**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **WASHINGTON,
        DC 20549**
  **FORM
        10-QSB**
  (Mark
        One)
 þ
              
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
  **For
        the
        period ended: September 30, 2007**
 o
              
              **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
                  incorporation
                    or organization)
              
              (I.R.S.
                  Employer
                  Identification
                    No.)**Concertgebouwplein
                  13, 1071 LL Amsterdam, The Netherlands**
              
              **1071
                  LL**(Address
                  of principal executive offices)
              
              (Zip
                  Code)
  **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. þ Yes
o
        No
  Indicate
        by
        check mark whether the registrant is a shell company (as defined in
        Rule 12b-2 of the Exchange Act). o Yes þ
        No
  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 September 30, 2007Common
                  Stock, par value $.001 per share
              
              38,532,580
                  shares
  Transitional
        Small Business Disclosure Format (check one): Yes o No þ




**PLAYLOGIC
        ENTERTAINMENT, INC.**
  **FORM
        10-QSB**
  **TABLE
        OF
        CONTENTS**
   **PART
                  I -- FINANCIAL
                  INFORMATION**
              Page
                  No.Item
                  1.
              Financial
                  Statements
              3Item
                  2.
              Management’s
                  Discussion and Analysis
              15Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              20Item
                  4
              Controls
                  and Procedures
              20**PART
                  II -- OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              20Item
                  1A.
              Risk
                  Factors
              20Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              20Item
                  3.
              Defaults
                  Upon Senior Securities
              20Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              21Item
                  5.
              Other
                  Information
              21Item
                  6.
              Exhibits
              21Signatures
              22Exhibit
                  Index
              23Certifications
              Attached
 
 *-
            2
            -*
 
  **PART
            I -- FINANCIAL INFORMATION**
  **Item
            1 -  Financial Statements**
 **PLAYLOGIC
          ENTERTAINMENT INC. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED BALANCE SHEETS**
 (UNAUDITED)
 **September
          30, 2007**
 
 **ASSETS****Current
                    Assets**Cash
                
                $
                317,168Cash
                    in
                    escrow (see note F)
                
                
                778,047Accounts
                    receivableTrade,
                    net
                    of allowance for doubtful accounts
                
                
                2,160,224Value
                    Added Taxes from foreign governments
                
                
                44,067Software
                    development costs
                
                
                4,640,375Prepaid
                    expenses and other
                
                
                459,123**Total
                    current assets**
                
                
                8,399,004**Net
                    property and equipment**
                
                
                783,450**Other
                    assets**Software
                    development costs, net of current portion
                
                
                2,125,208**Total
                    other assets**
                
                
                2,125,208**Total
                    Assets**
                
                $
                11,307,662**LIABILITIES
                    AND SHAREHOLDERS' DEFICIT****Current
                    Liabilites**Bank
                    line
                    of credit
                
                $
                1,442,051Short-term
                    debts
                
                
                382,994Warrant
                    derivatives
                
                
                7,373Current
                    maturities of long-term debt
                
                
                42,555Accounts
                    payable - trade
                
                
                4,593,885Other
                    accrued liabilities
                
                
                2,335,113Deferred
                    revenues
                
                
                143,197Loan
                    from
                    shareholders
                
                
                560,022**Total
                    current liabilities**
                
                
                9,507,190**Long-term
                    debt, less current maturities**
                
                
                223,414**Total
                    Liabilities**
                
                
                9,730,604**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.  38,532,580  shares issued and
                    outstanding
                
                
                38,533Additional
                    paid-in capital
                
                
                54,148,735Deferred
                    Compensation-Employee Stock Options
                
                
                298,493Accumulated
                    currency translation adjustments reserve
                
                
                (3,022,258
                )Accumulated
                    deficit
                
                
                (49,886,445
                )**Total
                    shareholders' equity**
                
                
                1,577,058**Total
                    Liabilities and Shareholders' Equity**
                
                $
                11,307,662
 
 See
          accompanying
          Notes to Unaudited Condensed Consolidated Financial Statements
 
 *-
                3
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT INC. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF OPERATIONS**
 (UNAUDITED)
 
 Three
                    months ended
                  September
                    30,
                
                
                Nine
                    months ended
                  September
                    30,2007
                
                
                2006
                    (restated)
                
                
                2007
                
                
                2006
                    (restated)**Revenues**Net
                    Revenue
                
                $
                3,712,390
                
                
                $
                1,461,194
                
                
                $
                8,296,418
                
                
                $
                4,593,865**Cost
                    of sales**Direct
                    costs of production
                
                
                (1,685,929
                )
                
                
                (664,582
                )
                
                
                (3,538,227
                )
                
                
                (2,592,495
                )**Gross
                    profit**
                
                ****
                **2,026,461**
                
                
                ****
                **796,612**
                
                
                ****
                **4,758,191**
                
                
                ****
                **2,001,370****Operating
                    expenses**Research
                    and development
                
                
                82,207
                
                
                
                975,810
                
                
                
                448,962
                
                
                
                2,262,975Selling
                    and marketing
                
                
                398,723
                
                
                
                330,392
                
                
                
                929,346
                
                
                
                1,068,394General
                    and administrative
                
                
                1,025,392
                
                
                
                1,170,223
                
                
                
                2,760,234
                
                
                
                3,961,870Asset
                    impairment charges
                
                
                -
                
                
                
                72,127
                
                
                
                -
                
                
                
                1,123,439Depreciation
                
                
                40,757
                
                
                
                785,494
                
                
                
                193,381
                
                
                
                226,490**Total
                    operating expenses**
                
                
                1,547,079
                
                
                
                3,334,046
                
                
                
                4,331,923
                
                
                
                8,643,168**Profit
                    / (Loss) from operations**
                
                ****
                **479,382**
                
                
                ****
                **(2,537,435**
                **)**
                
                ****
                **426,268**
                
                
                ****
                **(6,641,798**
                **)****Other
                    income/(expense)**gain
                    on
                    debt restructuring
                
                
                377,000
                
                
                
                -
                
                
                
                850,411
                
                
                
                -Interest
                    expense
                
                
                (169,535
                )
                
                
                (439,715
                )
                
                
                (1,054,659
                )
                
                
                (611,803
                )Loan
                    penalty expense
                
                
                1,377,150
                
                
                
                (1,242,400
                )
                
                
                1,377,150
                
                
                
                (1,242,400
                )Realized
                    and unrealized exchange losses
                
                
                -
                
                
                
                (360,471
                )
                
                
                -
                
                
                
                (49,305
                )**Income/(Loss)
                    before provision for income taxes**
                
                
                2,063,997
                
                
                
                (4,580,020
                )
                
                
                1,599,170
                
                
                
                (8,545,307
                )Provision
                    for Income Taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -**Net
                    loss before before extraordinary items**
                
                
                2,063,997
                
                
                
                (4,580,020
                )
                
                
                1,599,170
                
                
                
                (8,545,307
                )Extra
                    ordinary items
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -**Net
                    Profit / (loss)**
                
                
                2,063,997
                
                
                
                (4,580,020
                )
                
                
                1,599,170
                
                
                
                (8,545,307
                )Net
                    loss
                    per weighted-average share of common stock outstanding, computed
                    on Net
                    Profit / (Loss)-
                    basic
                    and fully diluted
                
                
                0.07
                
                
                
                (0.19
                )
                
                
                0.06
                
                
                
                (0.35
                )Weighted-average
                    number of shares of common stock outstanding-
                    basic
                    and fully diluted
                
                
                27,727,726
                
                
                
                24,593,733
                
                
                
                26,343,562
                
                
                
