U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
                                   (Mark One)

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

                  For the quarterly period ended June 30, 2000

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                                                SECURITIES EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                         Commission File Number O-25030

                       PLAY CO. TOYS & ENTERTAINMENT CORP.
                       -----------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<CAPTION>

<S>                                                                             <C>
                     Delaware                                                   95-3024222
         (State or Other Jurisdiction of                               (IRS Employer Identification No.)
         Incorporation or Organization)
</TABLE>

                550 Rancheros Drive, San Marcos, California 92069
                    (Address of Principal Executive Offices)

                                 (760) 471-4505
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
            ---------------------------------------------------------
              (Former Name, Former Address, and Former Fiscal Year,
                          if Changed Since Last Report)

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such  shorter  period that  registrant  was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares of each of the issuer's classes of common equity
outstanding as of the latest  practicable date:  Common Stock,  $0.01 par value:
51,412,624 shares outstanding as of August 15, 2000.

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>

                       PLAY CO. TOYS & ENTERTAINMENT CORP.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I.             FINANCIAL INFORMATION                                                                       Page Number

Item 1.             FINANCIAL STATEMENTS

<S>                                                                   <C> <C>                                             <C>
                    Condensed consolidated balance sheets as of  June 30, 2000                                            3
                    (unaudited) and March 31, 2000.

                    Condensed consolidated statements of operations and comprehensive net loss for three
                    months ended June 30, 2000 and 1999 (unaudited).                                                      4

                    Condensed consolidated statements of cash flows for the three months ended June 30,
                    2000 and 1999 (unaudited).                                                                            5

                    Notes to condensed consolidated financial statements                                                  6

Item 2.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS
                                                                                                                         11
PART II.            OTHER INFORMATION


Item 1.             LEGAL PROCEEDINGS                                                                                    18

Item 2.             CHANGES IN SECURITIES AND USE OF PROCEEDS                                                            18

Item 3.             DEFAULTS UPON SENIOR SECURITIES                                                                      18

Item 4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                  18

Item 5.             OTHER INFORMATION                                                                                    18

Item 6.             EXHIBITS AND REPORTS ON FORM 8-K                                                                     18

                    Signatures                                                                                           19

</TABLE>

                                       2
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                         June 30, 2000               March 31, 2000
                                                                                         -------------               --------------
                                                                                          (unaudited)
Current
<S>                                                                                           <C>                    <C>
           Cash and cash equivalents                                                          $2,286,775             $ 6,050,007
           Accounts receivable, net                                                              330,623                 676,456
           Merchandise inventories, net                                                       16,928,637              14,111,236
           Other current assets                                                                   20,000                 149,000
                                                                                             -----------             -----------
                                           Total current assets                               19,566,035              20,986,699
Property and Equipment,         Net of accumulated
           depreciation and amortization of $4,749,604
           and $5,162,813, respectively                                                        7,775,783               7,398,621
Deposits and other assets                                                                      4,266,350               3,898,461
                                                                                             -----------             -----------
                                                                                            $ 31,608,168            $ 32,283,781
                                                                                            ============            ============

                       LIABILITIES & STOCKHOLDERS' EQUITY

                                                                                         June 30, 2000          March 31, 2000
                                                                                         -------------          --------------
Current
          Accounts payable                                                                   $ 8,482,651             $ 6,110,161
          Accrued expenses and other liabilities                                                 979,203                 892,428
          Current portion of capital lease obligations                                           290,767                 386,179
          Borrowings under financing agreement                                                   129,646                  47,542
                                                                                             -----------             -----------
                Total current liabilities                                                      9,882,267               7,436,310

Capital leases, net of current portion                                                           994,797                 988,767
Deferred rent liability                                                                          136,154                 135,607
                                                                                             -----------             -----------
                        Total liabilities                                                     11,013,218               8,560,684
                                                                                             -----------             -----------

Minority interest in subsidiary                                                                8,844,650               9,943,407
                                                                                             -----------             -----------

Stockholders' equity:
          Convertible series E preferred stock, $1 par, 25,000,000 shares
            authorized: 2,895,766 and 8,377,640 shares outstanding, respectively               2,291,845               7,349,154
          Convertible series F preferred stock, $0.01 par,
            5,500,000 shares authorized; 750,000 shares outstanding                              750,000                 750,000
          Common stock, $.01 par value, 160,000,000 shares authorized;
               49,177,408 and 11,227,568 shares outstanding, respectively                        489,767                 112,275
          Additional paid-in-capital                                                          38,819,995              33,053,724
          Accumulated other comprehensive loss                                                  (185,013)               (151,531)
                                                                                                -
          Accumulated deficit                                                                (30,416,294)            (27,333,932)
                                                                                             -----------             -----------
                                           Total stockholders' equity                         11,750,300              13,779,690
                                                                                             -----------             -----------
                                                                                             $31,608,168             $32,283,781
                                                                                             ===========             ===========
</TABLE>
      See accompanying notes to condensed consolidated financial statements

