         21

PART II -- OTHER INFORMATION                                                22

   Item 1.  Legal Proceedings                                               22

   Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds     22

   Item 3.  Defaults Upon Senior Securities                                 22

   Item 4.  Submission of Matters to a Vote of Security Holders             22

   Item 5.  Other Information                                               22

   Item 6.  Exhibits                                                        22

   Signatures                                                               23

   Exhibit Index                                                            24






                                       2
<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

                 Playlogic Entertainment, Inc. and Subsidiaries
                                 Balance Sheets
                                  June 30, 2005
                                   (Unaudited)

                                                                    June 30, 2005
                                                                    -------------
<S>                                                                 <C>
                                     ASSETS
                                     ------
Current Assets
    Cash on hand and in bank                                        $     144,031
    Accounts Receivable
       Trade, net of allowance for doubtful accounts                      703,430
       Taxes                                                              301,740
       Affiliated entities                                                491,115
    Prepaid expenses                                                      784,499
    Deferred tax asset                                                    584,837
                                                                    -------------
       Total current assets                                             3,009,652
                                                                    -------------

Software development costs                                              1,838,512
                                                                    -------------

Property and equipment - at cost, net of accumulated depreciation         503,666
                                                                    -------------

Other Assets                                                              584,837
                                                                    -------------

Total Assets                                                        $   6,046,249
                                                                    =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Current Liabilities
    Bank overdraft                                                  $     393,896
    Short term loans from third parties                                   187,023
    Software development financing                                        241,320
    Accounts payable - trade                                            2,450,847
    Accrued salaries, wages and related payroll taxes                     745,263
    Other accrued liabilities                                             415,339
    Income tax due to shares for management                                85,251
                                                                    -------------
       Total Current Liabilities                                        4,518,939
                                                                    -------------

Commitments and Contingencies

Shareholders' Equity
    Preferred stock - $0.001 par value
       20,000,000 shares authorized
       None issued and outstanding
    Common stock - $0.001 par value
       100,000,000 shares authorized
       23,063,994 and 22,801,894 shares
         issued and outstanding, respectively                              23,064
    Additional paid-in capital                                         32,127,823
    Currency translation adjustment                                     1,171,721
    Accumulated deficit                                               (32,066,783)
                                                                    -------------
       Total shareholders' equity                                       1,255,825
                                                                    -------------

    Total Liabilities and Shareholders' Equity                      $   6,046,249
                                                                    =============
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>

                 Playlogic Entertainment, Inc. and Subsidiaries
                Statements of Operations and Comprehensive Income
                Six and Three months ended June 30, 2005 and 2004

                                   (Unaudited)

                                             Six months       Six months      Three months     Three months
                                                ended            ended            ended            ended
                                            June 30, 2005    June 30, 2004    June 30, 2005    June 30, 2004
                                            -------------    -------------    -------------    -------------
<S>                                         <C>              <C>              <C>              <C>
Revenues                                    $     736,559    $        --      $     204,421    $        --

Cost of Sales                                     139,769             --             16,692             --
                                            -------------    -------------    -------------    -------------
Gross Profit                                      596,790             --            187,729             --
                                            -------------    -------------    -------------    -------------

Expenses
   Research and development costs                 485,937        1,809,483          123,668        1,010,310
   Sales and marketing expenses                   500,585          386,999          494,665          372,255
   General and administrative expenses          1,300,367       10,360,091          649,388          775,682
   Depreciation                                   204,968          154,038          100,901           80,591
Compensation expense related to
   common stock issuances at less
   than "fair value"                               90,000             --             90,000             --
                                            -------------    -------------    -------------    -------------
   Total operating expenses                     2,581,857       12,710,611        1,458,622        2,238,838
                                            -------------    -------------    -------------    -------------

Loss from operations                           (1,985,067)     (12,710,611)      (1,270,893)      (2,238,838)

Other Income (Expense)
   Interest expense                              (197,775)        (752,349)         (94,445)        (416,238)
                                            -------------    -------------    -------------    -------------

Loss before Income Taxes                       (2,182,842)     (13,462,960)      (1,365,338)      (2,655,076)

Provision for Income Tax Benefit                  623,404             --            365,890             --
                                            -------------    -------------    -------------    -------------

Net Loss                                       (1,559,438)     (13,462,960)        (999,448)      (2,655,523)

Other comprehensive income
   Change in foreign currency translation      (3,958,188)        (466,735)      (2,271,116)        (198,138)
                                            -------------    -------------    -------------    -------------

Comprehensive Loss                          $  (5,517,626)   $ (13,929,965)   $  (3,270,564)   $  (2,853,214)
                                            =============    =============    =============    =============

Loss per weighted-average share of
   common stock outstanding,
   computed on Net Loss - basic
   and fully diluted                        $       (0.07)   $       (0.56)   $       (0.04)   $       (0.12)
                                            =============    =============    =============    =============

Weighted-average number of shares of
   common stock outstanding                    22,821,155       22,676,120       22,840,205       22,759,290
                                            =============    =============    =============    =============
</TABLE>



The accompanying notes are an integral part of these consolidated financial
statements.



                                       4
<PAGE>
<TABLE>
<CAPTION>

                 Playlogic Entertainment, Inc. and Subsidiaries
                            Statements of Cash Flows
                     Six months ended June 30, 2005 and 2004

                                   (Unaudited)

                                                             Three months     Three months
                                                                ended             ended
                                                             June 30, 2005    June 30, 2004
                                                             -------------    -------------
<S>                                                          <C>              <C>
Cash Flows from Operating Activities
   Net Loss                                                  $  (1,604,310)   $ (13,462,960)
   Adjustments to reconcile net income to net cash
     provided by operating activities
       Currency translation adjustment                           3,958,188          466,734
       Depreciation                                                204,968          154,038
       Compensation expense related to common stock
         issuances at less than "fair value"                        90,000             --
       (Increase) Decrease in
       Accounts receivable - trade                                (703,430)         (79,897)
       Value added taxes receivable                               (301,740)        (276,413)
       Prepaid expenses                                         (1,237,843)         164,490
       Deferred tax asset                                         (584,837)            --
     Increase (Decrease) in
       Accounts payable - trade                                   (736,746)         949,609
       Other current liabilities                                   437,547          356,428
                                                             -------------    -------------
Net cash provided by (used in) operating activities               (478,203)     (11,727,971)
                                                             -------------    -------------
Cash Flows from Investing Activities
   Cash paid for software development                             (664,115)        (471,556)
   Cash advanced to affiliated entities                           (402,357)            --
   Cash paid to acquire property and equipment                        --           (319,300)
   Cash received from disposition of property and
     equipment                                                      12,838             --
                                                             -------------    -------------
Net cash used in investing activities                           (1,053,634)        (790,856)
                                                             -------------    -------------

Cash Flows from Financing Activities
   Increase in cash overdraft                                     (539,121)       1,510,736
   Principal payments on short term notes to third parties         (25,995)            --
   Principal payments on long-term debt                            (56,235)         (29,250)
   Cash advanced or repaid to shareholder                       (8,291,548)       2,940,867
   Proceeds from sales of common stock                          10,524,700        8,951,268
   Cash contributed by shareholder to support operations            45,341             --
   Cash paid to acquire capital                                     (3,500)            --
                                                             -------------    -------------

Net cash provided by (used in) financing activities              1,653,642       13,373,621
                                                             -------------    -------------

Increase (Decrease) in Cash and Cash Equivalents                   121,805          854,794
Cash and cash equivalents at beginning of period                    22,226           81,711
                                                             -------------    -------------
Cash and cash equivalents at end of period                   $     144,031    $     936,505
                                                             -------------    -------------
Supplemental Disclosures of Interest and Income
  Taxes Paid
   Interest paid during the period                           $     197,775    $     752,349
                                                             =============    =============
   Income taxes paid (refunded)                              $        --      $        --
                                                             =============    =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       5
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

Note A - Organization and Description of Business

Playlogic  Entertainment,  Inc.  (PEI)  was  incorporated  on May  25,  2001  in
accordance with the Laws of the State of Delaware as Donar Enterprises, Inc.