                24,445,768
 
 See
          accompanying
          Notes to Unaudited Condensed Consolidated Financial Statements
 
 *-
                4
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (UNAUDITED)
 
 Nine
                    months ended
                  September
                    30,2007
                
                
                2006
                    (restated)**CASH
                    FLOWS FROM OPERATING ACTIVITIES****Net
                    cash used in operating activities**
                
                **$**
                **(2,299,374**
                **)**
                
                **$**
                **(3,409,230**
                **)****CASH
                    FLOWS FROM INVESTING ACTIVITIES**Cash
                    paid
                    for software development
                
                
                (1,679,208
                )
                
                
                (1,854,507
                )Cash
                    paid
                    to acquire property and equipment
                
                
                (24,492
                )
                
                
                (269,357
                )**Net
                    cash used in investing activities**
                
                ****
                **(1,703,701**
                **)**
                
                ****
                **(2,123,865**
                **)****CASH
                    FLOWS FROM FINANCING ACTIVITIES**Payments
                    on bank line of credit
                
                
                (460,919
                )
                
                
                (562,632
                )Cash
                    receipts from short term notes
                
                
                2,514,776
                
                
                
                372,733Cash
                    repaid on short term notes
                
                
                (898,417
                )
                
                
                3,970,713Principal
                    payments on long-term debt
                
                
                (30,258
                )
                
                
                (27,955
                )Payments
                    on loans
                
                
                -
                
                
                
                (75,091
                )Proceeds
                    from sales of common stock
                
                
                2,735,019
                
                
                
                823,759Collections
                    on stock subscriptions receivable
                
                
                -
                
                
                
                1,229,344**Net
                    cash provided by financing activities**
                
                ****
                **3,860,202**
                
                
                ****
                **5,730,872****Effect
                    of foreign exchange on cash**
                
                ****
                **443,503**
                
                
                ****
                **(334,960**
                **)****Increase/(Decrease)
                    in Cash**
                
                
                300,630
                
                
                
                (137,183
                )Cash
                    at
                    beginning of period
                
                
                16,537
                
                
                
                139,760**Cash
                    at end of period**
                
                $
                317,168
                
                
                $
                2,577**Supplemental
                    disclosures of interest and income taxes paid**Interest
                    paid during the period
                
                $
                1,326,164
                
                
                $
                74,534Income
                    taxes paid (refunded)
                
                
                -
                
                
                
                -**Supplemental
                    disclosures of non-cash investing and financing
                    activities**Common
                    stock issued to repay notes payable
                
                $
                5,852,523
                
                
                $
                737,700Cost
                    of
                    acquiring capital paid with issuance of common stock
                
                $
                21,150
                
                
                $
                13,200Payments
                    paid to vendors directly by equity subscribers
                
                $
                2,924,432
                
                
                $
                -
  See
          accompanying
          Notes to Unaudited Condensed Consolidated Financial Statements
 
 *-
                5
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY**
 
 Additional
                
                
                Deferred
                    Compensation
                
                
                Currency
                
                
                CurrencyCommon
                    stock
                
                
                paid-in
                
                
                Employee
                    Stock
                
                
                translation
                
                
                AccumulatedShares
                
                
                Amount
                
                
                capital
                
                
                options
                
                
                adjustment
                
                
                deficit
                
                
                Total**Balances
                    at December 31, 2006**
                
                ****
                **25,332,109**
                
                
                **$**
                **25,332**
                
                
                **$**
                **42,596,112**
                
                
                **$**
                **414,040**
                
                
                **$**
                **(2,439,541**
                **)**
                
                **$**
                **(51,485,615**
                **)**
                
                **$**
                **(10,889,671**
                **)**Common
                    stock issued for cash
                
                
                2,648,278
                
                
                $
                2,648
                
                
                $
                2,732,371
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                2,735,019Common
                    stock issued for cash paid directly to vendors
                
                
                3,415,522
                
                
                $
                3,416
                
                
                $
                2,92,016
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                2,924,432Common
                    stock issued in exchange for debt
                
                
                7,136,671
                
                
                $
                7,137
                
                
                $
                5,845,336
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                5,852,523Capital
                    contributed to support operations
                
                
                
                
                
                
                
                
                
                $
                75,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                75,000Issuing
                    costs
                
                
                
                
                
                
                
                
                
                $
                (21,150
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (21,150
                )Stock
                    options issued pursuant to Employee Compensation Plan
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (115,547
                )
                
                
                
                
                
                
                
                
                
                $
                (115,547
                )Change
                    in currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (582,718
                )
                
                
                
                
                
                $
                (582,718
                )Net
                    loss for the period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                1,599,170
                
                
                $
                1,599,170**Balances
                    at September 30, 2007**
                
                ****
                **38,532,580**
                
                
                **$**
                **38,533**
                
                
                **$**
                **54,148,735**
                
                
                **$**
                **298,493**
                
                
                **$**
                **(3,022,258**
                **)**
                
                **$**
                **(49,886,445**
                **)**
                
                **$**
                **1,577,058**
 
 See
          accompanying
          Notes to Unaudited Condensed Consolidated Financial Statements
 
 *-
                6
                -*
  **PLAYLOGIC
          ENTERTAINMENT, INC. AND
          SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
 
 
 **NOTE
          A -
          ORGANIZATION AND DESCRIPTION OF BUSINESS**
  Playlogic
          Entertainment, Inc. (“the Company, “we”, “us” or similar pronouns) is a
          developer and publisher of interactive entertainment products, such as
          video
          game software and other digital entertainment products. We publish for
          most
          major interactive entertainment hardware platforms, such as Sony’s PlayStation 3
          and Playstation2, Microsoft’s Xbox and Xbox360, Nintendo’s Wii, PCs and handheld
          devices (such as Nintendo DS, and PSP) and mobile devices.
  Our
          principal
          sources of revenue are derived from publishing operations. Publishing revenues
          are derived from the sale of our digital entertainment products. We own
          most of
          the intellectual properties of our products.
 
 As
          a publisher,
          we are responsible for publishing, sales and marketing of our products.
          We sell
          our products to distributors, who sell to retail. Furthermore, we sell
          directly
          to consumers through online distribution channels, at least two months
          after the
          product was made available at retail.
 
 **NOTE
          B -
          BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**
 
 **Basis
          of
          Presentation**
 
 The
          accompanying
          condensed consolidated financial statements include the accounts of the
          Company
          and reflect all adjustments necessary for fair presentation of our financial
          position, results of operations and cash flows. Inter-company accounts
          and
          transactions have been eliminated. The preparation of these condensed
          consolidated financial statements in conformity with accounting principles
          generally accepted in the United States requires management to make estimates
          and assumptions that affect the amounts reported in these condensed consolidated
          financial statements and accompanying notes. We adhere to the same accounting
          policies in preparation of interim financial statements. As permitted under
          generally accepted accounting principles, interim accounting for certain
          expenses, including income taxes are based on full year assumptions when
          appropriate. Actual results could differ materially from those
          estimates.
 
 Certain
          information and footnote disclosures normally included in financial statements
          prepared in accordance with accounting principles generally accepted in
          the
          United States have been omitted pursuant to the rules and regulations of
          the
          Securities and Exchange Commission (“SEC”), although we believe that the
          disclosures are adequate to make the information presented not misleading.
          These
          condensed consolidated financial statements and accompanying notes should
          be
          read in conjunction with our annual consolidated financial statements and
          the
          notes thereto for the fiscal year ended December 31, 2006, included in
          our
          Annual Report on Form 10-KSB for the year ended December 31, 2006.
 
