UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549




FORM
10-QSB/A






(Mark
One)


þ
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the period ended: March 31, 2008


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 May 8, 2008Common
      Stock, par value $.001 per share
            
            41,532,580
      shares




Transitional
Small Business Disclosure Format (check one): Yes o No þ












EXPLANATORY
NOTE
 
 This
Amendment No. 1 on Form 10-QSB/A amends the items identified below with respect
to the quarterly report on Form 10-QSB filed by Playlogic Entertainment, Inc.
(“We” or the “Company”) with the Securities and Exchange Commission (the “SEC”)
on May 8, 2008 (the “Original Filing”) for the fiscal quarter ended March 31,
2008.
 
 In
connection with the review of the Original Filing, the SEC asked the Company
to  revise the officers’ certifications to include all the required
disclosures set forth in Exhibit 601(b)(31) of Regulation S-K.  The
Company determined that it would amend its quarterly report for the year ended
December 31, 2007 to address the SEC’s comments. The amendment has no impact on
the Company’s consolidated balance sheet, consolidated statements of operations,
consolidate statements of changes in shareholders’ equity and consolidated
statements of cash flows for the fiscal quarter ended March 31,
2008.
 
 Changes
Reflected in this Form 10-QSB/A
 
 This
Form 10-QSB/A only amends certain information in the following items related to
the fiscal quarter ended March 31, 2008:
 
 Cover
Page
 Explanatory
Note
 Part
I
 Item 4
Disclsoure Controls and Procedures
 Part
II
 Item
1A – Risk Factors
 Exhibits
 Signature
Page
 Certifications
 
 The
application of the foregoing has resulted in certain amendments to the Original
Filing.  Primarily these amendments are to address the SEC’s comments
as discussed above.  Except for the amended information, this Form
10-QSB/A continues to describe conditions as of the date of the Original Filing,
and the disclosures contained herein have not been updated to reflect events,
results or developments that have occurred after the Original Filing, or to
modify or update these disclosures affected by subsequent events, results or
developments that have occurred or facts that have become known to us after the
date of the Original Filing (other than this amendment), and such forward
looking statements should be read in their historical context.  This
Form 10-QSB/A should be read in conjunction with the Company’s filings made with
the SEC subsequent to the Original Filing, including any amendments to those
filings.














PLAYLOGIC
ENTERTAINMENT, INC.




FORM
10-QSB/A




TABLE
OF CONTENTS






PART
      I -- FINANCIAL INFORMATION
            Page
      No.Item
      1.
            Financial
      Statements
            3Item
      2.
            Management’s
      Discussion and Analysis
            12Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            17Item
      4
            Controls
      and Procedures
            18PART
      II -- OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            18Item
      1A.
            Risk
      Factors
            18Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            18Item
      3.
            Defaults
      Upon Senior Securities
            18Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            19Item
      5.
            Other
      Information
            19Item
      6.
            Exhibits
            19Signatures
            20Exhibit
      Index
            21Certifications
            Attached




-
2 -






PART I -- FINANCIAL INFORMATION


Item 1 -  Financial
Statements





PLAYLOGIC
ENTERTAINMENT INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




March
      31, 2008Unaudited
              
              
              December
      31, 2007Derived from audited statementsASSETSCurrent
      AssetsCash
      and cash equivalents
              
              $
              6,629,290
              
              
              $
              349,464ReceivablesTrade,
      net of allowance for doubtful accounts
              
              
              1,908,464
              
              
              
              671,148Officers
              
              
              14,695
              
              
              
              78,754Value
      added taxes from foreign governments
              
              
              61,839
              
              
              
              50,620Current
      portion of software development costs
              
              
              7,468,794
              
              
              
              6,244,843Discount
      on long term debt
              
              
              490,000
              
              
              
              -Prepaid
      expenses and other receivables
              
              
              2,591,490
              
              
              
              892,855Total
      current assets
              
              
              19,164,572
              
              
              
              8,287,684Property
      and equipment, net of accumulated depreciation
              
              
              780,194
              
              
              