PEI's initial  business plan was to provide the conversion and filing of various
documents  prepared in  accordance  with either the  Securities  Act of 1933, as
amended,  or the  Securities  Exchange  Act of 1934,  as  amended,  for small to
mid-sized  public  companies with the U.S.  Securities  and Exchange  Commission
(SEC)  electronically  through  EDGAR,  the  SEC's  Electronic  Data  Gathering,
Analysis,  and Retrieval system.  The Company has never been affiliated with the
SEC in any manner.

On February 27, 2002,  PEI's  Registration  Statement on Form SB-2 (SEC File No.
333-68702), registering 2,000,000 pre-reverse split shares to be sold at a price
of $0.05 per share, was declared effective.  Between July and December 2002, PEI
sold  an  aggregate  656,000  pre-reverse  split  shares  of  stock  under  this
Registration Statement.

In June 2004 and December 2004,  respectively,  PEI experienced separate changes
in control and  abandoned  its business  plan  related to  providing  electronic
filing  services for small to mid-sized  public  companies and began a search to
seek a suitable reverse  acquisition  candidate through  acquisition,  merger or
other suitable business combination method.

On  June  30,  2005,  pursuant  to a  Securities  Exchange  Agreement  (Exchange
Agreement)  by and  among  the  Company  and  Playlogic  International  N.V.,  a
corporation  formed  under  the  laws of The  Netherlands  (Playlogic),  and the
shareholders of Playlogic (Playlogic  Shareholders);  the Playlogic Shareholders
exchanged  100.0% of the issued and  outstanding  ordinary  shares and preferred
shares of Playlogic for an aggregate  21,836,924  shares of the Company's common
stock.  As  a  result  of  this  transaction,  Playlogic  became  the  Company's
wholly-owned  subsidiary,   now  represents  all  of  the  Company's  commercial
operations,  and the Playlogic  Shareholders control  approximately 91.0% of the
outstanding common stock of the Company, post-transaction.

Playlogic  International  N.V. was  incorporated in the Netherlands in May 2002.
Playlogic publishes interactive  entertainment software for video game consoles,
personal  computers  (PCs) and other  handheld  and  mobile  electronic  devices
developed by its internal studio and by third parties.

In subsequent notes, the consolidated entity is referred to as "Company".

Note B - Preparation of Financial Statements

The acquisition of Playlogic  International N. V. on June 30, 2005, by Playlogic
Entertainment,  Inc.  (formerly  Donar  Enterprises,  Inc.) effected a change in
control and was accounted for as a "reverse acquisition" whereby Playlogic N. V.
is the accounting acquiror for financial statement  purposes.  Accordingly,  for
all periods  subsequent to the June 30, 2005,  the  financial  statements of the
Company reflect the historical financial statements of Playlogic N. V. since its
inception  and  the  operations  of  Playlogic  Entertainment  (formerly  Donar)
subsequent to the June 30, 2005.



                                       6
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note B - Preparation of Financial Statements - Continued

The  Company  follows  the  accrual  basis  of  accounting  in  accordance  with
accounting principles generally accepted in the United States of America and has
a year-end of December 31.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Management  acknowledges  that  it is  solely  responsible  for  adopting  sound
accounting  practices,   establishing  and  maintaining  a  system  of  internal
accounting  control and preventing and detecting  fraud. The Company's system of
internal  accounting  control is designed to assure,  among other items, that 1)
recorded  transactions  are valid; 2) valid  transactions  are recorded;  and 3)
transactions  are  recorded in the proper  period in a timely  manner to produce
financial  statements which present fairly the financial  condition,  results of
operations  and cash  flows of the  Company  for the  respective  periods  being
presented

For  segment  reporting  purposes,  the Company  operated  in only one  industry
segment during the periods represented in the accompanying  financial statements
and makes all  operating  decisions and  allocates  resources  based on the best
benefit to the Company as a whole.

During interim periods, the Company follows the accounting policies set forth in
its annual  audited  financial  statements  filed with the U. S.  Securities and
Exchange  Commission on its Current Report on Form 8-K as filed on July 15, 2005
containing  the  Playlogic  financial  statements  as of and for the year  ended
December 31, 2004.  The  information  presented  within these interim  financial
statements  may not  include all  disclosures  required  by  generally  accepted
accounting  principles  and the  users of  financial  information  provided  for
interim periods should refer to the annual  financial  information and footnotes
when reviewing the interim financial results presented herein.

In the opinion of management,  the accompanying  interim  financial  statements,
prepared in  accordance  with the U. S.  Securities  and  Exchange  Commission's
instructions   for  Form  10-QSB,   are   unaudited  and  contain  all  material
adjustments,  consisting  only of  normal  recurring  adjustments  necessary  to
present fairly the financial condition,  results of operations and cash flows of
the Company for the respective  interim  periods  presented.  The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending December 31, 2005.

These  financial   statements   reflect  the  books  and  records  of  Playlogic
Entertainment,  Inc. (formerly Donar Enterprises, Inc.), Playlogic International
N.V.  (a  corporation  domiciled  in The  Netherlands)  and its  100%-subsidiary
Playlogic Game Factory B.V. All significant intercompany  transactions have been
eliminated in combination. The consolidated entities are referred to as Company.


                                       7
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note C - Going Concern Contingency

The Company's  management  believes that the current cash on hand and additional
cash expected  from  operations  will be  sufficient  order to cover its working
capital requirements through the third quarter of 2005. After that time, it will
need to obtain  additional  financing from third parties.  If it does obtain any
necessary financing in the future, it may need to cease operations.