 **Reclassifications**
 
 Certain
          prior
          year amounts have been reclassified to conform to current year presentation.
          Furthermore, the Company has reclassified gains from debt extinguishments
          from
          General and Administrative expenses to other income in the Condensed
          Consolidated Statement of Operations.
 
 **Earnings
          Per Share**
  SFAS
          No. 128, “Earnings Per Share”, requires dual presentation of basic and
          diluted income per share for all periods presented. Basic income per share
          excludes dilution and is computed by dividing earnings available to common
          shareholders by the weighted-average number of common shares outstanding
          during
          the period. Diluted earnings per share reflects the potential dilution
          that
          could occur if securities or other contracts to issue common stock were
          exercised or converted into common stock or resulted in the issuance of
          common
          stock that then shared in the earnings of the Company.
  
 
 *-
                7
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
 
 
 Unexercised
          stock options to purchase 1,435,000 shares of the Company’s common stock as of
          September 30, 2007, were not included in the computation of diluted
          earnings per share because the exercise of the stock options would be
          anti-dilutive to earnings per share.
 
 Unexercised
          warrants to purchase 6,089,270 shares of the Company’s common stock as of
          September 30, 2007, were not included in the computation of diluted
          earnings per share because the exercise of the warrants would be anti-dilutive
          to earnings per share.
  **Restatements**
 
 During
          the
          course of preparing the unaudited financial statements for the three months
          ended September 30, 2006, Management of the Company determined that the
          Company’s accounting for the reimbursement of certain expenses incurred during
          the second and third quarter of 2005 had not been properly reflected in
          accordance with U.S. generally accepted accounting principles. Certain
          operating
          expenses and transaction costs associated with the Company’s Share Exchange
          Agreement entered into in June 2005, which were initially paid by the Company
          and reimbursed by certain shareholders, were not included in the Company’s
          consolidated statements of operations for each of the six and three months
          ended
          June 30, 2005, the nine and three months ended September 30, 2005 and the
          year
          ended December 31, 2005. The corrections to this situation resulted in
          the
          recognition of expenses in connection with the Share Exchange Agreement
          as well
          as either the recognition of additional contributed capital and/or a reduction
          in amounts due from shareholder(s) for unrelated advances made prior to
          the
          aforementioned Share Exchange Agreement
  The
          restated
          numbers have been included in the consolidated statement of
          operations.
 
 These
          restatements to the Company’s financial statements were, in part, caused by a
          material weakness in the Company’s internal control over financial reporting due
          to the limitations in the capacity of the Company’s accounting resources to
          appropriately identify and react in a timely manner to non-routine, complex
          and
          related party transactions and communicate said occurrences to it’s independent
          auditors, as well as the adequate understanding of the disclosure requirements
          relating to these types of transactions. In order to remediate this material
          weaknesses, Management of the Company has designed and implemented improvements
          to it’s internal controls over financial reporting and to better define the most
          appropriate protocols to enhance the preparation, review, presentation
          and
          disclosures of the Company’s financial statements.
 
 
 **NOTE
          C -
          GOING CONCERN UNCERTAINTY**
 
 The
          Company is a
          global publisher of interactive software games designed for personal computers,
          and video game consoles and handheld platforms manufactured by Sony, Microsoft
          and Nintendo. Its principal sources of revenue are derived from publishing
          and
          distribution operations. Publishing revenues are derived from the sale
          of
          internally developed software titles or software titles developed by third
          parties. Operating margins in its publishing business are dependent upon
          its
          ability to continually release new, commercially successful products. Operating
          margins for titles based on licensed properties are affected by the company's
          costs to acquire licenses. The Company pursues a growth strategy by capitalizing
          on the widespread market acceptance of video game consoles, as well as
          the
          growing popularity of innovative action games that appeal to mature
          audiences.
 
 The
          accompanying
          condensed consolidated financial statements have been prepared assuming
          the
          Company will continue as a going concern. At September 30, 2007, the Company
          had
          an accumulated deficit of approximately $50.1 million, a shareholders’ equity of
          approximately $1.4 million and a working capital deficit of approximately
          $1.3
          million. Furthermore, the Company  realized a year-to-date net profit
          of $ 1.4 million during the nine months ended September 30, 2007. These
          figures
          show a significant improvement of the financial position compared to previous
          periods, however, the current Company’s financial position still raises
          uncertainties about the Company’s ability to continue as a going
          concern.
  
 *-
                8
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
 
 
 While
          the
          Company has contracts in place with several third-party developers and
          is
          developing titles through its Playlogic Game Factory B.V. subsidiary, and
          anticipates successful debuts of such titles; the market for interactive
          entertainment software is characterized by short product lifecycles and
          frequent
          introduction of new products. Many software titles do not achieve sustained
          market acceptance or do not generate a sufficient level of sales to offset
          the
          costs associated with product development. A significant percentage of
          the sales
          of new titles generally occur within the first three months following their
          release. Therefore, the Company’s profitability depends upon the Company’s
          ability to develop and sell new, commercially successful titles and to
          replace
          revenues from titles in the later stages of their lifecycles. Any competitive,
          financial, technological or other factor which delays or impairs the Company’s
          ability to introduce and sell the Company’s software could adversely affect
          future operating results.
 
 The
          Company’s
          continued existence is dependent upon its ability to generate sufficient
          cash
          flows from operations to support its daily operations as well as provide
          sufficient resources to retire existing liabilities and obligations on
          a timely
          basis and its ability to raise debt and/or equity financing favorable to
          or
          affordable by the Company.
 
 If
          no additional
          funding is received during the next twelve months, the Company will be
          forced to
          rely on additional funds loaned by management and/or significant stockholders
          to
          preserve the integrity of the corporate entity at this time. In the event,
          the
          Company is unable to acquire advances from management and/or significant
          stockholders, the Company’s ongoing operations would be negatively impacted to
          the point that all operating activities are ceased.
 
 While
          the
          Company is of the opinion that it is reasonably possible that the Company’s is
          able to secure additional capital in the future to reach the Company’s goals,
          there is no assurance that the Company will receive sufficient funding
          to
          sustain operations or implement any future business plan steps.
 
 No
          adjustment
          has been made in the accompanying financial statements to the amounts and
          classification of assets and liabilities which could result should the
          Company
          be unable to continue as a going concern.
 
 
 **NOTE
          D -
          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.
 
 *-
                9
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
 
 
 **NOTE E
          - COMPREHENSIVE INCOME/(LOSS)**
  Components
          of
          comprehensive income/(loss) are as follows:
 Nine
                    months ended September 30,2007
                
                
                2006Net income
                    / (loss)
                
                $
                1,599,170
                
                
                $
                (8,545,307
                )Foreign
                    currency translation adjustment
                
                
                (582,442
                )
                
                
                (460,639
                )Comprehensive income
                    / (loss)
                
                $
                1,016,728
                
                
                $
                (9,005,946
                )
  
 **NOTE
          F –
CASH IN ESCROW**
 As
          of September
          30, the Company held an amount of $778,000 in escrow which is cash being
          held by
          an attorney. These funds are subject to withdrawal by the Company at the
          Company's option. The full amount has been transferred to the Companies
          bank
          account during the month of October 2007.
 
 
 **NOTE
          G -
          SOFTWARE DEVELOPMENT COSTS**
  The
          following
          table provides the details of software development costs for the six months
          ended September 30, 2007:
  Beginning
                    balance
                
                $
                4,463,430Additions
                
                
                3,179,312Amortization
                
                
                (1,317,260
                )Write
                    down
                
                
                0Foreign
                    exchange
                
                
                440,101Ending
                    balance
                
                
                6,765,583Less:
                    current portion
                
                
                (4,640,375
                )Non-current
                    portion
                
                $
                2,125,208
 
 The
          amount of
          software development costs resulting from advance payments and guarantees
          to
          third-party developers was $6,167,000 at September 30, 2007. In addition,
          software development costs at September 30, 2007 included an amounts of
          $2,315,000 related to titles that have not been released yet.
  The
          non-current
          portion of the capitalized software development costs is expected to be
          amortized in 2008.
 