              753,768Other
      assetsSoftware
      development costs, net of current portion
              
              
              1,523,739
              
              
              
              1,040,510Restricted
      cash
              
              
              237,225
              
              
              
              -Total
      other assets
              
              
              1,760,964
              
              
              
              1,040,510Total
      Assets
              
              $
              21,705,730
              
              
              $
              10,081,962LIABILITIES AND
      SHAREHOLDERS' DEFICITCurrent
      LiabilitesAccounts
      and notes payableAccounts
      payable
              
              $
              5,803,424
              
              
              $
              4,785,678Note
      payable to bank
              
              
              1,164,391
              
              
              
              1,056,552Note
      payable, other
              
              
              427,146
              
              
              
              397,845Other
      current liabilitiesCurrent
      maturities of long-term debt
              
              
              47,445
              
              
              
              44,205Accrued
      liabilities
              
              
              2,647,812
              
              
              
              2,142,754Deferred
      revenues
              
              
              413,742
              
              
              
              148,750Indebtedness
      to related party
              
              
              2,623,299
              
              
              
              589,400Total
      current liabilities
              
              
              13,127,259
              
              
              
              9,165,184Long-term
      debt, less current maturitiesNote
      payable to related party
              
              
              4,000,000
              
              
              
              -Note
      payable to other
              
              
              225,365
              
              
              
              221,0254,225,365
              
              
              
              221,025Total
      liabilities
              
              
              17,352,624
              
              
              
              9,386,209Shareholders'
      EquityPreferred
      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.  41,532,580  shares issued and
      outstanding
              
              
              41,533
              
              
              
              38,533Additional
      paid-in capital
              
              
              56,880,831
              
              
              
              54,081,832Deferred
      compensation-employee stock options
              
              
              438,948
              
              
              
              374,571Accumulated
      currency translation adjustments reserve
              
              
              (2,963,061
              )
              
              
              (3,057,297
              )Accumulated
      deficit
              
              
              (50,045,145
              )
              
              
              (50,741,886
              )4,353,106
              
              
              
              695,753Total
      liabilities and shareholders' equity
              
              $
              21,705,730
              
              
              $
              10,081,962




See
accompanying notes to unaudited condensed consolidated financial
statements


-
3 -








PLAYLOGIC
ENTERTAINMENT INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS





unauditedThree
      months ended March 31,2008
            
            
            2007RevenuesSales,
      net of returns and allowances
            
            $
            4,031,680
            
            
            $
            3,482,596Cost
      of salesDirect
      costs and license fees
            
            
            (1,070,560
            )
            
            
            (637,983
            )Amortisation
      of software development costs
            
            
            (745,693
            )
            
            
            (448,418
            )(1,816,253
            )
            
            
            (1,086,401
            )Gross
      profit
            
            
            2,215,427
            
            
            
            2,396,195Operating
      expensesResearch
      and development
            
            
            63,892
            
            
            
            22,719Selling
      and marketing
            
            
            185,647
            
            
            
            464,792General
      and administrative
            
            
            1,145,359
            
            
            
            1,136,012Depreciation
            
            
            76,820
            
            
            
            81,690Total
      operating expenses
            
            
            1,471,718
            
            
            
            1,705,213Profit  from
      operations
            
            
            743,709
            
            
            
            690,982Other
      income/(expense)Gain
      on debt restructuring
            
            
            -
            
            
            
            387,408Interest
      expense
            
            
            (57,915
            )
            
            
            (319,446
            )Realized
      and unrealized exchange profit
            
            
            10,954
            
            
            
            -Profit
      before provision for income taxes
            
            
            696,747
            
            
            
            758,944Provision
      for income taxes
            
            
            -
            
            
            
            -Net
      profit
            
            $
            696,747
            
            
            $
            758,944Net
      profit per weighted-average share of common stock outstanding, computed on
      net profit-
      basic and fully diluted
            