Note D - Summary of Significant Accounting Policies

1.   Currency translation
     --------------------

     The  Company  incurs  expenses  in  both US  Dollar  and  Euro  transaction
     accounts.  The Euro is the functional  currency of the Company's  operating
     subsidiaries  domiciled in The Netherlands.  All transactions  reflected in
     the  accompanying  financial  statements have been converted into US Dollar
     equivalents.  For  balance  sheet  purposes,  at the end of any  accounting
     cycle,  the exchange  rate at the balance  sheet is used for all assets and
     liabilities. The utilized conversion rates are:

         June 30, 2004:                            $1.21500
         December 31, 2004:                        $1.36450
         June 30, 2005:                            $1.20660

     For  revenues,  expenses,  gains and losses  during a respective  reporting
     period,  an weighted  average  exchange rate for the  respective  reporting
     period  is used to  translate  those  elements.  The  Company's  management
     considers  the  Euro to be a  stable  currency.  Accordingly,  the  Company
     calculates  the weighted  average  exchange rate using the first day of the
     period being converted,  the 15th of each respective month and the last day
     of each respective month in the reporting  period.  The exchange rates used
     for all  revenues,  expenses,  gains and  losses  during  the  year-to-date
     periods ended, as noted, are:

         June 30, 2004:                            $1.22618
         December 31, 2004:                        $1.24829
         June 30, 2005:                            $1.28617

2.   Cash and cash equivalents
     -------------------------

     The  Company  considers  all cash on hand  and in  banks,  certificates  of
     deposit and other highly-liquid investments with maturities of three months
     or less, when purchased, to be cash and cash equivalents.

     Cash  overdrafts may occur from  time-to-time  depending upon  management's
     cash management policies.

3.   Accounts receivable - trade
     ---------------------------

     The Company's current customers are located  principally within Europe. The
     Company   typically   makes  sales  to  most  of  its  retailers  and  some
     distributors on unsecured  credit,  with terms that vary depending upon the
     customer's credit history,  solvency, credit limits and sales history. From
     time to time,  distributors and retailers in the interactive  entertainment
     software  industry  have  experienced  significant  fluctuations  in  their
     business  operations  and a number of them have failed.  The  insolvency or
     business failure of any significant  Company customer could have a material
     negative impact on the Company's business and financial results.


                                       8
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note D - Summary of Significant Accounting Policies - Continued

3.   Accounts receivable - trade - continued
     ---------------------------

     Because of the credit risk  involved,  management has provided an allowance
     for doubtful  accounts  which  reflects  its opinion of amounts  which will
     eventually become uncollectible.  In the event of complete non-performance,
     the  maximum  exposure  to the  Company  is the  recorded  amount  of trade
     accounts   receivable   shown  on  the   balance   sheet  at  the  date  of
     non-performance.

4.   Property and equipment
     ----------------------

     Property  and  equipment  is  recorded  at  cost  and is  depreciated  on a
     straight-line  basis,  over the estimated  useful lives  (generally 3 to 10
     years)  of the  respective  asset.  Major  additions  and  betterments  are
     capitalized and depreciated  over the estimated useful lives of the related
     assets. Maintenance, repairs, and minor improvements are charged to expense
     as incurred.

5.   Software development costs
     --------------------------

     Capitalized software development costs include payments made to independent
     software developers under development  agreements,  as well as direct costs
     incurred  for  internally  developed  products.  The Company  accounts  for
     software  development  costs in  accordance  with  Statement  of  Financial
     Accounting  Standards  No.  86 -  "Accounting  for the  Costs  of  Computer
     Software to be Sold, Leased, or Otherwise  Marketed".  Software development
     costs are  capitalized  once  technological  feasibility  of a  product  is
     established  and such costs are determined to be  recoverable.  The Company
     utilizes  both  internal   development   teams  and  third-party   software
     developers to develop its products.  The Company also capitalizes  internal
     software   development   costs  and  other  content  costs   subsequent  to
     establishing  technological  feasibility of a title.  Amortization  of such
     costs as a component of cost of sales is recorded on a title-by-title basis
     based on the greater of the  proportion  of current year sales to the total
     of current and  estimated  future sales for the title or the  straight-line
     method  over the  remaining  estimated  useful  life of the title.  At each
     balance sheet date, the company evaluates the recoverability of capitalized
     software costs based on  undiscounted  future cash flows and charge to cost
     of  sales  any  amounts  that  are  deemed  unrecoverable.   The  Company's
     agreements with third-party  developers generally provide it with exclusive
     publishing and distribution  rights and require it to make advance payments
     that are  recouped  against  royalties  due to the  developer  based on the
     contractual amounts of product sales, adjusted for certain costs.



                                       9
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note D - Summary of Significant Accounting Policies - Continued

6.   Prepaid royalties
     -----------------

     The  Company  capitalizes  external  software  development  costs  (prepaid
     royalties) and other content costs subsequent to establishing technological
     feasibility of a title. Advance payments are amortized as royalties in cost
     of sales on a  title-by-title  basis based on the greater of the proportion
     of current  year sales to the total of current and  estimated  future sales
     for that title or the contractual  royalty rate based on actual net product
     sales as defined in the respective agreements.  At each balance sheet date,
     the company evaluates the recoverability of advanced  development  payments
     and unrecognized  minimum commitments not yet paid to determine the amounts
     unlikely to be realized through product sales. Advance payments are charged
     to cost of sales in the amount that management  determines is unrecoverable
     in the  period  in  which  such  determination  is  made  or if  management
     determines that it will cancel a development project.

7.   Organization and reorganization costs
     -------------------------------------

     The Company has adopted the provisions of AICPA Statement of Position 98-5,
     "Reporting on the Costs of Start-Up  Activities" whereby all organizational
     and   initial   costs   incurred   with  the   incorporation   and  initial
     capitalization of the Company were charged to operations as incurred.

8.   Research and development expenses
     ---------------------------------

     Research and development expenses are charged to operations as incurred.

9.   Advertising expenses
     --------------------

     The Company does not utilize  direct  solicitation  advertising.  All other
     advertising and marketing expenses are charged to operations as incurred.

10.  Income Taxes
     ------------

     The Company  utilizes  the asset and  liability  method of  accounting  for
     income  taxes.  At June 30,  2005 and  2004,  the  deferred  tax  asset and
     deferred tax liability  accounts,  as recorded when material,  are entirely
     the  result  of  temporary  differences.  Temporary  differences  represent
     differences  in the  recognition  of  assets  and  liabilities  for tax and
     financial  reporting  purposes,   primarily  accumulated  depreciation  and
     amortization  and  the  anticipated   utilization  of  net  operating  loss
     carryforwards to offset current taxable income..

11.  Share-Based Payments
     --------------------

     The Company  utilizes the  fair-value  method of accounting for the payment
     for goods and/or  services  with the  issuance of equity  shares in lieu of
     cash.

12.  Earnings (loss) per share
     -------------------------

     Basic  earnings  (loss) per share is computed  by  dividing  the net income
     (loss) available to common shareholders by the  weighted-average  number of
     common shares  outstanding  during the respective  period  presented in our
     accompanying financial statements.



                                       10
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note D - Summary of Significant Accounting Policies - Continued

12.  Earnings (loss) per share - continued
     -------------------------

     Fully diluted earnings (loss) per share is computed similar to basic income
     (loss) per share  except that the  denominator  is increased to include the
     number of common  stock  equivalents  (primarily  outstanding  options  and
     warrants).

     Common  stock  equivalents  represent  the  dilutive  effect of the assumed
     exercise of the outstanding stock options and warrants,  using the treasury
     stock method, at either the beginning of the respective period presented or
     the date of  issuance,  whichever  is later,  and only if the common  stock
     equivalents  are  considered  dilutive  based upon the Company's net income
     (loss) position at the calculation date.