 *-
                10
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
 
 
 **NOTE
          H -
          ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**
 
 Accrued
          expenses
          and other current liabilities consist of the following:
 Payroll
                      taxes payable
                  
                  $
                  1,073,682
                  a)Deferred
                      payroll taxes
                  
                  
                  521,400Royalties
                      to be paid
                  
                  
                  212,775Accrued
                      interest
                  
                  
                  39,236Invoices
                      to be received
                  
                  
                  126,246Accrued
                      holiday expenses employees
                  
                  
                  223,581Board
                      remuneration to be paid
                  
                  
                  137,624Other
                      accrued liabilities
                  
                  
                  569**$**
                  **2,335,113**
  _________________
  a) Payroll taxes payable have been partly offset against VAT refund
          claimed.
 
 
 **NOTE I
          – SHAREHOLDER’S EQUITY TRANSACTIONS**
 
 Common
          stock
  During
          the nine
          months ended ended September 30, 2007, the Company sold 3,182,609 units
          at $1.15
          per unit to unrelated third parties for proceeds of $ 3,660,000 pursuant
          to an
          exemption from registration claimed under Rule 4(2) of the Securities Act
          of
          1933, as amended.  Each unit consisted of two shares of the Company’s
          par value common stock and one Common Stock Warrant to purchase the Company’s
          common stock at $2.75 per share at any time within the next 5 years. In
          total
          1,591,308 warrants have been issued in relation to this sale.
 
 During
          the nine
          months ended September 30, 2007, the Company issued 9,147,861 units at
          $0,80 per
          unit to unrelated third parties for proceeds of approximately $7,313,000
          pursuant to an exemption from registration claimed under Rule 4(2) of the
          Securities Act of 1933, as amended.  In relation to this sale
          2,500,000 warrants have been issued to purchase the Company’s common stock at
          $1.35 per share at any time within the next 5 years.
 Of
          this
          subscription, 6,287,273 shares were used to convert outstanding debt amounting
          to $5,024,899. The remaining 2,288,471 shares have been sold for cash,
          however  the cash was paid directly by subscriber to vendors of the
          Company and didn’t therefore go through the Company’s records.
 
 During
          the
          quarter, the Company sold  600,000 shares of its common stock to an
          accredited investor based in the Netherlands at $0,90 per share for a total
          cash
          consideration of $538,604 pursuant to an exemption from registration claimed
          under Rule 4(2) of the Securities Act of 1933, as amended.
 Cash
                  
                  
                  Cash
                      to
                      Vendors
                  
                  
                  Conversion
                      of Debt
                  
                  
                  Total
                  
                  
                  UnitsShares
                      issued @ 1.15
                  
                  $
                  2,735,019
                  
                  
                  $
                  635,961
                  
                  
                  $
                  289,020
                  
                  
                  $
                  3,660,000
                  
                  
                  $
                  3,182,609Shares
                      issued @ 0.80
                  
                  
                  
                  
                  
                  
                  2,288,471
                  
                  
                  
                  5,024,899
                  
                  
                  
                  7,313,370
                  
                  
                  
                  9,147,861Shares
                      issued @ 0.90
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  538,604
                  
                  
                  
                  538,604
                  
                  
                  
                  600,000$
                  2,735,019
                  
                  
                  $
                  2,924,432
                  
                  
                  $
                  5,852,523
                  
                  
                  $
                  11,511,974
                  
                  
                  $
                  12,930,470
 
 *-
                11
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
  
  **NOTE J
          - COMMITMENTS AND CONTINGENCIES**
  Litigation
  In
          June 2007,
          Playlogic Entertainment Inc. was sued in class action before the US district
          court in Manhattan, with respect to alleged damage as a result of copy
          protection software included in Age of Pirates – Caribbean Tales. We do not
          foresee any liability in this matter, as plaintiffs have clearly sued the
          wrong
          company and the wrong entity. Playlogic acts only as a publisher of the
          game and
          therefore is not liable for possible faults in production or distribution.
          Moreover, as far as any claim could be brought against Playlogic, it would
          be
          the Dutch subsidiary Playlogic International NV, with its statutory seat
          in
          Amsterdam, the Netherlands, that would have to be sued. As a consequence,
          the
          pending case should fail on both grounds and any new action against the
          Dutch
          subsidiary would have to be brought before the Dutch courts that are even
          more
          likely than the US courts to reject class actions like this.
 
 Moreover
          the
          Company is involved in a few minor legal actions incidental to its ordinary
          course of business.
  With
          respect to
          the above matter, the Company believes that it has adequate legal claims
          or
          defenses and/or provided adequate accruals for related costs such that
          the
          ultimate outcome will not have a material adverse effect on the Company’s future
          financial position or results of operations.
 
 Office
          leases
  The
          Company
          leases it’s executive offices located at Concertgebouwplein 13 in Amsterdam from
          Mr. Prof. Dr. D. Valerio. This lease agreement expires on June 30, 2008.
          The
          lease requires annual payments of approximately $83,000 (€59,000) per year, to
          be paid in quarterly installments.
 
 Our
          subsidiary,
          Playlogic Game Factory, B. V., previously operated in leased offices, located
          at
          Hoge Mosten 16-24 in Breda, from Kantoren Fonds Nederland B.V. pursuant
          to a
          lease agreement which expired on February 28, 2007. Playlogic Game Factory,
          B.
          V., leases offices located at Hambroeklaan 1 in Breda from Neglinge BV
          pursuant
          to a lease agreement which expires on October 1, 2013. This lease agreement
          contains an extension option, which if exercised, will extend the expiration
          date to October 1, 2018. At the execution of this lease agreement, the
          landlord
          committed itself to invest approximately $425,000 (€300,000) in leasehold
          improvements which are scheduled to be repaid by Playlogic Game Factory
          B.V.
          over a 10 year period. The lease requires annual payments of
          approximately$425,000 (€300,000) per year, payable in quarterly
          installments.
  Transportation
          leases
 
 The
          Company
          leases 23 automobiles for certain officers and employees pursuant to the
          terms
          of their individual employment agreements under operating lease agreements.
          These agreements are for terms of 3 to 4 years and begin to expire in 2007.
          The
          leases require monthly aggregate payments of approximately $25,000.
 
 Debt
          restructuring
 
 During
          the three
          months ended September 30, 2007, the Company has negotiated a discount
          amounting
          to approximately $180,000 with some of it’s creditors resulting in the
          obligation to pay the amount of approximately $210,000 as a premium to
          the next
          capital raise. The realized gain following the agreed discount has been
          included
          in other income and expenses.
 
  **NOTE K
          — OTHER RELATED PARTY TRANSACTIONS**
  Willem
          M. Smit,
          the Company’s Chief Executive Officer, has agreed to not receive any cash
          compensation until such time that the Company achieves positive cash flows
          from
          operations. However, the Company does reimburse Mr. Smit for his business
          related expenses and provides him with an automobile. As Mr. Smit provides
          executive management and oversight services to the Company, an amount of
          $100,000 per annum (or $25,000 per quarter) is imputed as the value of
          his
          services and recorded as additional contributed capital to the
          Company.
  
