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

                                 FORM 10-QSB/A-2
                                   (Mark One)

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

                For the quarterly period ended September 30, 1999

                                       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)

                    Delaware                         95-3024222
         (State or Other Jurisdiction of       (IRS Employer Identification No.)
         Incorporation or Organization)

                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,  $.01 par value:
5,548,857 shares outstanding as of November 19, 1999.

     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  September 30, 1999                                       3
                    and March 31, 1999.

                    Condensed consolidated statements of operations and comprehensive net loss for three
                    months and six months ended September 30, 1999 and 1998.                                              4

                    Condensed consolidated statements of cash flows for the six months ended September
                    30, 1999 and 1998.                                                                                    5

                    Notes to condensed consolidated financial statements                                               6-14

Item 2.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS
                                                                                                                      15-24
PART II.                                              OTHER INFORMATION


Item 1.             LEGAL PROCEEDINGS                                                                                    25

Item 2.             CHANGES IN SECURITIES AND USE OF PROCEEDS                                                            25

Item 3.             DEFAULTS UPON SENIOR SECURITIES                                                                      25

Item 4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                  25

Item 5.             OTHER INFORMATION                                                                                    25

Item 6.             EXHIBITS AND REPORTS ON FORM 8-K                                                                     25

                    Signatures                                                                                           26
</TABLE>
<PAGE>

                       PLAY CO. TOYS & ENTERTAINMENT CORP.
                 (A SUBSIDIARY OF UNITED TEXTILES & TOYS CORP.)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                     ASSETS
                                                                                     September 30, 1999             March 31, 1999
                                                                                      Restated (Note 5)           Restated (Note 5)
                                                                                        (unaudited)
                                                                                     -------------------          ------------------
Current
<S>                                                                                            <C>                        <C>
           Cash                                                                                $  377,178                 $  125,967
           Accounts receivable                                                                    172,442                     98,276
           Merchandise inventories                                                             15,127,625                 11,506,284
           Stock subscription receivable                                                          723,678                          -
           Other current assets                                                                 2,360,091                  1,591,629
                                                                                                ---------                  ---------
                                           Total current assets                                18,761,014                 13,322,156
Property and Equipment, Net of accumulated
           depreciation and amortization of $4,511,565
           and $4,058,603, respectively                                                         7,245,790                  5,348,175

Deposits and other assets                                                                       3,412,965                  2,411,427
                                                                                                ---------                  ---------
                                                                                             $ 29,419,769               $ 21,081,758
                                                                                             ============               ============

                       LIABILITIES & STOCKHOLDERS' EQUITY

                                                                                      September 30, 1999        March 31, 1999
                                                                                      Restated (Note 5)        Restated (Note 5)
                                                                                          (unaudited)
                                                                                       ------------------       -----------------
Current
          Accounts payable                                                                   $  9,705,643             $ 5,611,442
          Accrued expenses and other liabilities                                                  260,709                 595,008
          Current portion of notes payable and capital leases                                     864,429               1,352,197
          Borrowings under financing agreement                                                 10,725,774                       -
                                                                                                ---------               ---------
                Total current liabilities                                                      21,556,555               7,558,647

Borrowings under financing agreement                                                                    -               7,814,666
Notes payable and capital leases, net of current portion                                        1,000,637                 585,681
Deferred rent liability                                                                                                   126,769
                                                                                                ---------               ---------
                                                                                                  130,881
                        Total liabilities                                                      22,688,073              16,085,763
                                                                                                ---------               ---------

Minority interest in subsidiary                                                                 1,612,976                       -
                                                                                                ---------               ---------