     As of June 30, 2005 and 2004, the Company has no outstanding stock options
     and the Company's outstanding stock warrants are anti-dilutive due to the
     Company's net operating loss position.

13.  Revenue recognition
     -------------------

     The Company  evaluates the recognition of revenue based on the criteria set
     forth in SOP 97-2, "Software Revenue Recognition",  as amended by SOP 98-9,
     "Modification of SOP 97-2,  Software Revenue  Recognition,  With Respect to
     Certain  Transactions"  and Staff  Accounting  Bulletin  ("SAB")  No.  101,
     "Revenue  Recognition  in  Financial  Statements",  as  revised by SAB 104,
     "Revenue Recognition".  The Company evaluates revenue recognition using the
     following basic criteria:

     *    Evidence of an arrangement: The Company recognizes revenue when it has
          evidence of an agreement  with the customer  reflecting  the terms and
          conditions to deliver products.
     *    Delivery:  Delivery  is  considered  to occur  when the  products  are
          shipped and risk of loss has been transferred to the customer.
     *    Fixed or determinable  fee: If a portion of the arrangement fee is not
          fixed or determinable,  the Company  recognizes that amount as revenue
          when the amount becomes fixed or determinable.
     *    Collection is deemed  probable:  At the time of the  transaction,  the
          Company  conducts  a credit  review  of each  customer  involved  in a
          significant  transaction  to  determine  the  creditworthiness  of the
          customer.  Collection  is deemed  probable if the Company  expects the
          customer  to be able to pay  amounts  under the  arrangement  as those
          amounts become due. If the Company  determines  that collection is not
          probable,  it  recognizes  revenue when  collection  becomes  probable
          (generally upon cash collection).



                                       11
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note D - Summary of Significant Accounting Policies - Continued

14.  New accounting pronouncements
     -----------------------------

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
     Statement  of  Financial  Accounting  Standards  No.  123  (revised  2004),
     "Share-Based  Payment"  which  revised  Statement of  Financial  Accounting
     Standards  No.  123,  "Accounting  for  Stock-Based   Compensation".   This
     statement  supersedes APB Opinion No. 25,  "Accounting  for Stock Issued to
     Employees".  The revised statement addresses the accounting for share-based
     payment transactions with employees and other third parties, eliminates the
     ability to account for share-based  compensation  transactions using APB 25
     and requires that the compensation  costs relating to such  transactions be
     recognized  in the  condensed  consolidated  statement of  operations.  The
     revised  statement is effective as of the first fiscal year beginning after
     June 15, 2005.  Although the Company is currently  analyzing  the method of
     adoption and impact of the adoption of this standard,  effective January 1,
     2006,  it is  expected  to have an  impact  on the  Company's  consolidated
     financial statements similar to the pro forma disclosure under Statement of
     Financial   Accounting  Standards  No.  123,  "Accounting  for  Stock-Based
     Compensation" ("SFAS 123").


Note E - Fair Value of Financial Instruments

The carrying amount of cash,  accounts  receivable,  accounts  payable and notes
payable, as applicable,  approximates fair value due to the short term nature of
these items  and/or the current  interest  rates  payable in relation to current
market conditions.

Interest  rate risk is the risk  that the  Company's  earnings  are  subject  to
fluctuations  in interest  rates on either  investments  or on debt and is fully
dependent  upon  the  volatility  of  these  rates.  The  Company  does  not use
derivative instruments to moderate its exposure to interest rate risk, if any.

Financial  risk  is  the  risk  that  the  Company's  earnings  are  subject  to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the  volatility  of  these  rates.  The  company  does  not use  derivative
instruments to moderate its exposure to financial risk, if any.


Note F - Concentrations of Credit Risk

The Company  maintains its cash accounts in a financial  institution  subject to
insurance coverage issued by the Federal Deposit Insurance  Corporation  (FDIC).
Under FDIC rules, the Company is entitled to aggregate  coverage of $100,000 per
account type per separate legal entity per financial  institution.  Through June
30, 2005, the Company maintained deposits in various financial institutions with
credit risk  exposures in excess of  statutory  FDIC  coverage.  The Company has
incurred no losses during 2004 or 2003, or  subsequent  thereto,  as a result of
any unsecured bank balance.



                                       12
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note F - Concentration of credit Risk - Continued

The Company is exposed to currency risks. The Company is particularly exposed to
fluctuations  in the exchange  rate between the U.S.  Dollar and the Euro, as it
incurs  manufacturing  costs and prices its products in the Euro (the  Company's
operating  subsidiary's  functional  currency) while a portion of its revenue is
denominated  in U.S.  Dollars.  A substantial  portion of the company's  assets,
liabilities and operating  results are denominated in Euros, and a minor portion
of its assets,  liabilities and operating  results are denominated in currencies
other  than the  Euro.  The  Company's  consolidated  financial  statements  are
expressed in US Dollars.  Accordingly,  its results of operations are exposed to
fluctuations  in various  exchange  rates.  As of the  applicable  balance sheet
dates, the exposure was very limited,  hence, no hedging  activities were deemed
necessary by  management.  In the Company's  exchange rate  agreements,  it uses
fixed interest rates.

Note G - Common Stock Transactions

On  February  21,  2005,  by written  consent in lieu of  meeting,  stockholders
representing  78.9% of the issued  and  outstanding  shares of our common  stock
approved a  recommendation  of our Board of  Directors to effect a one share for
ten shares  reverse stock split of our common stock,  par value $.001 per share,
with all fractional  shares rounded down to the nearest whole share. The reverse
split became  effective on April 15, 2005. As a result of the reverse split, the
total number of issued and outstanding shares of our common stock decreased from
9,289,647  shares  to  928,964  shares,  after  giving  effect to  rounding  for
fractional shares. In the reverse split calculation,  all fractional shares were
rounded down to the nearest whole share.  Holders of less than ten shares, prior
to the reverse split, shall receive $0.30 per share as compensation.  The effect
of this action is  reflected in the  Company's  financial  statements  as of the
first day of the first period.

In  conjunction  with  the  above  discussed  reverse  stock  split,  all  share
references in the following  paragraphs  reflect the post-April 15, 2005 reverse
split action.

On  June  30,  2005,  pursuant  to a  Securities  Exchange  Agreement  (Exchange
Agreement)  by and  among  the  Company  and  Playlogic  International  N.V.,  a
corporation  formed  under  the  laws of The  Netherlands  (Playlogic),  and the
shareholders of Playlogic (Playlogic  Shareholders);  the Playlogic Shareholders
exchanged  100.0% of the issued and  outstanding  ordinary  shares and preferred
shares of Playlogic for an aggregate  21,836,924  shares of the Company's common
stock.  As  a  result  of  this  transaction,  Playlogic  became  the  Company's
wholly-owned  subsidiary,   now  represents  all  of  the  Company's  commercial
operations,  and the Playlogic  Shareholders control  approximately 91.0% of the
outstanding common stock of the Company, post-transaction.