                                       3
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                           AND COMPREHENSIVE NET LOSS
<TABLE>
<CAPTION>

                                                                 Three Months Ended June 30
                                                                    2000              1999
                                                                (unaudited)        Restated
                                                                                   (Note 5)
                                                                ------------    ------------
<S>                                                             <C>             <C>
Net sales ...................................................   $  7,018,093    $  6,508,565
Cost of sales ...............................................      3,954,668       3,763,214
                                                                ------------    ------------
             Gross profit
                                                                   3,063,425       2,745,351
                                                                ------------    ------------

Operating expenses:
             Operating expenses .............................      5,541,313       3,753,528
             Depreciation and amortization
                                                                     552,118         224,468
                                                                ------------    ------------
                        Total operating expenses ............      6,093,431       3,977,996
                                                                ------------    ------------

Operating loss ..............................................     (3,030,006)     (1,232,645)
                                                                ------------    ------------

Interest expense:
             Cash interest expense ..........................         99,113         284,664
             Non-cash interest expense ......................        552,000         680,730
                                                                ------------    ------------

                                                                     651,113         965,394
                                                                ------------    ------------

Loss before minority interest in consolidated subsidiary ....     (3,681,119)     (2,198,039)

Minority interest in loss of consolidated subsidiary ........      1,098,757            --
                                                                ------------    ------------

Net loss before extraordinary gain ..........................     (2,582,362)     (2,198,039)

Extraordinary gain on modification of debt terms ............           --           650,000
                                                                ------------    ------------

Net loss ....................................................     (2,582,362)     (1,548,039)

Other comprehensive loss ....................................        (33,482)           --
                                                                ------------    ------------

Comprehensive net loss ......................................   $ (2,615,844)   $ (1,548,039)
                                                                ============    ============

Calculation of Basic and Diluted Loss Per Share:
             Net loss .......................................   $ (2,582,362)   $ (1,548,039
             Effect of non-cash dividends on preferred ......       (500,000)       (585,116)
             stock
                                                                ------------    ------------
Net loss applicable to common shares ........................     (3,082,362)     (2,133,155)
                                                                ============    ============

Basic and diluted loss per common share and share equivalents   $      (0.10)   $      (0.39)
                                                                ============    ============

Weighted average number of common shares
             and share equivalents outstanding ..............     30,237,290       5,525,936
                                                                ============    ============
</TABLE>

      See accompanying notes to condensed consolidated financial statements


<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                       Three-months Ended June 30,
                                                                             2000          1999
                                                                             -----         ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                    <C>            <C>
           Net loss ................................................   $(2,582,362)   $(1,548,039)
           Adjustments used to reconcile net loss to net
           cash used in operating activities:

                Depreciation and amortization ......................       552,118        224,468
                Minority interest in net loss of subsidiary ........    (1,098,757)          --
                Deferred rent ......................................           547          2,764
                Stock compensation .................................          --           56,100
                Extraordinary gain .................................          --         (650,000)
                Effective interest for beneficial conversion .......          --          650,000
                Effective interest for financing agreement .........       500,000           --
                Other ..............................................        86,454           --
           Increase (decrease) from changes in:
                           Accounts receivable .....................        45,833        (33,560)
                           Merchandise inventories .................    (2,817,401)      (740,735)
                           Other current assets ....................          --          271,079
                           Deposits and other assets ...............      (506,798)      (511,410)
                           Accounts payable ........................     2,372,490      2,319,827
                           Accrued expenses and other liabilities ..        86,775       (267,983)
                                                                       -----------    -----------

                           Net cash used by operating activities ...    (3,361,101)      (227,489)
                                                                       -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
           Payments received on note receivable ....................       300,000           --
           Release of restricted cash ..............................       129,000           --
           Purchases of property and equipment .....................      (790,371)      (196,653)
                                                                       -----------    -----------

                          Net cash used by investing activities ....      (361,371)      (196,653)
                                                                       -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
           Proceeds from issuance of preferred stock ...............          --          657,500
           Borrowings under financing agreement ....................        82,104      8,561,047
           Repayments under financing agreement ....................          --       (8,112,000)
           Borrowings under notes payable ..........................          --          200,000
           Repayments under notes payable and capital leases .......       (89,382)      (615,627)
                                                                       -----------    -----------

                           Net cash provided by financing activities        (7,278)       690,920
                                                                       -----------    -----------

Effect of exchange rate changes on cash ............................       (33,482)          --
                                                                       -----------    -----------
Net (decrease) increase in cash ....................................    (3,763,232)       266,778