 *-
                12
                -*
  **PLAYLOGIC
            ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
            NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (unaudited)**
 
 Effective
          January 1, 2006 the Company entered into a service agreement with Altaville
          Investments B.V., a company beneficially owned by its CEO Willem M. Smit.
          The
          Company pays for certain service among others house keeping and cleaning
          services provided by Altaville to the Company an annual aggregate amount
          of
          approximately $ 50,000 which is paid in twelve monthly
          installments.
 
 
 **NOTE L
          - SEGMENT INFORMATION AND REVENUE CONCENTRATIONS**
 
 The
          Company
          sells it’s products to wholesale distributors in various domestic and foreign
          markets. The following table shows the Company’s gross revenue
          composition:
 
 Nine
                    months ended September 30,2007
                
                2006Europe
                    and United KingdomCustomer
                    A
                
                2,772,328
                *
                33%
                
                1,463,597
                32%Customer
                    B
                
                1,676,799
                
                20%
                
                1,213,661
                26%Customer
                    C
                
                1,795,135
                
                22%
                
                0
                0%Customer
                    D
                
                652,853
                
                8%
                
                0
                0%Others
                
                1,268,530
                
                15%
                
                304,158
                7%8,165,645
                
                98%
                
                2,981,416
                65%Middle
                    East/AfricaOthers
                
                0
                
                0%
                
                53,538
                1%0
                
                0%
                
                53,538
                1%United
                    States & CanadaCustomer
                    A
                
                0
                *
                0%
                
                1,144,864
                25%Customer
                    E
                
                130,773
                
                2%
                
                414,047
                9%130,773
                
                2%
                
                1,558,911
                34%Total
                
                8,296,418
                
                100%
                
                4,593,865
                100%
  *
          The Company
          entered into a license contract with Customer A, for global distribution
          of
          certain games. As the Company is located in Europe, the revenue has been
          allocated to Europe and UK. Part of this revenue should however be read
          as US
          market revenue.
  
 **NOTE
          M –
OTHER INCOME & EXPENSES**
 
 **Debt
          restructuring**
 
 During
          the three
          months ended September 30, 2007, the Company has negotiated a discount
          amounting
          to $100,000 with vendor A resulting in the obligation to pay an amount
          of
          $100,000 as a premium to the next capital raise. The realized gain following
          the
          agreed discount has been included in gain on debt restructuring. Furthermore,
          the Company has negotiated a discount amounting to $80,000 with vendor
          B
          resulting in the obligation to pay an amount of $110,000 as a premium to
          the
          next capital raise. The realized gain following the agreed discount has
          been
          included in gain on debt restructuring. With the same vendor (B) the Company
          agreed a settlement of 197,000 based on agreed payments.
 The
          Company
          estimates the chance of a future successful capital raise to be reasonably
          possible.
 
 During
          the first
          nine months of 2007, the company negotiated discounts resulting in the
          following
          gains, as presented under gains on debt restructuring totaling $850,411
          over 4
          different vendors.
 
 *-
                13
                -*
 
 **PLAYLOGIC
          ENTERTAINMENT, INC. AND SUBSIDIARIES**
 **CONDENSED
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**
 
 
 The
          total gain
          from settlements amounts to:
 Vendor
                
                gain
                    on
                    debt restructuring first six months
                
                
                Gain
                    on
                    debt restructuring during the 3th quarter
                
                
                TotalVendor
                    A
                
                
                
                
                $
                100,000
                
                
                $
                100,000Vendor
                    B
                
                
                
                
                $
                277,000
                
                
                $
                285,000Vendor
                    C
                
                $
                115,000
                
                
                
                
                
                
                $
                115,000Vendor
                    D
                
                $
                350,411
                
                
                
                
                
                
                $
                350,411$
                465,411
                
                
                $
                377,000
                
                
                $
                850,411
 
 The
          gains have
          been recognized based on agreed payments done.
 
 **Loan
          penalty expense**
 During
          the three
          months ended September 30, 2007, one of the Company’s loan providers, who
          imposed a penalty for being in default of repayment of a loan, amounting
          to
          $1,242,000 (€ 1,000,000) has waived that penalty during the quarter. As a result
          we have reversed that transaction and we have recorded this reversal as
          a gain,
          amounting to $1,377,000 (€ 1,000,000).****
   *-
              14
              -*
   **Item
          2.
          Management’s Discussion and Analyses of Financial Condition and Results of
          Operation**
 
 Playlogic
          is a
          publisher of interactive entertainment products, such as video game software
          and
          other digital entertainment products. We publish for most major interactive
          entertainment hardware platforms, like Sony’s PlayStation 3,and Playstation2,
          Microsoft’s Xbox 360 and Nintendo’s Wii, PCs and handheld devices (such as
          Nintendo DS, and PSP) and mobile devices. Our principal sources of revenue
          are
          derived from publishing operations. Publishing revenues are derived from
          the
          sale of our digital entertainment products. We own most of the intellectual
          properties of our products, which we believe positions us to maximize
          profitability.
 
 As
          a publisher,
          we are responsible for publishing, production, localization, QA and testing,
          PR
          and marketing, manufacturing and sales of our products. Playlogic’s products are
          sold to distributors who supply retailers worldwide. Furthermore, we sell
          directly to consumers through online distribution channels with various
          partners.
 
 Development
          studios throughout the world help create the games which are published
          by
          Playlogic. One of these studios is our fully owned subsidiary, Playlogic
          Game
          Factory B.V., located in The Netherlands. Other independent studios in
          various
          countries develop our games under Software Development Agreements (SDA).
          These
          development contracts generally provide that we pay an advance on future
          royalties earned upon achievement of milestones successfully completed
          and
          delivered. In addition, we license the rights of existing Playlogic IP
          to other
          development studios who then adapt these products to the specifications
          and
          abilities of other (console) platforms.
 
 Studios
          and
          developers contact us daily requesting financing and publishing of their
          games
          or concepts. We evaluate each of these offers based on several factors,
          including sales potential of concept or product, technology & tools used,
          track record and project management of the studio.
 
 We
          select which
          games we develop based on our analysis of consumer buying trends and behavior
          and our experience with similar or competitive products. Once we select
          a game
          to develop, we then assign a development studio, based upon its qualifications,
          previous experience and prior performance. Once developed, we distribute
          our
          games worldwide through existing distribution channels with global or local
          distributors. When appropriate we have the ability to release our titles
          simultaneously across a range of hardware formats to maximize overall sales
          for
          a particular product with a minimum augmentation in development time and
          resources.
 
 We
          believe that
          greater online functionalities, applications and  digital distribution
          on the new platforms will improve revenue margins and encourage further
          industry
          growth. In addition, according to DFC Intelligence, new sales potential,
          revenue
          opportunities from wireless gaming, online console gaming, and in-game
          advertising are expected to grow from $1 billion in 2005 to $5 billion
          in
          2009.
 
 **Industry
          Overview**
 
 Over
          the past
          two decades, the video game industry has advanced and become a valuable
          contributor to the entertainment consumption business. The estimated break-down
          of gamers in US households is 61% male and 39% female, with 47% of gamers
          between 13 and 24 years old, 30% between 25 and 39 years old; and 23% over
          40
          years old.
 
 Worldwide,
          the
          video game market is projected to increase from $26.2 billion in 2004 to
          $46.5
          billion in 2010, growing at an 11.4 percent compound annual rate. Asia
          Pacific,
          currently the largest market at $9.6 billion in 2004, is projected to maintain
          its dominance, growing at a 12.3 percent compound annual rate through 2010
          to
          reach $17.4 billion. The United States has the second largest market and
          is
          expected to grow from $8.4 billion in 2005 to $13.0 billion in 2010, an
          8.9
          percent compounded annual according to Company Annual Reports of Crandell
&
Sidak. The combined US and European software markets will grow at a 13.5%
          CAGR
          over the 2006-2008 period. (WedBush Morgan).
 