            $
            0.02
            
            
            $
            0.03Weighted-average
      number of shares of common stock outstanding-
      basic and fully diluted
            
            
            38,565,913
            
            
            
            25,332,109




See
accompanying notes to unaudited condensed consolidated financial
statements




-
4 -





PLAYLOGIC
ENTERTAINMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS





Three
      months ended March 31,2008
            
            
            2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      cash used in operating activities
            
            $
            (345,472
            )
            
            $
            23,101CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      paid for software development
            
            
            (1,868,065
            )
            
            
            1,696,303-Cash
      paid to acquire property and equipment
            
            
            (49,247
            )
            
            
            42,314-Net
      cash used in investing activities
            
            
            (1,917,312
            )
            
            
            (1,738,617
            )CASH
      FLOWS FROM FINANCING ACTIVITIESReceipts
      on bank credit facility
            
            
            -
            
            
            
            30,229Payments
      on bank line of credit
            
            
            29,081
            
            
            
            -Cash
      repaid on short term notes
            
            
            -
            
            
            
            407,132-Principal
      payments on long-term debt
            
            
            (11,347
            )
            
            
            9,850-Cash
      received from shareholder loans
            
            
            5,719,297
            
            
            
            2,090,419Proceeds
      from sales of common stock
            
            
            2,790,000Net
      cash provided by financing activities
            
            
            8,527,031
            
            
            
            1,703,666Effect
      of foreign exchange on cash
            
            
            15,578
            
            
            
            1,915Increase/(decrease)
      in cash
            
            
            6,279,825
            
            
            
            9,936-Cash
      at beginning of period
            
            
            349,464
            
            
            
            16,537Cash
      at end of period
            
            $
            6,629,290
            
            
            $
            6,601Supplemental
      disclosures of interest and income taxes paidInterest
      paid during the period
            
            $
            -
            
            
            $
            -Income
      taxes paid (refunded)
            
            
            -
            
            
            
            -Supplemental
      disclosures of non-cash investing and financing activitiesCommon
      stock issued to repay notes payable
            
            $
            -
            
            
            $
            -Cost
      of acquiring capital paid with issuance of common stock
            
            $
            210,000
            
            
            $
            -




See
accompanying notes to unaudited condensed consolidated financial
statements




-
5 -








PLAYLOGIC
ENTERTAINMENT, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY







Common stock
              
              
              
              
              
              Deferred
                compensation
      -
                employee
      stock
                optionsShares
              
              
              Par
      value
              
              
              Additionalpaid-incapital
              
              
              Accumulated
      othercomprehensiveloss
              
              
              Accumulateddeficit
              
              
              TotalBalances
      at December 31, 2007
              
              
              38,532,579
              
              
              $
              38,533
              
              
              $
              54,081,831
              
              
              $
              374,571
              
              
              $
              (3,057,291
              )
              
              $
              (50,741,892
              )
              
              $
              695,752Common
      stock issued for cash
              
              
              3,000,000
              
              
              
              3,000
              
              
              
              2,997,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,000,000Capital
      contributed to support operations
              
              
              -
              
              
              
              -
              
              
              
              25,000
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              25,000Issuing
      costs
              
              
              -
              
              
              
              -
              
              
              
              (713,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (713,000
              )Stock
      options issued pursuant to employee compensation plan
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              64,377
              
              
              
              -
              
              
              
              -
              
              
              
              64,377Discount
      on long term debt
              
              
              
              
              
              
              
              
              
              
              490,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              490,000Change
      in currency translation adjustment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              94,231
              
              
              
              -
              
              
              
              94,231Net
      result for the period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              696,747
              
              
              
              696,74741,532,579
              
              
              $
              41,533
              
              
              $
              56,880,831
              
              
              $
              438,948
              
              
              $
              (2,963,061
              )
              
              $
              (50,045,145
              )
              
              $
              4,353,106




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. (“Playlogic,” the “Company” or “we”) develops and publishes
interactive software games designed for video game consoles, handheld platforms
and personal computers. We currently offer our products primarily in versions
that operate on the Sony PlayStation 2 (“PS2”), Sony PlayStation 3 (“PS3”),
Nintendo Wii (“Wii”), and Microsoft Xbox 360 (“Xbox360”) console systems,
Nintendo Game Boy Advance (“GBA”), Sony PlayStation Portable (“PSP”), and
Nintendo Dual Screen (“NDS”) hand-held devices, and the personal computer
(“PC”).