On March 10, 2004, the Company issued 32,080 shares of restricted,  unregistered
common stock to Michael Tay, son of then-President and controlling  shareholder,
William Tay, as compensation for various services provided to the Company.  This
transaction  was valued at  approximately  $16,040 (or $0.50 per  reverse  split
share).  The Company relied upon the exemptions  provided by Section 4(2) of the
Securities Act of 1933, as amended, for this transaction.

On April 22,  2004,  the Company  issued an aggregate  184,618  shares of common
stock to William Tay as consideration of approximately  $85,000 in accrued,  but
unpaid,  officer  compensation,  reimbursement of trade accounts payable paid by
Mr. Tay on behalf of the Company and in  repayment  of  approximately  $7,000 in
unsecured  advances made to the Company for working capital.  The Company relied
upon the  exemptions  provided by Section 4(2) of the Securities Act of 1933, as
amended, for this transaction.



                                       13
<PAGE>

                 Playlogic Entertainment, Inc. and Subsidiaries

                    Notes to Financial Statements - Continued

Note G - Common Stock Transactions - Continued

As a result of the December 15, 2004 change in control and in consideration  for
agreeing to serve as an officer and director of the  Company,  Timothy P. Halter
was granted a stock warrant to purchase up to 100,000  post-reverse split shares
of the Company's restricted,  unregistered common stock at an effective price of
$0.60 per share, in reliance upon the exemption from  registration  set forth in
Section 4(2) of the Securities Act of 1933, as amended.  Mr. Halter may exercise
the  warrants,  in whole  or in part,  at any time  after  the  issuance  of the
warrants and prior to the  expiration  of the warrants on December 15, 2007.  On
June 1, 2005, Mr. Halter  exercised all of the outstanding  warrants for $60,000
cash.

The following table presents warrant activity through June 30, 2005:

                                                                    Weighted
                                                                     Average
                                               Number of            Exercise
                                                Shares                Price
                                               ---------            ---------
       Balance at December 31, 2004              100,000              $0.60
         Issued                                    --
         Exercised                              (100,000)
                                               ---------
       Balance at June 30, 2005                     --
                                               =========


On June 29,  2005,  the  Company  sold  162,100  shares of its  common  stock to
Johannes  Wilhelmus  Kluijtmans  for  aggregate  consideration  of $608,000,  or
approximately  $3.75 per  share.  The sale was made  pursuant  to the terms of a
Subscription  Agreement,  dated as of June 28, 2005,  which agreement  contained
confidentiality and non-disclosure  agreements and covenants.  The sale was made
without  registration in reliance upon the exemption afforded by Section 4(2) of
the Securities Act of 1933, as amended.  The shares are "restricted  securities"
in that they are legended with reference to Rule 144. The Company never utilized
an underwriter for this offering of its securities and no sales commissions were
paid to any third party in connection with the above-referenced sale.

Note H - Commitments and Contingencies

Security agreement
------------------

Playlogic Game Factory B.V., on August 31, 2004, signed a security  agreement in
favor of the Dutch Tax  Authorities  for the amount  $98,394  concerning  Engine
Software B.V.

Transactions with related parties
---------------------------------

In 2004,  Sloterhof  Investments N.V. and Castilla  Investments  B.V.,  entities
owned and  controlled  by  members  of the  Company's  current  management  were
previously  granted a stock  option  right to acquire up to a total of 8,609,189
shares in Playlogic  International  N. V. with an exercise price at par value of
EURO 0.05.  The  intrinsic  value of this option right was charged to operations
upon it's grant during 2004.

Sloterhof  Investments N.V. agreed with the company to reimburse the company for
certain  expenses  incurred  in  connection  with  the  reverse-share   exchange
transaction with Playlogic  Entertainment,  Inc., previously discussed.



                                       14
<PAGE>

Item 2. Management's Discussion and Analysis

Forward-Looking Statements

         The Information in this registration statement contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  This Act  provides a "safe  harbor"  for  forward-looking  statements  to
encourage companies to provide prospective  information about themselves so long
as they  identify  these  statements as forward  looking and provide  meaningful
cautionary  statements  identifying  important  factors  that could cause actual
results  to differ  from the  projected  results.  All  statements,  other  than
statements of historical fact, made in this  registration  statement are forward
looking.  In particular,  the statements herein regarding industry prospects and
future  results  of  operations  or  financial   position  are   forward-looking
statements. Forward-looking statements reflect management's current expectations
and are inherently  uncertain.  Our actual results may differ significantly from
management's expectations.

         The following  discussion  and analysis  should be read in  conjunction
with our financial  statements included herewith.  This discussion should not be
construed to imply that the results  discussed herein will necessarily  continue
into the future,  or that any  conclusion  reached  herein will  necessarily  be
indicative of actual operating results in the future. Such discussion represents
only the best present assessment of our management.

Management's Overview of Historical and Prospective Business Trends

         Increased  Console  Installed  Base. As consumers  purchase the current
generation  of  consoles,  either as first time  buyers or by  upgrading  from a
previous generation, the console installed base increases. As the installed base
for a  particular  console  increases,  we  believe  we will  generally  able to
increase our unit volume.  However, as consumers  anticipate the next generation
of consoles, unit volumes often decrease. In March 2004, Microsoft reduced there
tail price of its box consoles in the US, and in May and December 2004, Sony did
the same with its  PlayStation2  consoles.  As price  reductions  drive sales of
consoles and the related  installed  base of these current  generation  consoles
increases  during  fiscal  2005,  we  believe  that  our unit  sales of  current
generation titles are likely to be increased.

         Software Prices.  As current  generation  console prices  decrease,  we
expect  more  value-oriented   consumers  to  become  part  of  the  interactive
entertainment  software  market.  We believe that hit titles will continue to be
launched at premium  price points and will  maintain  those premium price points
longer than less popular games.  However,  as a result of a more  value-oriented
consumer  base,  and a greater  number of software  titles being  published,  we
expect  average  software  prices to  gradually  come  down,  which we expect to
negatively  impact our gross  margin.  To offset  this,  as the  installed  base
increases, total volume of software sales are expected to increase, compensating
for the lower margins on software sales.

         Increasing  Cost of Titles.  Hit titles have become  increasingly  more
expensive  to  produce  and  market as the  platforms  on which  they are played
continue to advance  technologically and consumers demand continual improvements
in the  overall  game play  experience.  We expect  this trend to continue as we
require larger  production teams to create our titles,  the technology needed to
develop  titles  becomes  more  complex,  we  continue to develop and expand the
online gaming  capabilities  included in our products and we develop new methods
to  distribute  our  content  via the  Internet.  Any  increase  in the  cost of
licensing third-party intellectual property used in our products would also make
these products more expensive to publish.



                                       15
<PAGE>

Critical Accounting Policies

General

The unaudited condensed  consolidated  financial  statements of the company have
been  prepared  in  accordance   with  the   instructions   to  Regulation  S-X.
Accordingly,  the  financial  statements  do not  include  all  information  and
disclosures  necessary for a presentation of the company's  financial  position,
results of  operations  and cash flows in  conformity  with  generally  accepted
accounting  principles  in the  United  States of  America.  In the  opinion  of
management, the financial statements reflect all adjustments (consisting only of
normal recurring  accruals)  necessary for a fair  presentation of the company's
financial  position,  results  of  operations  and cash  flows.  The  results of
operations for any interim periods are not necessarily indicative of the results
for  the  full  year.  The  unaudited  financial  statements  should  be read in
conjunction with the audited financial statements and notes thereto contained in
this prospectus.

Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements  and the  reported  amounts  of net sales  and  expenses  during  the
reporting periods. The most significant  estimates and assumptions relate to the
recoverability of prepaid royalties,  capitalized software development costs and
intangibles,  inventories, realization of deferred income taxes and the adequacy
of allowances for doubtful accounts.  Actual amounts could differ  significantly
from these estimates.

Accounts receivable

         Accounts  receivable  are shown after  deduction of a provision for bad
and doubtful debts where appropriate.

Software Development Costs

         Capitalized   software  development  costs  include  payments  made  to
independent software developers under development agreements,  as well as direct
costs  incurred  for  internally  developed  products.  We account for  software
development  costs in accordance  with SFAS No. 86 "Accounting  for the Costs of
Computer  Software  to  be  Sold,  Leased,  or  Otherwise  Marketed".   Software
development costs are capitalized once technological feasibility of a product is
established and such costs are determined to be recoverable.

         We utilize both internal  development  teams and  third-party  software
developers to develop our products.

         We capitalize  internal  software  development  costs and other content
costs  subsequent  to  establishing   technological   feasibility  of  a  title.
Amortization  of such costs as a  component  of cost of sales is  recorded  on a
title-by-title  basis based on the  greater of the  proportion  of current  year
sales to the total of current and  estimated  future  sales for the title or the
straight-line  method over the remaining  estimated useful life of the title. At



                                       16
<PAGE>

each balance sheet date, we evaluate the recoverability of capitalized  software
costs  based on  undiscounted  future cash flows and charge to cost of sales any
amounts  that  are  deemed   unrecoverable.   Our  agreements  with  third-party
developers  generally  provide us with  exclusive  publishing  and  distribution
rights  and  require  us to make  advance  payments  that are  recouped  against
royalties  due to the  developer  based on the  contractual  amounts  of product
sales, adjusted for certain costs.

Prepaid royalties

         We capitalize  external software  development costs (prepaid royalties)
and other content costs subsequent to establishing  technological feasibility of
a title.

         Advance  payments  are  amortized  as  royalties  in cost of sales on a
title-by-title  basis based on the  greater of the  proportion  of current  year
sales to the total of current and  estimated  future sales for that title or the
contractual  royalty  rate based on actual net  product  sales as defined in the
respective   agreements.   At  each   balance   sheet  date,   we  evaluate  the
recoverability  of  advanced   development  payments  and  unrecognized  minimum
commitments  not yet paid to  determine  the  amounts  unlikely  to be  realized
through  product  sales.  Advance  payments  are charged to cost of sales in the
amount that management  determines is  unrecoverable in the period in which such
determination  is made  or if  management  determines  that  it  will  cancel  a
development project.

Revenue Recognition

         We evaluate the  recognition of revenue based on the criteria set forth
in  SOP  97-2,  "Software  Revenue   Recognition",   as  amended  by  SOP  98-9,
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions"   and  Staff  Accounting   Bulletin  ("SAB")  No.  101,   "Revenue
Recognition  in  Financial   Statements",   as  revised  by  SAB  104,  "Revenue
Recognition".   We  evaluate  revenue  recognition  using  the  following  basic
criteria:

         o        Evidence of an arrangement:  We recognize revenue when we have
                  evidence of an  agreement  with the  customer  reflecting  the
                  terms and conditions to deliver products.

         o        Delivery:  Delivery is  considered  to occur when the products
                  are  shipped  and  risk of loss has  been  transferred  to the
                  customer.

         o        Fixed or determinable fee: If a portion of the arrangement fee
                  is not fixed or  determinable,  we  recognize  that  amount as
                  revenue when the amount becomes fixed or determinable.

         o        Collection is deemed probable: At the time of the transaction,
                  we  conduct a credit  review of each  customer  involved  in a
                  significant  transaction to determine the  creditworthiness of
                  the customer.

         o        Collection is deemed  probable if we expect the customer to be
                  able to pay amounts  under the  arrangement  as those  amounts
                  become due. If we determine  that  collection is not probable,
                  we  recognize   revenue  when  collection   becomes   probable
                  (generally upon cash collection).



                                       17
<PAGE>

Product Revenue

         Product  revenue,  including  sales to resellers and  distributors,  is
recognized  when the above  criteria  are met.  We reduce  product  revenue  for
estimated  customer  returns by distributing  our products  through  experienced
distributors with whom we had previously worked.

New Accounting Pronouncements

         In December 2004,  the Financial  Accounting  Standards  Board ("FASB")
issued  Statement of Financial  Accounting  Standards No. 123 (R),  "Share-Based
Payment" which revised Statement of Financial  Accounting Standards No. 123 (R),
"Accounting for Stock-Based Compensation". This statement supercedes APB Opinion
No. 25,  "Accounting  for Stock  Issued to  Employees".  The  revised  statement
addresses the accounting for share-based payment transactions with employees and
other  third  parties,   eliminates  the  ability  to  account  for  share-based
compensation  transactions using APB 25 and requires that the compensation costs
relating  to such  transactions  be  recognized  in the  condensed  consolidated
statement  of  operations.  The revised  statement  is effective as of the first
fiscal year beginning after June 15, 2005.

         Although we are  currently  analyzing the method of adoption and impact
of the adoption of this standard,  effective  January 1, 2006, we expect it will
have an impact on our condensed consolidated financial statements similar to the
pro forma disclosure under Statement of Financial  Accounting  Standards No. 123
(R), "Accounting for Stock-Based Compensation" ("SFAS 123 (R)").

Results of Operations

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004.

         Net sales.  Net sales for the three  months  ended  June 30,  2005 were
$204,421,  as  compared to $0 for the three  months  ended June 30,  2004.  This
increase in revenue is  primarily  the result of starting  sales of  Playlogic's
games in the fourth  quarter of 2004.  $204,421  of the  revenues  for the three
months  ended June 30,  2005 were from  Europe,  and $0 were from the US. All of
these revenues were derived from Playlogic's game distributors.

         Gross Profit. Gross profit totaled approximately $187,729 for the three
months  ended June 30, 2005.  For the three  months  ended June 30, 2004,  gross
profit  totaled $0. This  increase in gross profit is primarily the result of an
increase in net sales.

         Selling,  Marketing,  General  and  Administrative  Expenses.  Selling,
marketing, general and administrative expenses totaled $1,144,053, for the three
months ended June 30, 2005.  For the three months ended June 30, 2004,  selling,
general and  administrative  expenses  totaled  $1,147,937.  This  represents  a
decrease of $3,884, or 0.3%.

         Research and  development.  Research and development  expenses  totaled
$123,668 for the three  months  ended June 30, 2005.  For the three months ended
June 30, 2004, research and development  totaled  $1,010,310.  This represents a
decrease of $886,642,  or 87%.  This  decrease was due to a higher amount of our
research and development expenses being capitalized.