 The
          video game
          market reflects consumer spending on console games (including handheld
          games),
          personal computer (PC) games, online games, and wireless games. The category
          excludes spending on the hardware and accessories used to play the
          games.
 
 With
          the launch
          of the Nintendo Wii and Sony PlayStation 3, the gaming industry had a
          record-breaking year in 2006. According to NPD Group's industry tracking
          sales
          figures, overall profits are up 19 percent, and the combined hardware,
          software,
          and accessories sales reached $12.5 billion in the U.S. alone, making it
          the
          highest grossing year in the video game industry to date.
 
 **Market
          Trends – Worldwide**
 
 The
          fastest-growing segment during the next five years, global video game spending
          will increase to $55.6 billion in 2008, at a 20.1 percent CAGR.
          (PricewaterhouseCoopers). By 2008, online and wireless will be major
          distribution channels, spurred by broadband penetration and new mobile
          phones
          that will be used as much for entertainment as for communication. The PC
          game
          market will shrink, and console game spending will grow as next generation
          consoles are introduced.
 
 
 *-
                15
                -*
 
 The
          video game
          market was in a transition year in 2005, awaiting the introduction of the
          next-generation consoles. Growth slumped to 3.3 percent, the slowest increase
          during the past five years. The next generation of consoles and recently
          introduced handheld games will spur the console/handheld market in the
          U.S.,
          EMEA, Asia Pacific, and Canada, while PC games will continue to decline
          or see
          little growth in the U.S. and EMEA. The introduction of new wireless phones
          capable of downloading games will boost the wireless game market in the
          U.S.,
          EMEA, Asia Pacific, and Canada. Overall, the video game market will expand
          at an
          11.4 percent CAGR to $46 billion in 2010 from $27 billion in 2005.
 
 **Console
          Installed Base**
 
 Since
          the
          introduction of PlayStation 2 in 2000, the console has sold over 140 million
          units worldwide according to games industry. biz. The PlayStation 3 has
          been
          introduced to the market in the second half of 2006. Microsoft introduced
          its
          next generation console, the Xbox 360, in November 2005. Playlogic will
          continue
          development of PlayStation2 titles, because of their large installed base
          of
          over 120 million units.
 
 Microsoft’s
          Xbox360 has sold 11.6 million units so far. As of April 1, 2007 , Sony
          has
          shipped approximately 5.5 million Playstation 3 units
          worldwide.   Nintendo’s next generation console, called ‘Wii’ has
          sold more than 9.27 million units so far. Wed bush Morgan Securities expects
          next generation hardware shipments through the end of 2007 will reach 46
          million
          units in the U.S. and Europe.
 
 Nintendo
          Dual
          Screens (‘Nintendo DS’) and PlayStation Portable (‘PSP’) were both successfully
          introduced to the market. The sales volume of the Nintendo DS reached 47.3
          million units by June 30, 2007, and PSP reached the sales volume of 25.4
          million
          units sold as of March 31 , 2007.
 
 **PC
          Games**
 
 Playlogic
          will
          continue to also release PC games since, in comparison to next generation
          consoles games, these products are less expensive to develop, address a
          very
          wide target audience and contribute significant better margins. Furthermore
          Playlogic will focus on new successful platforms like the Nintendo DS and
          Nintendo Wii.
 
 **Consumer
          Facts**
 
 Thirty
          percent
          of most frequent game players are under eighteen years old while twenty-six
          percent of most frequent game players are between 18 and 35 years old.
          Forty-four percent of most frequent game players are over 35 years old.
          Forty
          percent of most frequent console game players are under eighteen years
          old while
          thirty-five percent of most frequent game players are between 18 and 35 years
          old. Twenty-five percent of most frequent console game players are over
          35 years
          old. Thirty-eight percent of game players are women. Women age 18 or older
          represent a significantly greater portion of the game-playing population
          (30%)
          than boys age 17 or younger (23%).The average adult woman plays games 7.4
          hours
          per week.  The average adult man plays 7.6 hours per week. Though
          males spend more time playing than do females, the gender/time gap has
          narrowed
          significantly.
 
 Females
          are
          being significantly attracted to playing certain online multi-user video
          games
          that offer a more communal experience, and a small hardcore group of young
          females are playing aggressive games that are usually thought of as being
          "traditionally male" games. The most loyal fan-base is reported to be for
          large
          role-playing games     (Nielsen Active Gamer
          Study).
 
 According
          to the
          ESRB almost 41% of video and PC gamers are women.
 
 We
          believe the
          demographics of game players will widen, and be a major source of the growth
          of
          the industry. The first generation gamers are now in their 30s and are
          still
          playing games and new consumers enter the market, including children at
          the age
          of 6 to 8 and an increasing number of women players.
 
 *-
                16
                -*
  ***Expected
                      release******Game***
                  
                  ***Studio***
                  
                  ***Platform***
                  
                  ***date
                      to retail*****Completed
                      Games**Alpha
                      Black Zero
                  
                  Khaeon
                      (NL)
                  
                  PC
                  
                  ReleasedAirborne
                      Troops
                  
                  Widescreen
                      Games (F)
                  
                  PS2,
                      PC
                  
                  ReleasedCyclone
                      Circus
                  
                  Playlogic
                      Game Factory (NL)
                  
                  PS2
                  
                  ReleasedXyanide
                  
                  Overloaded
                      (NL)
                  
                  Mobile
                      Phones
                  
                  ReleasedWorld
                      Racing 2
                  
                  Synetic
                      (G)
                  
                  PS2,
                      Xbox,
                      PC
                  
                  ReleasedKnights
                      of
                      the Temple 2
                  
                  Cauldron
                      (SK)
                  
                  PS2,
                      Xbox,
                      PC
                  
                  ReleasedGene
                      Troopers
                  
                  Cauldron
                      (SK)
                  
                  PS2,
                      Xbox,
                      PC
                  
                  ReleasedXyanide
                  
                  Playlogic
                      Game Factory (NL)
                  
                  Xbox
                  
                  Released
                      (2)Age
                      of
                      Pirates: Caribbean Tales
                  
                  Akella
                      (Russia)
                  
                  PC
                  
                  ReleasedInfernal
                  
                  Metropolis
                      (Poland)
                  
                  PC
                  
                  ReleasedAncient
                      Wars: Sparta
                  
                  World
                      Forge (Russia)
                  
                  PC
                  
                  ReleasedXyanide
                      Resurrection
                  
                  Playlogic
                      Game Factory (NL)
                  
                  PSP
                  
                  ReleasedEvil
                      Days
                      Of Luckless John
                  
                  3A
                      Entertainment (Great Britain)
                  
                  PC
                  
                  ReleasedXyanide:
                      Resurrection
                  
                  Playlogic
                      Game Factory (NL)
                  
                  PS2
                  
                  ReleasedObscure
                      2
                  
                  Hydravision
                      (F)
                  
                  PC
                  
                  Released
                      (1)Obscure
                      2
                  
                  Hydravision
                      (F)
                  
                  PS2
                  
                  Released
                      (1)**Under
                      development**Obscure
                      2
                  
                  Hydravision
                      (F)
                  
                  PS2,
                      PC,
                      Wii
                  
                  Q1
                      2008
                      (4)Officers
                  
                  GFI
                      (Russia)
                  
                  PC
                  
                  Q1
                      2008Dimensity
                  
                  Dagger
                      Studio (Bulgaria)
                  