Cash at beginning of period ........................................     6,050,007        125,967
                                                                       -----------    -----------

Cash at end of period ..............................................   $ 2,286,775    $   392,745
                                                                       ===========    ===========
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                       5
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2000

Note 1.    General

The interim accompanying  unaudited condensed  consolidated financial statements
have been prepared in accordance with generally accepted  accounting  principles
("GAAP") for interim  financial  information  and with the  instructions to Form
10-Q.  Accordingly,  they do not include all of the  information  and  footnotes
required  by  GAAP  for  complete  financial  statements.   In  the  opinion  of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  For further  information,
management  suggests that the reader refer to the audited  financial  statements
for the year ended March 31, 2000  included in its Annual Report on Form 10-KSB.
Operating  results  for the  three-month  period  ended  June  30,  2000 are not
necessarily indicative of the results of operations that may be expected for the
year ending March 31, 2001.

Note 2.  Conversion of Series E Preferred Stock to Common Stock

During the quarter ended June 30, 2000, certain shareholders of 6,333,574 shares
of Series E Preferred  Stock ("Series E Stock")  elected to convert their shares
into Common  Stock  shares at the stated  conversion  rate of  six-to-one.  This
resulted in the issuance of 38,019,044 shares of Common Stock.

During the period July 1, 2000 through August 15, 2000, a further 372,536 shares
of Series E Stock was converted into Common Stock. This resulted in the issuance
of 2,235,216 shares of Common Stock.

Note 3.  Issuance of Series E Preferred Stock

In May 2000, the Company entered into a termination  and release  agreement with
ZD Group LLC ("ZD") for a financing  arrangement  previously provided by ZD. See
the Company's March 31, 2000 10-KSB for a complete description of this financing
agreement.  The  agreement  made  the  Company  no  longer  liable  to ZD  for a
percentage  of the profits of three retail  stores,  in exchange for $500,000 in
cash.  Subsequently,  ZD agreed to receive  854,700  shares of Series E Stock in
lieu of $500,000 cash. The Series E Stock was thereby valued at $0.59 per share,
which  represented  a 60 percent  discount of the market value as of the date of
the  transaction.  To obtain a fair  value for the Series E Stock,  the  Company
engaged an  independent  appraiser to determine  the value of the Series E Stock
near the transaction date. ZD assigned its rights under this the above mentioned
financing  agreement to European American Capital  Foundation and,  accordingly,
the Company issued the 854,700 shares of Series E Stock to EACF.


                                       6
<PAGE>
As part of this  issuance,  the Company  recognized  the  beneficial  conversion
feature in the  convertible  securities.  The benefit  amount was limited to the
amount of  "proceeds" or  consideration  obtained,  which was  $500,000.  As the
market value of the  Company's  common stock  exceeded  the  consideration,  the
Company  recognized a non-cash  dividend of $500,000  related to this beneficial
conversion feature in the quarter ended June 30, 2000.

Note 4.  Segment Reporting

         The Company  adopted SFAS No. 131,  "Disclosures  About  Segments of an
Enterprise  and Related  Information,"  in the fiscal year ended March 31, 2000.
This accounting  standard changes the way the Company reports  information about
its operating segments.

         The Company's  reportable  segments are its retail store operations and
its Internet  operations.  The retail store operations are entirely based in the
United States,  and its Internet  operations occur both in the United States and
in Germany.  Internet  sales for the period  ended June 30, 1999 were  generated
only  in  the  United   States.   The  Internet   operations   consist  of  both
business-to-consumer  and  business-to-business  (or wholesale) sales. Since the
Internet  activities  effectively  began  in  April  1999,  no  restatements  of
prior-year presentations are necessary to comply with SFAS 131.

         Information on segments  which is based on information  utilized by the
Company's chief operating decision maker is as follows:
<TABLE>
<CAPTION>

                                Three Months Ended June 30:
                                   2000          1999
                                   ----          ----
Sales:
<S>                           <C>            <C>
     Retail stores ........   $ 6,862,429    $ 6,393,797
    Internet ..............       155,664        114,768
                              -----------    -----------
              Sales .......   $ 7,018,093    $ 6,508,565
                              ===========    ===========

Gross profit:
    Retail stores .........   $ 3,963,395    $ 2,676,956
      Internet ............        (8,727)        68,395
                              -----------    -----------
           Gross profit ...   $ 3,063,425    $ 2,745,351
                              ===========    ===========

Operating loss:
    Retail stores .........   $(2,508,795)   $(1,294,904)
     Internet .............      (428,260)        62,259
                              -----------    -----------
             Operating loss   $(2,937,055)   $(1,232,645)
                              ===========    ===========
</TABLE>


                                       7
<PAGE>
Note 5.  Restatement of Amounts Previously Reported

The June 30, 1999 financial  statements contain certain  restatements of amounts
previously reported. These restatements were previously reported in an amendment
to the June 1999 quarterly report. The restatements were the result of inquiries
made by the SEC regarding the accounting  treatment for  transactions  revolving
around  the  Company's  debt  and  equity   securities,   including   grants  of
options/stock,  convertible  debentures,  and convertible  preferred stock. As a
result, the Company has restated several amounts, which are described below. The
table  below  identifies  significant  changes  to  balances  in  the  financial
statements.