         Depreciation.  Depreciation  expenses  totaled  $100,901  for the three
months  ended June 30,  2005.  For the three  months  ended June 30,  2004,  the
depreciation  expense  totaled  $80,591.  The  increase  of $20,310 or 25.2% was
caused by an increase in fixed assets that are  depreciated  on a straight  line
basis over the economic life time.



                                       18
<PAGE>

         Interest Expense. Interest expense totaled $94,445 for the three months
ended June 30, 2005. For the three months ended June 30, 2004,  interest expense
totaled  $416,238.  This  represents  a decrease  of  $321,793,  or 77.3%.  This
decrease in interest expense is primarily the result of Playlogic's debt holders
converting their loans into ordinary shares of Playlogic.

         Benefit  from income  taxes.  The benefit  from  income  taxes  totaled
$365,890  for the three  months  ended June 30, 2005 and $0 for the three months
ended June 30, 2004.  This increase was caused by our entering into contracts to
purchase  finished  products and for  distribution  of these  games;  therefore,
deferred tax income has been recognized.

         Net Loss. Our net loss was $999,448 for the three months ended June 30,
2005.  For the three months ended June 30,  2004,  net loss totaled  $2,655,076.
This was  primarily  due to a  one-time  charge  related  to the  grant of stock
options to certain  stockholders  in 2004,  recognition  of benefits from income
taxes,  increased gross profit,  lower interest  expenses and lower research and
development costs.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004.

         Net  sales.  Net  sales for the six  months  ended  June 30,  2005 were
$736,559,  as  compared  to $0 for the six  months  ended  June 30,  2004.  This
increase in revenue is  primarily  the result of  increased  sales of our games.
$394,468 of the revenues for the six months ended June 30, 2005 were from Europe
and $342,091 were from the US. All of these  revenues were derived from our game
distributors.

         Gross Profit.  Gross profit  totaled  $596,790 for the six months ended
June 30, 2005. For the six months ended June 30, 2004,  gross profit totaled $0.
This  increase  in gross  profit is  primarily  the result of an increase in net
sales.

         Selling,  Marketing,  General  and  Administrative  Expenses.  Selling,
marketing,  general and  administrative  expenses totaled $1,800,952 for the six
months  ended June 30, 2005.  For the six months  ended June 30, 3004,  selling,
general and  administrative  expenses  totaled  $10,747,090.  This  represents a
decrease  of  $8,946,138,   or  83%.  This  decrease  in  selling,  general  and
administrative  expenses is primarily the result of a one-time charge of granted
options to certain  stock  holders in 2004.  No options have been granted in the
first six months ended June 30, 2005.

         Research and  development.  Research and development  expenses  totaled
$485,937 for the six months  ended June 30, 2005.  For the six months ended June
30, 2004, research and development expenses totaled $1,809,483.  This represents
a  decrease  $1,323,546,  or  73%.  This  decrease  is due to our  research  and
development expenses not being able to be capitalized.

         Depreciation.  Depreciation expense totaled $204,968 for the six months
ended June 30,  2005.  For the six  months  ended  June 30,  2004,  depreciation
expense  totaled  $154,038.  The  increase of  $50,930,  or 33% was caused by an
increase in fixed assets that are  depreciated on a straight line basis over the
economic life time.



                                       19
<PAGE>

         Interest Expense.  Interest expense totaled $197,775 for the six months
ended June 30, 2005.  For the six months ended June 30, 2004,  interest  expense
totaled $752,349.  This represents a decrease of $554,574, or 74%. This decrease
in interest expense is primarily the result of our debt holders converting their
loans into ordinary shares of Playlogic.

         Benefit from income taxes.  Benefit from income taxes totaled  $623,404
for the six months ended June 30, 2005.  For the six months ended June 30, 2004,
benefit from income taxes  totaled $0. This  increase was caused by our entering
into  contracts  to purchase  finished  products and for  distribution  of these
games; therefore deferred tax income has been recognized.

         Net Loss. Our net loss was $1,559,438 for the six months ended June 30,
2005. For the six months ended June 30, 2004, net loss totaled $13,462,960. This
was primarily due to a one-time  charge related to the grant of stock options to
certain  stockholders  in 2004,  recognition  of  benefits  from  income  taxes,
increased  gross  profit,   lower  interest  expenses  and  lower  research  and
development costs.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003.

         Net sales.  For the fiscal year ended  December 31, 2004,  we had total
revenue of $109,764 compared to revenue of $0 for the fiscal year ended December
31,  2003.  This  increase in revenue of is a  primarily  the result of starting
sales of our games in the fourth  quarter of 2004.  All of the  revenues for the
year ended  December 31, 2004 were from Europe.  All of these revenues were from
our game distributors.

         Gross Profit.  Gross profit  totaled  $73,768 for the fiscal year ended
December 31, 2004 as compared to $0 for the fiscal year ended December 31, 2003.
The increase in our gross profit is a result of increased sales.

         Selling,  Marketing,  General  and  Administrative  Expenses.  Selling,
marketing,  general and  administrative  expenses  totaled  $12,864,286  for the
fiscal year  December  31,  2004.  For the fiscal year ended  December 31, 2003,
selling, general and administrative expenses totaled $2,884,942. This represents
an increase  of  $9,979,344,  or 346%.  This  increase  in selling,  general and
administrative  expenses is primarily the result of a one-time charge of granted
options to certain  stock  holders and the  increased  number of  employees  and
related costs.

         Interest  Expense.  Interest expense totaled  $2,505,423 for the fiscal
year ended  December  31,  2004.  For the fiscal year ended  December  31, 2003,
interest expense totaled $176,238. This represents an increase of $2,329,185, or
1,322%.  This  increase  in  interest  expense  is  primarily  the result of our
increased loan commitments and related interest rates.

         Net  Loss.  Our net loss was  $20,213,899  for the  fiscal  year  ended
December 31, 2004. For the fiscal year ended December 31, 2003, net loss totaled
$7,657,536.  This  decrease  in  profitability  is  primarily  the result of our
increased  costs  incurred with  research and  development  and  increased  loan
commitments and an expense related to granted options to certain shareholders.



                                       20
<PAGE>

Liquidity And Capital Resources

June 30, 2005

         As of June 30, 2005, we had $141,031 of cash on hand.

         Our  management  believes that the current cash on hand and  additional
cash expected  from  operations  will be  sufficient  order to cover our working
capital requirements through the third quarter of 2005. After that time, we will
need to obtain  additional  financing  from third  parties.  We are currently in
negotiations  for a revolving  credit line for game  financing,  and we are also
seeking  bank  financing.  In  addition,  we  may  raise  funds  through  equity
financings.  If we do not obtain any necessary  financing in the future,  we may
need to cease operations.

         We expect our capital  requirements  to increase  over the next several
years as we continue to develop new  products  both  internally  and through our
third-party  developers,  increase marketing and administration  infrastructure,
and  embark  on  in-house  business  capabilities  and  facilities.  Our  future
liquidity  and capital  funding  requirements  will depend on numerous  factors,
including,  but not  limited  to,  the cost of hiring  and  training  production
personnel  who  will  produce  our  titles,  the  cost of  hiring  and  training
additional sales and marketing  personnel to promote our products,  and the cost
of hiring and training administrative staff to support current management.