We
develop and publish action/adventure, racing, simulation, first-person action,
and other software games to casual players, game enthusiasts, children, adults,
and mass-market consumers.   Our principal sources of revenue are
derived from publishing operations.  Publishing revenues are derived
from the sale of internally developed software titles or software titles
developed by third parties.  Our publishing business involves the
development, marketing, and sale of products directly through distributors or
through licensing arrangements, under which we receive royalties.





We sell
our products in the globally, focusing on the United States, Europe and
Asia.





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





Principles of
consolidation


The
consolidated  financial statements include the consolidated financial
statements of Playlogic Entertainment, Inc. a Delaware corporation, Playlogic
International N.V. (a corporation domiciled in The Netherlands) and its
wholly-owned subsidiary Playlogic Game Factory B.V. (a corporation domiciled in
The Netherlands).  All inter-company accounts and transactions have
been eliminated in consolidation.





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





Basis of
presentation


The
accompanying condensed consolidated balance sheet as of December 31, 2007 has
been derived from audited financial statements and the accompanying unaudited
condensed consolidated financial statements for the three months ended March 31,
2008 have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial
information and the interim reporting requirements of Regulation
S-B.  They do not include all of the information and footnotes for
complete consolidated financial statements as required by GAAP.  In
management's opinion, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been
included.  These financial statements should be read in conjunction
with the audited financial statements and notes thereto contained in the
Company’s annual report on Form 10-KSBfor the year ended December 31,
2007.





The
results of operations for the three months ended March 31, 2008 and 2007
presented are not necessarily indicative of the results to be expected for the
year.





There is
no provision for dividends for the quarter to which this quarterly report
relates.




-
7 -







PLAYLOGIC
ENTERTAINMENT, INC. AND SUBSIDIARIES


CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)







Currency
translation


The
accompanying consolidated financial statements are reported in U.S.
Dollars.  Accounts of foreign operations are translated into U.S.
dollars using exchange rates for assets and liabilities at the balance sheet
date and average prevailing exchange rates for the period for revenue and
expense accounts. Adjustments resulting from translation are included in other
comprehensive income (loss). Realized and unrealized transaction gains and
losses are included in income in the period in which they occur, except on
inter-company balances considered to be long term. Transaction gains and losses
on inter-company balances considered to be long term are recorded in other
comprehensive income.





Comprehensive
income (loss) is defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. The Company’s items of
other comprehensive income (loss) are foreign currency translation adjustments,
which relate to investments that are permanent in nature and therefore do not
require tax adjustments.





The Euro
is the functional currency of our operating subsidiaries domiciled in The
Netherlands. We translate Euro into US Dollars, in accordance with the following
table:





Financial statement element
            Applicable rateAssets
            Balance
      sheet date *Liabilities
            Balance
      sheet date *Equity
            HistoricalRevenues
            Annual
      average**Expenses
            Annual
      average**Gains
            Annual
      average**Losses
            Annual
      average**




*$1.5815
at March 31, 2008


$1.4735 at
December 31, 2007




**
Average for the 3 months ended March 31, 2008 $1.5130


Average for the 3 months ended March 31, 2007 $1.3133






NOTE B - SOFTWARE DEVELOPMENT
COSTS




The
following table provides the details of software development costs for the three
months ended March 31, 2008 and for the year ended December 31,
2007:




March
      31, 2008 unaudited
              
              December
      31, 2007 (derived from audited statements)Beginning
      balance
              
              $
              7,285,353
              
              $       
                     
       4,463,430Additions
              
              
              1,754,590
              
              4,593,036Amortization
              
              
              (745,678
              )
              (2,386,223
              )Write
      down
              