                  PC
                  
                  Q1
                      2008Age
                      of
                      Pirates: Captain Blood*
                  
                  Akella
                      (Russia)
                  
                  PC
                  
                  Q1
                      2008Age
                      of
                      Pirates: Captain Blood*
                  
                  Akella
                      (Russia)
                  
                  Xbox360
                  
                  Q1
                      2008Aggression
                      1914
                  
                  Buka
                      (Russia)
                  
                  PC
                  
                  Q1
                      2008Red
                      Bull
                      Break Dancing
                  
                  TBC
                  
                  DS
                  
                  Q2
                      2008Infernal
                      2
                  
                  Metropolis
                      (Poland)
                  
                  TBC
                  
                  Q2
                      2008
                      (5)Xyanide:
                      Resurrection
                  
                  Playlogic
                      Game Factory (NL)
                  
                  PC
                  
                  Q1
                      2008Dragon
                      Hunters
                  
                  Engine
                      software (NL)
                  
                  DS
                  
                  Q1
                      2008Simon
                      the
                      Sorcerer 4
                  
                  RTL
                      /Silverstyle Studio (GER)
                  
                  PC
                  
                  Q1
                      2008The
                      Strategist
                  
                  Humagade/Canada
                  
                  DS
                  
                  Q2
                      2008Undisclosed
                      Title
                  
                  Playlogic
                      Game Factory (NL)
                  
                  PS3,
                      Xbox360, PC
                  
                  Q4
                      2008
 _______________
 
 1       Released
          in Europe only.
 2       Released
          in the US only
 3       Released
          in Asia only
 4       To
          be released in all territories/Global
 5       Final
          decision on Next Generation options to be made.
 *       working
          title
 
 The
          games
          industry is currently in a transition period. The current and Next Gen
          consoles
          (Xbox360, PlayStation 3, Wii) and DS platforms have broadened the market,
          appealing to an even larger mass consumer audience than ever before, providing
          increased publishing opportunities. The investments in next generation
          platforms
          are however larger than for the previous generation platforms. Playlogic
          has
          created a healthy balance between games available for the current and the
          next
          generation platforms. To spread risk and broaden Playlogic’s portfolio, PC games
          and handheld titles are a substantial part of the line-up for the coming
          year.
 
 **Material
          agreements**
 
 During
          the three
          months ended September 30, 2007, the Company entered into a number of publishing
          and distribution agreements.
 
 *-
                17
                -*
  
 **Critical
          Accounting Policies and Estimates**
  Our
          most
          critical accounting policies, which are those that require significant
          judgment,
          include: capitalization and recognition of software development costs and
          licenses; share-based compensation and revenue recognition. In-depth
          descriptions of these can be found in our Annual Report on Form 10-KSB
          for the
          fiscal year ended December 31, 2006 (the “2006 Form 10-K”). There have been no
          material changes in our existing accounting policies from the disclosures
          included in our 2006 Form 10-K.
 
 **Recently
          Issued Accounting Pronouncements**
 
 In
          September
          2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157,
*Fair Value Measurements* (“SFAS 157”), which clarifies the definition of
          fair value, establishes a framework for measuring fair value in generally
          accepted accounting principles, and expands disclosures about fair value
          measurement.  SFAS 157 does not require any new fair value measurements and
          eliminates inconsistencies in guidance found in various prior accounting
          pronouncements.  SFAS 157 will be effective for us on November 1, 2008. We
          are currently assessing whether the adoption of SFAS 157 will have an impact
          on
          our financial statements.
  In
          September
          2006, the SEC released Staff Accounting Bulletin No. 108, *Considering the
          Effects of Prior Year Misstatements when Quantifying Misstatements in Current
          Year Financial Statements* (“SAB 108”). SAB 108 provides interpretive
          guidance on the SEC’s views on how the effects of the carryover or reversal of
          prior year misstatements should be considered in quantifying a current
          year
          misstatement. The provisions of SAB 108 will be effective for us on November
          1,
          2007. We are currently evaluating the impact of applying SAB 108 but do
          not
          believe that its application will have a material effect on our financial
          position, cash flows, or results of operations.
  In
          June 2006,
          the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income
          Taxes, an interpretation of SFAS No. 109* (“FIN 48”), to create a single
          model to address the accounting for uncertainty in tax positions. FIN 48
          clarifies the accounting for income taxes by prescribing the minimum recognition
          threshold a tax position is required to meet before being recognized in
          the
          financial statements. FIN 48 also provides guidance on derecognition,
          measurement, classification, interest and penalties, accounting in interim
          periods, disclosure, and transition. FIN 48 will be effective for us beginning
          November 1, 2007. The cumulative-effect of adopting FIN 48 will be recorded
          to
          opening retained earnings. Management is currently evaluating the effect,
          if
          any, that the adoption of FIN 48 will have on our consolidated financial
          statements.
  **Results
          of Operations**
  *Nine
          Months
          Ended September 30, 2007 Compared to Nine Months Ended September 30,
          2006*
  Net
          sales. Net
          sales for the nine months ended September 30, 2007 were $8,296,418 as
          compared to $4,593,865 for the nine months ended September 30, 2006. This
          increase of $3,702,553 or 81% in revenue is primarily related to the release
          of
          Infernal and Sparta Ancient Wars through our global distribution agreement
          with
          Eidos and the release of Obscure II in the third quarter of 2007.
  Gross
          Profit.
          Gross profit totaled $4,758,191 for the nine months ended September 30,
          2007. For the nine months ended September 30, 2006, gross profit totaled
          $2,001,370. This increase in gross profit is primarily the result of the
          increase in net sales.
 Gross
          Profit as
          a percentage of sales can vary significantly from period to period due
          to the
          sales mix and the type of sales deals included.
  Selling,
          Marketing, General and Administrative Expenses. Selling, marketing, general
          and
          administrative expenses totaled $3,689,580, for the nine months ended
          September 30, 2007. For the nine months ended September 30, 2006,
          selling, general and administrative expenses totaled $5,030,264. This represents
          a decrease of $1,340,684 or 27%. This decrease in selling, general and
          administrative expenses is due to managements’ focus on cost control and debt
          restructuring.
  Research
          and
          Development. Research and development expenses totaled $448,962 for the
          nine
          months ended September 30, 2007. For the nine months ended September 30,
          2006,
          research and development totaled $2,262,975. This represents a decrease
          of
          $1,814,013 or 404%. This decrease is due to costs in relation to 3 rd party
          development
          activities being classified as Cost of Sales.
  Depreciation.
          Depreciation expenses totaled $193,381 for the nine months ended September
          30,
          2007. For the nine months ended September 30, 2006, the depreciation expense
          totaled $226,490.
 
 
 *-
                18
                -*
 
 
 Gain
          on debt
          restructuring. Gain on debt restructuring totaled $850,411 for the nine
          months
          ended September 30, 2007. For the nine months ended September 30, 2006,
          gain on debt restructuring totaled $0. The gains  relate to debt
          extinguishments with various creditors arranged during the first nine months
          of
          the year.
 
 Interest
          Expense. Interest expense totaled $1,054,659 for the nine months ended
          September 30, 2007. For the nine months ended September 30, 2006, interest
          expense totaled $611,803. This represents an increase of $442,856, or 72%.
          This
          increase in interest expense is primarily due to the increase of interest
          bearing short term loans during the year.
 