The  following  is a summary of the impact of the  restatements  on the June 30,
1999 consolidated  financial  statements which include the cumulative effects of
the  restatements  made to the March 31, 1999  financial  statements as detailed
above.

Balance Sheet
<TABLE>
<CAPTION>

<S>                                                                                                       <C>
1.       Reduction of other current assets for options not
         ultimately issued, net of previously recorded  amortization                                       $(67,072)
2.       Increase in Series E Preferred Stock for issuance of shares                                         79,000
3.       Increase in additional paid-in capital for beneficial conversion
         feature of convertible debentures                                                                  650,000
4.       Reduction in additional  paid-in capital for extraordinary
         gain from modification of debt terms,  which was considered
         a debt  extinguishment  from  significant  modification  in
         the terms  under EITF 96-19.                                                                      (650,000)
5.       Increase in additional paid-in capital for beneficial
         conversion feature of revised convertible  debentures treated
         as new debt instruments (Note 4)                                                                   650,000
6.       Reduction in additional paid-in capital for cancellation of options                                (79,000)
7.       Increase in Series F Preferred Stock to reflect change in amortization
         period for beneficial  conversion  feature.  The amortization for
         the dividend  associated with the beneficial  conversion feature
         of the securities  was initially to be recognized  over the two-
         year hold period. The  amortization  period  was  changed  to
         seven  months  to  correspond  to the expected timeframe to bring
         the Series F Stock registration  statement effective, since this is
         the first instance when the Series F Stock is able to be converted.                                 44,643
8.       Additional net loss and non-cash dividend in accumulated deficit.
         The increase in the accumulated  deficit is attributable to a
         cumulative  increase of $718,634 for the year ended March 31, 1999
         (see previous  table  outlining  changes in the March 31, 1999 balance
         sheet),  less $1,562 in operating  expenses  attributed to the reversal
         of  amortization  expense of prepaid  stock  options  that were not
         issued,  plus an additional non-cash dividend of $44,643 related to
         the change in the  amortization  period of the beneficial  conversion
         feature,  as noted in 7. above.                                                                    761,715
9.       Net reduction in stockholders' equity                                                              (67,072)
</TABLE>

                                       8
<PAGE>
Statement of Operations and Comprehensive Net Income (Loss)
<TABLE>
<CAPTION>
<S>                                                                                            <C>
1.       Net decrease in operating expenses from reversal of amortization of stock
         options not issued                                                                    $           (1,562)
2.       Additional  effective  non-cash  interest  expense  attributable  to
         the  beneficial  conversion  feature  of  revised convertible
         debentures treated as new debt instruments (Note 4)                                              650,000
3.       Extraordinary  gain from modification of debt terms,  since such
         modifications were significant to be considered a debt extinguishment
         under EITF 96-19                                                                                 650,000

         Decrease in net loss for the three months ending June 30, 1999                        $           (1,562)
                                                                                                         =========
</TABLE>
The  effects on the  Company's  previously  submitted  June 30,  1999  financial
statements are summarized as follows.

<TABLE>
<CAPTION>
                                                             Previously         Increase
                                                              Reported         (Decrease)        Restated
                                                           ---------------  ----------------  ---------------
Consolidated balance sheet:
<S>                                                        <C>              <C>               <C>
       Other current assets                                $     1,387,622  $        (67,072) $     1,320,550

           Total assets                                    $    22,665,095  $        (67,072) $    22,598,023
                                                           ===============  ================  ===============

       Series E convertible preferred stock                $     6,160,074  $         79,000  $     6,239,074
       Additional paid-in capital                               16,048,319           571,000       16,619,319

          Total liabilities and stockholders' equity       $    22,665,095  $        (67,072) $    22,598,023
                                                           ===============  ================  ===============
</TABLE>

                                       9
<PAGE>
<TABLE>
<CAPTION>
Consolidated statement of operations and comprehensive loss:
<S>                                                        <C>              <C>               <C>
       Operating expenses                                  $     3,755,090  $         (1,562) $     3,753,528
       Effective interest for beneficial
         conversion feature                                              -           650,000          650,000
       Extraordinary gain on extinguishment
          of debt                                                        -           650,000          650,000

       Net income(loss)                                    $    (1,549,601) $          1,562  $    (1,548,039)
                                                           ===============  ================  ===============