              
              -
              
              (68,566)Foreign
      exchange
              
              
              698,279
              
              683,676Ending
      balance
              
              
              8,992,544
              
              7,285,353Less: current portion
              
              
              (7,468,794
              )
              (6,244,843
              )Non-current
      portion
              
              $
              1,523,750
              
              $          
                  
       1,040,510




The
amount of software development costs resulting from advance payments and
guarantees to third-party developers was $7,043,000 at March 31, 2008. In
addition, software development costs at March 31, 2008 included an amounts of
$823,000 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 2009.


-
8 -







PLAYLOGIC ENTERTAINMENT, INC.
AND SUBSIDIARIES


CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)







NOTE C
– SHAREHOLDER’S EQUITY TRANSACTIONS





Common
stock




The
Company sold 3,000,000 shares of its common stock to an accredited investor
based in the Netherlands at $ 1.00 per share for a total cash consideration of
$3,000,000. The sale was made pursuant to the terms of a subscription agreement
dated March 27, 2008. The Company will pay a placement fee of 7% (being
$210,000) on this sale.





Concurrent
with this sale, the Company issued warrants to purchase 1,000,000 shares of the
Company’s common stock at an exercise price of $2.00 per share. The warrants may
be exercised starting March 28, 2008 and expire on March 27, 2013.








NOTE
D – LOANS FROM SHAREHOLDERS





In
February 2008 the Company has entered into a bridge loan agreement with a lender
in the Netherlands, pursuant to which the Company borrowed a principle amount of
€ 1,250,000 (or $1,977,000). The loan bears compound interest at a rate of 10%
per annum and will be repaid on April 4, 2008.
 
 On March
27, 2008, the Company has entered into a long term loan agreement with two
lenders based in the Netherlands, pursuant to which the Company borrowed the
principal amount of $4,000,000. The loan bears compound interest at a rate of 7%
per annum and has a 2.5 year term. The interest will be paid on a monthly basis
and repayment of the principal will be done in 8 quarterly installments,
starting in the fourth quarter of 2008. Under this loan agreement, the Company
pledged as a collateral all Intellectual Property (IP) owned by the Company. The
Company has paid a placement fee of 1% on this loan ($40,000).
 
 Concurrent
with this loan agreement of March 27, 2008, the Company issued to these lenders
warrants to purchase 1,286,000 shares of the Company’s common stock at an
exercise price of $1.20 per share. The warrants may be exercised starting March
28, 2008 and expire on March 27, 2013. The warrants will be exercised cashless
and have a mandatory call clause when the stock price is $4.00.
 
 The
warrants have been valued based on the Black & Scholes model. In accordance
with APB 14, we have recognized a discount on the long term debt amounting to
$490,000 which will be amortized over the term of the loan.




NOTE E
- COMMITMENTS AND CONTINGENCIES




Litigation




On
November 27, 2007, the District Court of Amsterdam found for the plaintiff
(Playlogic) in the case of Playlogic Entertainment, Inc. vs.
WorldForge/VisionVale Ltd.




The
provisional judge of the District Court of Amsterdam concludes that all the
copyrights to the game Ancient Wars: Sparta always belonged to Playlogic
pursuant to the agreement with WorldForge / Visionvale and Burut. The judge
ruled in Playlogic’s favor on all counts and WorldForge / Visionvale and Burut
have to pay a penalty of  € 10,000 ($15,815)each time they state the
contrary or refrain from publishing rectifications of former wrong
statements.





Moreover
the Company is involved in a few minor legal actions incidental to its ordinary
course of business.




With
respect to the above matters, 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 consolidated financial position or results of operations .





Office
leases




The
Company leases it’s executive offices located at Concertgebouwplein 13 in
Amsterdam from Mr. D. Valerio. This lease agreement expires on June 30,
2008. The lease requires a last payment of approximately $23,000 (€15,000) for
the second quarter of 2008. The Company will move their office in the second
quarter of 2008 to the World Trade Center (WTC) in Amsterdam, the
Netherlands.