 Loan
          penalty
          Expense. The nine months ending September 30, 2006 showed a penalty expense
          of
€1 million ($1,242,000). The nine months ending September 30, 2007 show
          an
          income of €1 million ($1,377,000). The €1 million penalty charged in the third
          quarter of 2006 was waived in the third quarter of 2007 and is therefore
          shown
          as a profit in 2007.
  Net
          Result. Our
          net profit was $1,599,170 for the nine months ended September 30, 2007. For
          the nine months ended September 30, 2006, the net loss totaled $8,545,307.
          The improvement of the result is primarily the result of new titles released
          to
          market in the first three quarters of Fiscal 2007. Furthermore the Company
          was
          able to agree settlements on certain outstanding debts that have resulted
          in
          significant gains. The Company continues to focus on controlling operating
          expenses and debt restructuring.
  Other
          comprehensive income. Other comprehensive income represents the change
          of the
          Currency Translation Adjustments balance during the reporting period. The
          Currency Translation Adjustments balance that appears in the stockholders’
equity section is cumulative in nature and is a consequence from translating
          all
          assets and liabilities at current rate whereas the stockholders’ equity accounts
          are translated at the appropriate historical rate and revenues and expenses
          being translated at the weighted-average rate for the reporting period.
          The
          Change in currency translation adjustments was $(582,442) for the nine
          months
          ended September 30, 2007 and $(460,639) for the nine months ended
          September 30, 2006.
  **Liquidity
          and Capital Resources**
  As
          of  September 30, 2007, our cash balance was
          $317,168.  Furthermore the Company  recorded "Cash in
          escrow", amounting to $778,047which is cash being held by an attorney.
          These
          funds are subject to withdrawal by the Company at the Company's option.
          The full
          amount has been transferred to the Company’s bank account during October
          2007
  In
          order to
          cover our working capital requirements through the fourth quarter of 2007,
          we
          will need to obtain additional financing. The Company is currently in
          negotiation with several parties in this respect. The Company is presently
          in
          contact with both private investors and institutional investors. If the
          Company
          does not obtain any necessary financing in the future, it 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
          cash generation from the released games, 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.
  Our
          net accounts
          receivable, after providing an allowance for doubtful accounts, at
          September 30, 2007 was $2,160,224.
  **Fluctuations
          in Quarterly Operating Results and Seasonality**
  We
          have
          experienced fluctuations in quarterly operating results as a result of
          the
          timing of the introduction of new titles; variations in sales of titles
          developed for particular platforms; market acceptance of our titles; development
          and promotional expenses relating to the introduction of new titles; sequels
          or
          enhancements of existing titles; projected and actual changes in platforms;
          the
          timing and success of title introductions by our competitors; product returns;
          changes in pricing policies by us and our competitors; the accuracy of
          retailers’ forecasts of consumer demand; the size and timing of acquisitions;
          the timing of orders from major customers; and order cancellations and
          delays in
          product shipment. Quarterly comparisons of operating results are not necessarily
          indicative of future operating results.
 
 *-
                19
                -*
  
 **Item
          3.
          Quantitative and Qualitative Disclosures about Market Risk**
  We
          transact
          business in foreign currencies and are exposed to risks resulting from
          fluctuations in foreign currency exchange rates. Accounts relating to foreign
          operations are translated into United States dollars using prevailing exchange
          rates at the relevant quarter end. Translation adjustments are included
          as a
          separate component of stockholders’ equity. For the nine months ended September
          30, 2007, our accumulated foreign currency translation adjustment loss
          was
          approximately $3.0 million.
  
 **Item 4.
          Controls and Procedures**
  *Evaluation
          of Disclosure Controls and Procedures*
  Based
          on an
          evaluation under the supervision and with the participation of management,
          our
          principal executive officer and principal financial officer have concluded
          that
          our disclosure controls and procedures as defined in rules 13a-15(e) and
          15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)
          were effective as of September 30, 2007 to ensure that information required
          to be disclosed by us in reports that we file or submit under the Exchange
          Act
          is (i) recorded, processed, summarized and reported within the time periods
          specified in the Securities and Exchange Commission rules and forms and
          (ii) accumulated and communicated to our management, including our
          principal executive officer and principal financial officer, as appropriate
          to
          allow timely decisions regarding required disclosure.
  *Changes
          in
          Internal Control over Financial Reporting*
  There
          were no
          changes in our internal control over financial reporting during the third
          quarter of 2007, which were identified in connection with management’s
          evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under
          the Exchange Act, that have materially affected, or are reasonably likely
          to
          materially affect, our internal control over financial reporting.
   **PART
          II
— OTHER INFORMATION**
  **Item
          1. Legal Proceedings**
 
 In
          June 2007,
          Playlogic Entertainment Inc. was sued in class action before the US district
          court in Manhattan, with respect to alleged damage as a result of copy
          protection software included in Age of Pirates – Caribbean Tales. We do not
          foresee any liability in this matter, as plaintiffs have clearly sued the
          wrong
          company and the wrong entity. Playlogic acts only as a publisher of the
          game and
          therefore is not liable for possible faults in production or distribution.
          Moreover, as far as any claim could be brought against Playlogic, it would
          be
          the Dutch subsidiary Playlogic International NV, with its statutory seat
          in
          Amsterdam, The Netherlands, that would have to be sued. As a consequence,
          the
          pending case should fail on both grounds and any new action against the
          Dutch
          subsidiary would have to be brought before the Dutch courts that are even
          more
          likely than the US courts to reject class actions like this.
  Except
          as
          referred to above there were no new material legal proceedings or material
          developments to the pending legal proceedings that have been previously
          reported in Part I, Item 3 of our 2006 Form 10-K.  A full
          discussion of our pending legal proceedings is also contained in Part I,
          Item 1, “Notes to Unaudited Condensed Consolidated Financial Statements” of
          this Report.
  
 **Item
          1A.
          Risk Factors**
  There
          have been
          no material changes to the Risk Factors disclosed in Item 1A of our Annual
          Report on Form 10-K for the year ended December 31, 2006.
  
 **Item
          2 -
          Changes in Securities.**
 
 No
          response
          required.
 
 
 **Item
          3 -
          Defaults Upon Senior Securities.**
 
 No
          response
          required.
 
 *-
                20
                -*
   **Item
          4 -
          Submission of Matters to a Vote of Security Holders.**
 
 No
          response
          required.
 
 
 **Item
          5 -
          Other Information.**
 
 No
          response
          required.
   **Item
          6.
          Exhibits**
  **Exhibits:**31.1
                
                Chief
                    Executive Officer Certification Pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.31.2
                
                Chief
                    Financial Officer Certification Pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.32.1
                
                Chief
                    Executive Officer Certification pursuant to 18 U.S.C.
                    Section 1350, as adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.32.2
                
                Chief
                    Financial Officer Certification pursuant to 18 U.S.C.
                    Section 1350, as adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.
  
 *-
                21
                -*
   **SIGNATURES**
  
 Pursuant to the requirements of Section 13 or 15(d) of the Securities
          Exchange Act of 1934, the registrant has duly caused this report to be
          signed on
          its behalf by the undersigned, thereunto duly authorized.
  **Playlogic
                    International, Inc.**Date:
                    November 6, 2007
                By:
                /s/ Willem
                    M. Smit
                  Willem
                    M.
                    Smit
                  Chief
                    Executive Officer
 
  *-
                22
                -*
 
  **Exhibit
          Index**
   **Exhibits:**31.1
                
                Chief
                    Executive Officer Certification Pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.31.2
                
                Chief
                    Financial Officer Certification Pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.32.1
                
                Chief
                    Executive Officer Certification pursuant to 18 U.S.C.
                    Section 1350, as adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.32.2
                
                Chief
                    Financial Officer Certification pursuant to 18 U.S.C.
                    Section 1350, as adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.
   *-
          2**3
          -*