       Non-cash dividends on preferred stock                      (540,473)           44,643         (585,116)
       Net income(loss) applicable to
         common shares                                     $    (2,090,074) $         43,081  $    (2,133,155)
                                                           ===============  ================  ===============
       Basic and diluted income(loss) per
         common share and share equivalents                $         (.39)  $              -  $         (.39)
                                                           ===============  ================  ===============
</TABLE>

Note 6.  Subsequent Event

On August 15, 2000,  the Company  entered into the 7th Amendment to the Loan and
Security  Agreement  with FINOVA.  The original  Agreement  expired on August 3,
2000,  however,  the  amendment  provides  for a bridge loan  commencing  on the
expiration date through the bridge loan termination date, November 14, 2000. The
amount of the bridge line of credit is  $3,200,000.  The  interest  rate was not
changed under the amendment and remained at prime plus 1.5%

                                       10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Results of Operations

     This Report on Form 10-Q and the  following  "MANAGEMENT'S  DISCUSSION  AND
ANALYSIS  OF   FINANCIAL   CONDITION   AND  RESULTS  OF   OPERATIONS"   includes
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. All statements other than statements of
historical  fact  are   "forward-looking   statements"  for  purposes  of  these
provisions,  including any projections of earnings,  revenues or other financial
items,  any  statements of the plans and  objectives  of  management  for future
operations,  any statements  concerning  proposed new products or services,  any
statements  regarding  future  economic  conditions  or  performance,   and  any
statements  of  assumptions  underlying  any of the  foregoing  in  some  cases,
forward-looking  statements can be identified by the use of terminology  such as
"may", "will", "expects", "plans", "anticipates",  "estimates",  "potential", or
"continue" or the negative thereof or other comparable terminology.  Although we
believe  that  the  expectations  reflected  in the  forward-looking  statements
contained   herein  are  reasonable,   there  can  be  no  assurance  that  such
expectations or any of the forward-looking  statements will prove to be correct,
and actual results could differ  materially  from those  projected or assumed in
the  forward-looking  statements.  Our future financial condition and results of
operations,  as well as any  forward-looking  statements are subject to inherent
risks and uncertainties.  All forward-looking statements and reasons why results
may differ included in this report are made as of the date hereof, and we assume
no obligation to update any such forward-looking  statement or reason why actual
results might differ.

     The Company has two subsidiaries, Toys International.COM, Inc. ("Toys") and
Play  Co.  Toys  Canyon  Country,  Inc.  ("Canyon").   Toys  currently  operates
twenty-nine  of the Company's  aggregate  thirty-three  stores,  of which Canyon
holds the lease  for one of Toys'  retail  locations.  Toys  also  operates  the
Company's Internet activities (the "Internet Operations").

For the three months ended June 30, 2000 compared to the three months ended June
30, 1999

     The Company  generated  net sales of  $7,018,093  in the three months ended
June 30, 2000. This represented an increase of $509,528, or 7.8%, from net sales
of  $6,508,565  in the three months ended June 30, 1999.  Of this sales  growth,
approximately $41,000 can be attributed to the Internet Operations in the United
States and Germany  ("Internet  Operations");  the remainder of the sales growth
can be attributed  to the  Company's new stores as same store sales  declined by
21.5% for the period.


                                       11
<PAGE>
     The Company  believes  that its same store sales showed a decline  (after a
period of two years of continuous  increases in the fiscal years ended March 31,
1998 and March  31,1999) due to a significant  reduction in the sales of certain
collectible items, in particular,  Beanie Babies. The Company attributes a great
deal of this decline both to a reduction in demand for Beanie Babies and related
items and a general lack of availability  of those items from the  manufacturer.
The Company  expects this trend to continue  only through the second  quarter of
current fiscal year 2001.

     The  Company  ended  June  2000 with 33 retail  locations  in nine  states,
compared to 31 retail  locations in seven states at the end of fiscal year 2000.
During the quarter, the Company opened two new stores.

     The Company  posted a gross profit of  $3,063,425 in the three months ended
June 30,  2000,  reflecting  an increase of $318,074,  or 11.6%,  from the gross
profit of $2,745,351 in the three months ended June 30, 1999.  This increase was
due to the above noted growth in sales.  The Company's  gross margin of 43.7% in
the June 2000 period was 1.6% greater than the gross margin of 42.1% achieved in
the June 1999 period.

     Operating expenses (excluding  depreciation and amortization  expenses) for
the three  months  ended  June 30,  2000 were  $5,541,313.  This  represented  a
$1,787,785,  or  47.6%,  increase  over  the  Company's  operating  expenses  of
$3,753,528 in the three months ended June 30, 1999. The primary  reasons for the
operating  expense  increase were  operating  expenses  relating to the Internet
Operations  of  approximately  $427,000,  an  increase  in payroll  and  related
expenses of $812,000 and an increase in rent expense of approximately  $770,000.
The payroll expense  increase was due to the addition of a new President,  a new
Director  of MIS,  as well as  several  middle  managers  and  employees  at the
Company's  new  stores.  The  growth of rent  expense  was the  result of adding
additional stores.