The
Company has entered into a lease agreement with the World Trade Center in
Amsterdam for a period of 5 years ending July 31, 2013. The lease requires
annual payments of approximately $460,000 (€ 291,500) for the offices and
$32,000 (€20,600) for parking spaces at the building, all payable in quarterly
installments. The offices total approximately 8,000 square feet (or 900 square
meter). This lease agreement contains an extension option, which if exercised by
the Company, will extend the expiration date to July 31, 2018.The Company has
negotiated a rent-free period with the WTC for the period up to December 31,
2008. First payments will start January 2009.




-
9 -





PLAYLOGIC
ENTERTAINMENT, INC. AND SUBSIDIARIES


CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)







Our fully
owned subsidiary, 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 $470,000 (€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 $470,000 (€300,000) per year, payable
in quarterly installments.





Future
minimum non-cancelable lease payments on the above leases for office space are
as follows:





March
      31,2008
            
            $
            399,0002009
            
            
            355,0002010
            
            
            355,0002011
            
            
            355,0002012
            
            
            355,000Thereafter
            
            
            355,000Total
            
            $
            2,174,000




Transportation
leases





The
Company leases 14 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. The leases require
monthly aggregate payments of approximately $20,000.





Future
minimum non-cancelable lease payments on the above transportation leases are as
follows:




December
      31,2008
            
            $
            79,5002009
            
            
            37,4002010
            
            
            -2011
            
            
            -2012
            
            
            -Thereafter
            
            
            -Total
            
            $
            116,900




Software development
contracts





The
Company has entered into eight (8) separate software development contracts with
unrelated entities. These contracts require periodic payments of agreed-upon
amounts upon the achievement of certain developmental milestones, as defined in
each individual contract. All of these contracts have completion deadlines of
less than one (1) year from the contract execution and will require an aggregate
funding liability of approximately $1.8 million through completion.







NOTE F
— 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.




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 4 quarterly
installments.





-
10 -






PLAYLOGIC
ENTERTAINMENT, INC. AND SUBSIDIARIES
 CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)








NOTE G
- 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:







For
      the 3 months ended March 31,2008
            
            2007Europe and United
      KingdomCustomer
      A *
            
            0
            0%
            
            2,211,950
            64%Customer
      B
            
            1,083,710
            27%
            
            433,398
            12%Customer
      C
            
            188,058
            5%
            
            525,331
            15%Customer
      D
            
            1,108,424
            27%
            
            0
            0%Customer
      E
            
            434,609
            11%
            
            0
            0%Others
            
            493,614
            12%
            
            311,917
            9%3,308,415
            82%
            
            3,482,596
            100%AsiaOthers
            
            32,505
            1%
            
            0
            0%32,505
            1%
            
            0
            0%United States &
      CanadaCustomer
      A *
            
            0
            0%
            
            0
            0%Customer
      E
            
            690,760
            17%
            
            0
            0%Others
            
            0
            0%
            
            0
            0%690,760
            17%
            
            0
            0%Total
            
            4,031,680
            100%
            
            3,482,596
            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
H – SUBSEQUENT EVENTS





In April, the Company has repaid the related party
loans, amounting to $2.6 million using the available cash on the balance
sheet.





-
11 -


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.


-
12 -




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.




-
13 -





Expected
      releaseGame
            
            Studio
            
            Platform
            
            date
      to retailCompleted
      GamesAlpha
      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
      (1)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
            
            ReleasedObscure
      2
            
            Hydravision
      (F)
            
            PS2
            
            ReleasedObscure
      2
            
            Hydravision
      (F)
            
            Wii
            
            ReleasedXyanide:
      Resurrection
            
            Playlogic
      Game Factory (NL)
            
            PC
            
            ReleasedDragon
      Hunters
            
            Engine
      software (NL)
            
            DS
            
            ReleasedUnder
      developmentAggression
      1914
            
            Buka
      (Russia)
            