Stockholders' equity:
          Convertible series E preferred stock, $1 par, 25,000,000 shares
            authorized: 5,908,903 shares outstanding                                            6,717,047              5,761,101
          Convertible series F preferred stock, $0.01 par,
            5,500,000 shares authorized; 750,000 and 0
            shares outstanding, respectively                                                      428,571                      -
          Common stock, $.01 par value, 160,000,000 shares authorized;
            5,548,852 and 5,503,519 shares outstanding, respectively                               55,488                 55,035
          Additional paid-in-capital                                                           18,531,428             15,906,172
          Accumulated deficit                                                                                        (16,726,313)
                                                                                                ---------               ---------
                                                                                              (20,613,814)
                                           Total stockholders' equity                                                  4,995,995
                                                                                                ---------               ---------
                                                                                                5,118,720
                                                                                             $ 29,419,769            $21,081,758
                                                                                             ============            ===========

</TABLE>
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
                 (A SUBSIDIARY OF UNITED TEXTILES & TOYS CORP.)

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                           AND COMPREHENSIVE NET LOSS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                       Three Months Ended September 30,               Six Months Ended September 30,
                                                        Restated (Note 5)                          Restated (Note 5)
                                                                1999                  1998               1999                1998
                                                                -----                 ------             -----               ----

<S>                                                           <C>                  <C>                <C>                <C>
Net sales                                                     $6,867,119           $6,098,315         $13,375,684        $12,455,710

Cost of Sales                                                  3,600,901            3,414,054           7,364,115          7,120,385
                                                               ---------            ---------           ---------          ---------

                              Gross profit                     3,266,218            2,684,261           6,011,569          5,335,325
                                                               ---------            ---------           ---------          ---------

Operating expenses:
                Operating expenses                             3,788,706            2,610,120           7,542,234          5,093,891
                Depreciation and amortization                    228,514              193,794             452,982            382,211
                                                                ---------            ---------           ---------         ---------

                             Total operating expenses          4,017,220            2,803,914           7,995,216          5,476,102
                                                               ---------            ---------           ---------          ---------

Operating loss                                                  (751,002)           (119,653)          (1,983,647)         (140,777)
                                                               ---------            ---------           ---------          ---------

Interest expense:
                Interest and finance charges                     300,016              156,860             584,680            295,312
                Amortization of debt issuance costs               47,424               27,202              78,154             54,402
                Effective non-cash interest expense
                from beneficial conversion feature                     -                    -             650,000                  -
                                                               ---------            ---------           ---------          ---------
                             Total interest expense              347,440              184,062           1,312,834            349,714
                                                               ---------            ---------           ---------          ---------

Minority interest in loss of consolidated subsidiary             143,497                    -             143,497
                                                               ---------            ---------           ---------          ---------


Net loss before extraordinary gain                              (954,945)           (303,715)          (3,152,984)         (490,491)

Extraordinary gain on modification of debt terms                       -                    -             650,000                  -
                                                               ---------            ---------           ---------          ---------
 Net loss                                                       (954,945)           (303,715)          (2,502,984)         (490,491)

Other comprehensive income (loss)                                      -                    -                   -                  -
                                                               ---------            ---------           ---------          ---------

Comprehensive net loss                                        $ (954,945)         $ (303,715)        $ (2,502,984)       $ (490,491)
                                                              ===========         ===========        =============       ===========

Calculation of basic and diluted loss per share:
    Net loss                                                  $ (954,945)         $ (303,715)        $ (2,502,984)       $ (490,491)
    Effects of non-cash dividends on convertible
       preferred stock                                          (799,402)         (1,200,000)          (1,384,517)       (1,200,000)
                                                               ---------            ---------           ---------         ---------
     Net loss applicable to common  shares                  $ (1,754,347)       $ (1,503,715)        $ (3,887,501)      $(1,690,491)
                                                              ===========         ===========        =============       ===========
    Basic and diluted loss per common share
                and share equivalents                          $   (0.32)          $   (0.37)        $   (0.70)           $   (0.41)
                                                              ===========         ===========        =============       ===========

    Weighted average number of common shares
         and share equivalents outstanding                      5,548,852           4,103,525           5,537,457          4,103,525
                                                              ===========         ===========        =============       ===========
</TABLE>
            See accompanying notes to condensed financial statements
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
                 (A SUBSIDIARY OF UNITED TEXTILES & TOYS CORP.)