     During the three months ended June 30, 2000, the Company recorded  non-cash
depreciation  and  amortization  expense of $552,118,  a $327,650  increase from
depreciation and  amortization  expense of $224,468 in the period ended June 30,
1999. The primary reason for the depreciation and amortization  expense increase
was the  depreciation  related to the fixed assets  purchased  for the seven new
stores that opened during fiscal year 2000.

     Total operating expenses (operating expenses combined with depreciation and
amortization)  in  the  June  2000  period  were   $6,093,431,   representing  a
$2,118,435,  or 53.2%,  increase from total operating  expenses of $3,977,996 in
the June 1999 period.

     As a result of the $318,074  increase in gross  profit less the  $2,118,435
increase in total operating expenses,  the Company's operating loss increased by
$1,797,361  from  $1,232,645  during the three  months  ended  June 30,  1999 to
$3,030,006 during the three months ended June 30, 2000. The Internet  Operations
represented approximately $428,000 of the operating loss.


                                       12
<PAGE>
     Interest expense totaled $651,113 for the three months ended June 30, 2000.
This  represented a $314,281  decrease from interest expense of $965,394 for the
three months  ended June 30, 1999.  The June 2000  interest  expense  included a
$500,000 non-cash charge related to the winding up of a financing agreement with
ZD Group LLC ("ZD"), a related party. The  consideration  for this charge was an
issuance  of Series E Preferred  Stock to ZD (see Note 3). For the three  months
ended  June 30,  1999,  the  Company  recognized  non-cash  interest  expense of
$650,000  attributable to the beneficial  conversion  feature of its convertible
debentures.

     As a result of the  above-mentioned  factors,  the Company  recorded a loss
before minority interest of $3,681,119 for the three months ended June 30, 2000.
This represented a $1,483,080 increase over the loss before minority interest of
$2,198,039 recorded in the three months ended June 30, 1999.

     In the three months ended June 30,  2000,  the Company  recorded a minority
interest in the loss of the  consolidated  Toys  subsidiary of $1,098,757.  This
minority  interest  arose out of various  sales of stock in the  Company's  Toys
subsidiary.  This minority interest represented a reduction in the Company's net
loss for the June 2000 period. Since Toys operated as a wholly owned division of
the Company  during the June 1999 period,  no minority  interest was recorded in
that period.

     As a result of the above  factors,  the Company  recorded a net loss before
extraordinary  gain of $2,582,362 in the three months ended June 30, 2000.  This
represented a $384,323  increase  over the net loss of $2,198,039  posted in the
three months ended June 30, 1999.

     In  the  three  months  ended  June  30,  1999,  the  Company  recorded  an
extraordinary  gain of $650,000.  This gain arose out of the modification of the
terms of certain convertible debentures in the June 1999 period.

     The net loss for the three months ended June 30, 2000 was $2,582,362.  This
represented a $1,034,323  increase  over the net loss of $1,548,039  recorded in
the three months ended June 30, 1999.

     In the three  months  ended  June 30,  2000,  the  Company  recorded  other
comprehensive  loss of $33,482  that  related to  foreign  currency  translation
adjustments  arising from Toys'  Internet  operations in Germany.  There were no
foreign currency translation adjustments in the June 1999 period.

     For the three months ended June 30, 2000,  the net loss of  $2,582,362  was
increased by non-cash  dividends of $500,000 in order to determine  the net loss
applicable to common shares.

     Likewise,  during the three  months  ended June 30,  1999,  the net loss of
$1,548,039 was increased by non-cash dividends of $585,116 in order to determine
the net loss  applicable  to common  shares.  The non-cash  dividends  represent
amortization  of the discount  recorded  upon  issuance of Series E and Series F
preferred stock with a beneficial conversion feature.


                                       13

<PAGE>
     As a result of all of the above-mentioned  factors,  the Company recorded a
net loss applicable to common shares of $3,082,362,  or a basic and diluted loss
per share of $0.10,  in the three months ended June 30, 2000. This compares to a
net loss applicable to common shares of $2,133,155,  or a basic and diluted loss
per share of $0.39,  in the three  months  ended  June 30,  1999.  The  weighted
average number of common shares outstanding increased from 5,525,936 in the June
1999 period to 30,237,290 in the June 2000 period as a result of the  conversion
of Series E Shares into common  shares during the quarter as discussed in Note 2
to the condensed consolidated financial statements..