            PC
            
            Q2
      2008Dimensity
            
            Dagger
      Studio (Bulgaria)
            
            PC
            
            Q2
      2008Red
      Bull Break Dancing
            
            TBC
            
            DS
            
            Q2
      2008Infernal
      2
            
            Metropolis
      (Poland)
            
            TBC
            
            Q2
      2008 (2)Simon
      the Sorcerer 4
            
            RTL
      /Silverstyle Studio (GER)
            
            PC
            
            Q2
      2008The
      Strategist
            
            Humagade/Canada
            
            DS
            
            Q2
      2008Sudoku
      Ball
            
            White
      Bear
            
            Wii/PC/DS
            
            Q4
      2008Age
      of Pirates: Captain Blood*
            
            Akella
      (Russia)
            
            PC
            
            Q3
      2008Age
      of Pirates: Captain Blood*
            
            Akella
      (Russia)
            
            Xbox360
            
            Q3
      2008Worldshift
            
            RTL
      Games (Germany)
            
            PC
            
            Q4
      2008Undisclosed
      Title
            
            Playlogic
      Game Factory (NL)
            
            PS3,
      Xbox360, PC
            
            Q1
      2009


_______________





1       Released
in the US only


2
      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.




-
14 -





Material
agreements





During
the three months ended March 31, 2008, the Company entered into a number of
publishing and distribution agreements.





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, 2007 (the “2007 Form 10-K”). There have been no
material changes in our existing accounting policies from the disclosures
included in our 2007 Form 10-K.


Recently
Issued Accounting Pronouncements





In
February 2007, the FASB issued Statement of Financial Accounting Standard No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”, or
SFAS 159.  SFAS 159 permits companies to choose to measure many
financial instruments and certain other items at fair value.  It is
expected to expand the use of fair value measurements which is consistent with
the Financial Accounting Standards Board’s long-term measurement objectives for
accounting for financial instruments.  SFAS 159 is effective for our
first fiscal year that begins after November 15, 2007, which is our fiscal year
2009 that begins in January 2008.  The Company is currently evaluating
the impact of this statement to its financial position and results of
operations.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), ‘’Business
Combinations’’, or SFAS No. 141R.  SFAS No. 141R will change the
accounting for business combinations.  Under SFAS No. 141R, an
acquiring entity will be required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-date fair value with
limited exceptions.  SFAS No. 141R will change the accounting
treatment and disclosure for certain specific items in a business
combination.  SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  Accordingly, any business combinations we engage in will be
recorded and disclosed following existing GAAP until January 1,
2009.  We expect SFAS No. 141R will have an impact on accounting for
business combinations once adopted but the effect is dependent upon acquisitions
at that time.  We are still assessing the impact of this
pronouncement.





In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159
permits entities to choose to measure, on an item-by-item basis, specified
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected are
required to be reported in earnings at each reporting date. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007, the provisions of
which are required to be applied prospectively. The Company believes that SFAS
159 should not have a material impact on the consolidated financial position or
results of operations.




In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business
Combinations" ("SFAS No. 141R"). SFAS No. 141R will change the accounting for
business combinations. Under SFAS No. 141R, an acquiring entity will be required
to recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141R will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009. The Company expects
SFAS No. 141R will have an impact on accounting for business combinations once
adopted but the effect is dependent upon acquisitions at that time. The Company
is still assessing the impact of this pronouncement.




In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No. 160"
("SFAS No. 160"). SFAS No. 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008. The Company believes that SFAS 160
should not have a material impact on the consolidated financial position or
results of operations.




In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities" ("SFAS No. 161"). SFAS 161 requires companies with
derivative instruments to disclose information that should enable
financial-statement users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under FASB Statement No. 133 "Accounting for Derivative Instruments and
Hedging Activities" and how derivative instruments and related hedged items
affect a company's financial position, financial performance and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The adoption of this
statement is not expected to have a material effect on the Company's future
financial position or results of operations.