December 31, 2004

         As of December 31, 2004,  our cash balance was $22,226,  as compared to
$81,711 at December 31, 2003.

Cash flows from operating activities                         2004          2003
                                                             ----          ----
                                                         (In US$)      (In US$)
                                                         --------      --------
Net cash used in operating activities                  (8,482,740)   (4,863,542)
Cash flows from investing activities                     (445,729)     (308,448)
Cash flow provided by financing activities              8,861,980     5,195,464
Increase (decrease) in cash                                66,489        23,474

         The net cash used in operating activities increased $3,619,198 in 2004.
The majority of this  increase  was caused by more  general and  administrative,
research  and  development  and  interest  expenses.  The  increase  in net cash
provided by financing activities was caused by the payment.

         Our  accounts  receivable  at December  31, 2004 was $0, as compared to
$11,733 at December 31, 2003.

Off Balance Sheet Arrangements

         We do not have any off balance sheet  arrangements  that are reasonably
likely to have a current or future effect on our financial condition,  revenues,
results of operations, liquidity or capital expenditures.


Item 3. Controls and Procedures.

         As of the  end of the  period  covered  by  this  report,  the  Company
conducted an evaluation, under the supervision and with the participation of our
principal   executive   officer  and  principal   financial   officer,   of  the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules  13a-15 and 15d-15 of the Exchange  Act).  Based on this  evaluation,  our



                                       21
<PAGE>

principal  executive officer and principal  financial officer concluded that our
disclosure  controls and  procedures  are  effective to ensure that  information
required  to be  disclosed  by the  Company in reports  that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods  specified in the Securities and Exchange  Commission rules and
forms.  It should be noted that the design of any system of controls is based in
part upon certain  assumptions about the likelihood of future events,  and there
can be no assurance  that any design will succeed in achieving  its stated goals
under all potential future conditions, regardless of how remote.

         There was no change in the Company's  internal  control over  financial
reporting  during the Company's most recently  completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.



                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         None.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

         Each issuance set forth below was made in reliance upon the  exemptions
from  registration  requirements  of the  Securities  Act of 1933,  as  amended,
contained in Section 4(2) on the basis that such  transactions did not involve a
public  offering.  When  appropriate,  we  determined  that  the  purchasers  of
securities  described below were  sophisticated  investors who had the financial
ability to assume the risk of their  investment in our  securities  and acquired
such  securities  for their own account and not with a view to any  distribution
thereof to the  public.  Where  required by  applicable  law,  the  certificates
evidencing the securities bear legends stating that the securities are not to be
offered,  sold or transferred  other than pursuant to an effective  registration
statement  under the  Securities  Act or an  exemption  from  such  registration
requirements.

         -------------------------------- --------------- ----------------------
         NAME                                 SHARES            DATE
         Johannes W. M. Kluijtmans            162,100           June 29, 2005
         -------------------------------- --------------- ----------------------

         We sold the 162,100 restricted shares to Johannes W. M. Kluijtmans at a
price of $3.75 per share for a total of $607,875.


Item 3.  Defaults Upon Senior Securities.

         None.

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

         None.

Item 5.  Other Information.

         None.

Item 6. Exhibits.

         The  exhibits  are listed in the  Exhibit  Index  appearing  at page 26
herein.







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<PAGE>

SIGNATURES

         In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                 Playlogic Entertainment, Inc.
                                 -----------------------------
                                 (Registrant)

Date: August 19, 2005            By: /s/ Willem M. Smit
                                    -------------------
                                    Willem M. Smit
                                    Chief Executive Officer


Date: August 19, 2005            By: /s/ Leo van de Voort
                                    ---------------------
                                    Leo van de Voort
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)
















                                       23
<PAGE>

                          PLAYLOGIC ENTERTAINMENT, INC.
                                  EXHIBIT INDEX

Exhibit Number      Description

2.1                 Share Exchange  Agreement,  dated June 30, 20005 between the
                    Registrant and the  Shareholders of Playlogic  International
                    N.V. (incorporated by reference to the Registrant's Form 8-K
                    filed July 1, 2005)


3.1                 Certificate of  Incorporation  of the  Registrant,  as filed
                    with  the  Secretary  of  State  of the  State  of  Delaware
                    (incorporated by reference to the  Registrant's  form SB-2/A
                    filed September 5, 2001)

3.2                 Amendment  to  the  Certificate  of   Incorporation  of  the
                    Registrant,  as  filed  with the  Secretary  of State of the
                    State  of  Delaware   (incorporated   by  reference  to  the
                    Registrant's Form 8-K dated April 15, 2005)

3.3                 Bylaws of the Registrant  (incorporated  by reference to the
                    Registrant's form SB-2/A filed September 5, 2001)

10.1                Lease for Office  Space  between  Kantoren  Fonds  Nederland
                    B.V., as the Lessor,  and Playlogic Game Factory B.V. as the
                    Lessee dated March 11, 2002  (incorporated by reference from
                    the  Registrant's   Registration   Statement  on  Form  SB-2
                    previously filed with the Commission on July 20, 2005)

10.2                Lease for Office Accommodation between Fortis Vastgoed B.V.,
                    as the  Landlord,  and Playlogic  International  N.V. as the
                    Tenant dated April 25, 2005  (incorporated by reference from
                    the  Registrant's   Registration   Statement  on  Form  SB-2
                    previously filed with the Commission on July 20, 2005)

10.3                Lease for Office Space  between Pr. Dr. D.  Valerio,  as the
                    Lessor, and Mr. W.M. Smit company director,  handling in the
                    function of president of the company Playlogic International
                    N.V.,  as the Lessee dated March 12, 2002  (incorporated  by
                    reference from the  Registrant's  Registration  Statement on
                    Form SB-2  previously  filed with the Commission on July 20,
                    2005)

10.4                Lease for Office Space between Mr.  Endstra,  as the Lessor,
                    and  Playlogic  Game  Factory B.V. as the Lessee dated April
                    23, 2003  (incorporated  by reference from the  Registrant's
                    Registration  Statement on Form SB-2  previously  filed with
                    the Commission on July 20, 2005)

10.5                Employment  Contract between Playlogic  International,  N.V.
                    and Stefan  Layer dated  January 12, 2005  (incorporated  by
                    reference from the  Registrant's  Registration  Statement on
                    Form SB-2  previously  filed with the Commission on July 20,
                    2005)

10.6                Employment  Contract between Playlogic  International,  N.V.
                    and Leo van de Voort  dated April 4, 2005  (incorporated  by
                    reference from the  Registrant's  Registration  Statement on
                    Form SB-2  previously  filed with the Commission on July 20,
                    2005)




                                       24
<PAGE>

10.7                Employment  Contract between Playlogic  International,  N.V.
                    and  Rogier  Smit  dated  July  1,  2005   (incorporated  by
                    reference from the  Registrant's  Registration  Statement on
                    Form SB-2  previously  filed with the Commission on July 20,
                    2005)

31.1                Certifications  of the Chief Executive  Officer  pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.

31.2                Certifications  of the Chief Financial  Officer  pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002

32.1                Certifications  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                Certifications  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










                                       25