Liquidity and Capital Resources

     At June 30, 2000, the Company had a working capital  position of $9,683,768
compared to a working  capital  position of  $13,550,389  at March 31, 2000. The
primary  factor in the $3,866,621  decrease in working  capital was cash used to
fund the net loss incurred in the quarter ended June 30, 2000.

     While the Company  generated an operating  profit  during fiscal year ended
March 31, 1999,  the Company  generated an operating  loss in fiscal 2000 and in
the three  months  ended June 30, 2000.  The Company has  historically  financed
those  operating  losses and its working capital  requirements  through debt and
sales of the Company's  equity  securities.  There can be no assurance  that the
Company will be able to generate sufficient revenues or have sufficient controls
over expenses and other charges to achieve consistent profitability.

     During  the  three-month  period  ended June 30,  2000,  the  Company  used
$3,361,101 of cash in its operations  compared to $227,489 used in operations in
the  three-month  period  ended  June  30,  1999.  The  Company's  net  loss was
$2,582,362 and $1,549,601,  respectively,  in those periods. The largest factors
that led to the  consumption  of cash in operating  activities for the June 2000
period  exceeding  the  amount  of the  net  loss  was a  $2,817,401  growth  in
merchandise  inventories and the $1,098,757 that funded the minority interest in
net loss of subsidiary.

     The Company used  $361,371 of cash in its investing  activities  during the
three-month  period ended June 30, 2000 compared to $196,653 in the  three-month
period  ended  June  30,  1999.  Investing  activity  for the June  2000  period
consisted  of  the  purchase  of  equipment  and  fixtures  for  new  stores  of
approximately  $790,000,  which  was  partially  offset by the  collection  of a
$300,000  receivable  from a related  party and the release of  restrictions  on
certificates of deposit.

     The  Company  used  $7,278  of  cash  in its  financing  activities  in the
three-month  period ended June 30, 2000  compared to the  generation of $690,920
from  financing  activities in the  three-month  period ended June 30, 1999. The
primary  contributors to the Company's  financing  activities in the 1999 period
were the issuance of preferred stock and net borrowings under its credit line.

     As a result of the above factors, the Company had a net decrease in cash of
$3,763,232  in the  three-month  period  ended June 30,  2000  compared to a net
decrease in cash of $266,778 in the three-month period ended June 30, 1999.

                                       14
<PAGE>
     Planned new store openings remain a significant  capital  commitment of the
Company. The Company has entered into leases to open seven new stores by the end
of calendar year 2000. The Company  expects that the costs of building those new
stores  net of  landlord  tenant  improvement  contributions  and  of  inventory
requirements  will be approximately  $3.6 million.  The Company plans to finance
the costs of opening  those new stores  through a  combination  of capital lease
financing and the use of the Company's working capital.

     Three of those new stores were opened in the May through August period. The
first of those stores opened in May in Nashville,  Tennessee.  The second opened
in June in Orlando, Florida. The third opened in the Aladdin hotel in Las Vegas,
Nevada in August.  The net costs of constructing  those three stores  (excluding
inventory and the costs of opening the store including personnel acquisition and
training) were  approximately  $1.5 million.  The costs of opening the stores is
included in operating expenses.

     The remaining  four stores are  scheduled to open in the September  through
November  timeframe.  Those new stores  will be located in  Colorado,  Illinois,
Maryland and Minnesota.  It is expected that the net costs of constructing those
stores  (excluding  inventory  and the  costs of  opening  the  store  including
personnel acquisition and training) will be approximately $2.1 million.

     The  Internet  Operations  represent  another  area  that  will  require  a
significant  level of capital  expenditures.  The  Company  has  developed a new
strategy for its Internet  Operations  that it believes  may  differentiate  its
websites from its competitors'  websites. The Company has invested approximately
$2 million in this new concept.  The new concept  requires the  participation of
media  and/or  financing  partners.  The new  concept  is  based on the use of a
continuing story line to draw repeat viewers/potential customers to its websites
rather than spending  significant amounts of capital on advertising expense. The
Company  believes  that it may  draw a more  loyal  customer  base  in this  new
approach.  If the Company does secure the participation of media partners,  than
it will also need to raise additional  financing to fund the somewhat open-ended
nature of capital expenditures  associated with this new project. The Company is
currently  seeking  additional  financing  for  this  purpose.  There  can be no
assurance  that such  financing  will be  available on terms  acceptable  to the
Company  or  at  all.  During  the  June  2000  period,   the  Company  invested
approximately $1.1 million in the Internet Operations.  This $1.1 million amount
includes the operating loss in the Internet  Operations,  the costs of acquiring
additional  inventory  in Germany and the costs of creating new software for the
Internet Operations.

     The Company's previous financing  agreement with FINOVA Capital Corporation
was  scheduled  to expire on August 3, 2000.  On August 15,  2000,  the  Company
entered into an amendment to the FINOVA Agreement.  That amendment called for an
extension of the credit line through November 14, 2000 with a borrowing limit of
$3.2 million.