-
15 -





Results
of Operations




Three
Months Ended March 31, 2008 Compared to three months ended March 31,
2007




Net
sales. Net sales for the three months ended March 31, 2008 were $4,031,680 as
compared to $3,482,596 for the three months ended March 31, 2007. This increase
of $549,084 or 16% in revenue is primarily related to the release a number of
new titles and titles on next generation platforms such as the Nintendo
Wii.




Gross
Profit. Gross profit totaled $2,215,427 for the three months ended March 31,
2008. For the three months ended March 31, 2008, gross profit totaled
$2,396,195. This small decrease in gross margin is due to the 2007 revenue
consisted mainly of 2 titles that were licensed. In general the margins on
license contract are higher as the cost of goods are being paid by the
licensee.


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 $1,331,006, for the three months ended March 31,
2008. For the three months ended March 31, 2007, selling, general and
administrative expenses totaled $1,600,804. This represents a decrease of
$269,798 or 17%. This decrease in selling, general and administrative expenses
is due to managements’ focus on cost control.




Research
and Development. Research and development expenses totaled $63,892 for the three
months ended March 31, 2008. For the three months ended March 31, 2007, research
and development totaled $22,719. This represents a decrease of $41,173 or 181%.
This decrease is due to costs in relation to 3 rd party
development activities being classified as Cost of Sales. Furthermore, our
in-house studio is focusing on the development of a game to be released in Q1
2009.




Depreciation.
Depreciation expenses totaled $76,820 for the three months ended March 31, 2008.
For the three months ended March 31, 2007, the depreciation expense totaled
$81,690. The slight decrease is due to some fully depreciated assets. We expect
a slight increase in depreciation for the rest of the year as we are moving our
headquarter offices, which will lead to some leasehold improvement
investments.





Gain on
debt restructuring. Gain on debt restructuring totaled $0 for the three months
ended March 31, 2008. For the three months ended March 31, 2007, gain on debt
restructuring totaled $387,408. The gains relate to debt extinguishments
with various creditors arranged during the first three months of last year. For
2008 we have not restructured any debt.





Interest
Expense. Interest expense totaled $57,915 for the three months ended March 31,
2008. For the three months ended March 31, 2007, interest expense totaled
$319,446. This represents a decrease of $261,531, or 82%. This decrease in
interest expense is primarily due to the decrease of interest bearing short term
loans during the year. During the year 2007 most loans were repaid or converted
into equity.





Net
Result. Our net profit was $696,747 for the three months ended March 31, 2008.
For the three months ended March 31, 2007, the net profit totaled $758,944.
Although a slight decrease in profit is shown, the quality of the result has
improved dramatically. The company was able to restructure the debts, and
through continued focus on the operational expenses the expenses are very flat
compared to prior quarters. Last year we were able to also restructure debts
which led to a one-time gain of $387,408 impacting the result.




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 $94,232 for the three months
ended March 31, 2008 and $(104,667) for the three months ended March 31,
2007.




Cash flow from operations. We
showed a net profit of $696,747 for the 3 months ended March 31, 2008, however
the cash flow from operations shows $345,472 negative. This is due to the fact
that we released 3 new titles in the first quarter, two of which were in
March,  which causes some outstanding receivables in the balance
sheet. Sales resulting in revenue, but not yet in cash.





-
16 -




Liquidity
and Capital Resources




As
of March 31, 2008 our cash balance was $6,629,290.




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
March 31, 2008 was $1,908,464.




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.






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 three months ended March 31,
2008, our accumulated foreign currency translation adjustment loss was
approximately $3.0 million.


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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 March 31, 2008 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
first quarter of 2008, 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-KSB for the year ended December 31,
2007, as
amended.







Item
2 - Changes in Securities.





No
response required.








Item
3 - Defaults Upon Senior Securities.





No
response required.




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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.






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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:
      August 21, 2008
            By:
            /s/ Willem
      M. SmitWillem
      M. Smit
              Chief
      Executive Officer





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20 -




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.


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