                                       15
<PAGE>
     The Company  continues  to seek an  alternative  financing  agreement.  The
Company has  received a letter of intent for a  multiyear,  $15 million  line of
credit from a major  finance  company,  which is completing  its due  diligence.
However,  there can be no  assurance  that any such  finance  agreement  will be
consummated on terms acceptable to the Company, or if at all.

     We believe  that  current  cash and cash  equivalents  and cash that may be
generated from operations will be sufficient to meet our anticipated  cash needs
through March 31, 2001.  However,  any projections of future cash needs and cash
flows are subject to substantial uncertainty.  If current cash, cash equivalents
and cash that may be generated from  operations are  insufficient to satisfy our
liquidity  requirements,  we will likely seek to sell additional  equity or debt
securities  or to  obtain a line of  credit.  The sale of  additional  equity or
equity-related   securities   would  result  in   additional   dilution  to  our
stockholders.  In addition, we will, from time to time, consider the acquisition
of  or  investment  in   complementary   businesses,   products,   services  and
technologies, which might impact our liquidity requirements or cause us to issue
additional  equity or debt securities.  There can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at all.

Trends Affecting Liquidity, Capital Resources and Operations

     The Company  believes that the period  covered by both its fiscal year 2000
and the three months ended June 30, 2000 were slow periods for the worldwide toy
industry. With the exception of the Pokemon phenomenon,  there were very few hot
toys.  Movie related toy products  (such as Star Wars) did not sell well in that
period and as discussed above, sales of Beanie babies slowed dramatically.

     The Company is trying to  mitigate  this  slowness  in the toy  industry by
locating  its new  stores in sites  that have a large  amount of  customer  foot
traffic  such as tourist  areas.  These  high-traffic  areas  should  enable the
Company to provide better access to its educational,  specialty, and collectible
toy merchandise.  Additionally,  the history of the toy industry  indicates that
there is  generally  at least one highly  popular  toy every  year.  The Company
believes that its new locations will help position the Company to take advantage
of those future positive trends.

     The  Company's  future  financial  performance  will depend upon  continued
demand for toys and the  Company's  ability to choose  locations for new stores,
the Company's  ability to purchase  product at favorable prices and on favorable
terms,  and the  effects  of  increased  competition  and  changes  in  consumer
preferences.

     The toy and hobby retail  industry  faces a number of  potentially  adverse
business  conditions  including  price and gross  margin  pressures  and  market
consolidation.  The  Company  competes  with a  variety  of mass  merchandisers,
superstores,  and  other  toy  retailers,  including  Toys R Us and  Kay Bee Toy
Stores. Competitors that emphasize specialty and educational toys include Disney
Stores,  Warner Bros.  Stores,  Learning Smith, Lake Shore and Zany Brainy.  The
Company  also  competes  both through its  electronic  commerce  operations  and
through its stores against Internet  oriented toy retailers such as eToys,  Inc,
Amazon.com  and Toys R Us.com.  There  can be no  assurance  that the  Company's
business strategy will enable it to compete effectively in the toy industry.



                                       16
<PAGE>
Seasonality

     The Company's  operations are highly seasonal with approximately  30-40% of
its net sales falling within the Company's  third quarter,  which coincides with
the Christmas selling season.  The Company intends to open new stores throughout
the year, but generally before the Christmas selling season, which will make the
Company's  third  quarter  sales an even greater  percentage of the total year's
sales.

Impact of Inflation

     The impact of inflation on the Company's results of operations has not been
significant.  The Company  attempts  to pass on  increased  costs by  increasing
product prices over time.











                                       17
<PAGE>
PART II

Item 1.  .........Legal Proceedings

     No Director,  Officer,  or affiliate of the Company,  nor any  associate of
same, is a party to, or has a material  interest in, any  proceeding  adverse to
the Company.

Item 2.  .........Changes in Securities and Use of Proceeds:           None

Item 3.  .........Defaults Upon Senior Securities:   None

Item 4.  .........Submission of Matters to a Vote of Security Holders: None

Item 5.  .........Other Information:        None

Item 6.  .........Exhibits and Reports on Form 8-K

(a)      The following exhibits are filed herewith:

         None.


(b)      During the  quarter  ended June 30,  2000,  no reports on Form 8-K were
         filed with the Securities and Exchange Commission.



<PAGE>
                                   SIGNATURES




     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 21st day of August 2000.

                                           PLAY CO. TOYS & ENTERTAINMENT CORP.


                              By:      /s/ Richard L. Brady
                                           Richard L. Brady
                                           President and Chief Executive Officer


                              By:     /s/  James B. Frakes
                                           James B. Frakes
                                           Chief Financial Officer