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

                                                                                    Six-months Ended September 30,
                                                                                Restated (Note 5)
                                                                                     1999                  1998
                                                                                ---------------        --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                              <C>                     <C>
        Net loss                                                                 $ (2,502,984)           $ (490,491)
        Adjustments used to reconcile net loss to net
          cash used in operating activities:

               Depreciation and amortization                                          452,962                382,211
               Minority interest in net loss of subsidiary                           (143,497)                     -
               Deferred rent                                                            4,112                  9,102
               Stock compensation                                                           -                 21,876
               Extraordinary gain                                                    (650,000)                     -
               Effective interest for beneficial conversion                           650,000                      -
               feature

        Increase (decrease) from changes in:
                        Accounts receivable                                           (74,166)                21,077
                        Merchandise inventories                                    (3,621,341)            (4,312,326)
                        Other current assets                                         (650,462)              (500,243)
                        Deposits and other assets                                  (1,001,538)              (163,756)
                        Accounts payable                                            4,094,201              2,144,710
                        Accrued expenses and other liabilities                       (334,299)              (528,880)
                                                                                   -----------             ----------

                        Net cash used in operating activities                      (3,777,012)            (3,416,720)
                                                                                   -----------             ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
        Purchases of property and equipment                                        (1,919,427)            (1,149,757)
                                                                                   -----------             ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from issuance of preferred and common stock                         3,540,504                156,877
        Borrowings under financing agreement                                        21,157,590             17,967,798
        Repayments under financing agreement                                       (18,246,482)           (14,931,000)
        Borrowings under notes payable                                                       -              1,147,450
        Repayments under notes payable and capital leases                             (503,962)                     -
                                                                                   -----------             ----------
                         Net cash provided by financing activities                   5,947,650              4,341,125
                                                                                   -----------             ----------

Net increase (decrease) in cash                                                        251,211              (225,352)

Cash at beginning of period                                                            125,967               648,986
                                                                                   -----------             ----------
Cash at end of period                                                                $ 377,178             $ 423,634
                                                                                     =========             =========
</TABLE>
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)

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-QSB.  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,
as restated  (Note 5), for the year ended March 31, 1999  included in its Annual
Report on Form 10-KSB as amended.  Operating  results for the  six-month  period
ended  September  30,  1999 are not  necessarily  indicative  of the  results of
operations that may be expected for the year ending March 31, 2000.

Note 2.  Leases

During the three-month period ended September 30, 1999, the Company entered into
several  capital leases to help finance its new computer  system and several new
stores.  The leases are for an aggregate  principal  amount of $336,109 and bear
interest at rates varying between 9.2% and 17.5%.

Note 3.  Sale of Shares in Subsidiary

On July 15, 1999, Tudor Technologies,  Inc. ("Tudor"),  a British Virgin Islands
corporation,  an entity of which Mr. Moses Mika (a director of the Company) is a
shareholder  - as an  assignee  of an option to acquire  25% of the  outstanding
shares of the common stock of the Company's then wholly-owned  subsidiary,  Toys
International.COM ("Toys"), elected to exercise the option to purchase the stock
in the subsidiary. As of this date, Tudor was to receive 2,335,000 or 25% of the
outstanding  shares of the subsidiary,  for $723,678.  The option called for the
purchase  price to be 25% of the  subsidiary's  book value at June 30, 1999. The
Company  has  recorded a stock  subscription  receivable  as a current  asset to
reflect this transaction as the funds were received in October 1999.

This option arose out of the June 30, 1998 conversion, by ABC Fund, Inc. ("ABC,"
an  affiliate  of the  Company),  of a $1.5  million  debenture  into  Series  E
Preferred Stock ("Series E Stock") as of June 30, 1998. Pursuant to the terms of
the  debenture,  in September  1998, ABC assigned its right to purchase the Toys
common stock to Tudor.

On July 20, 1999,  Toys entered into an agreement to sell 660,000 shares of Toys
common  stock  to  CDMI  Capital  Corporation   ("CDMI")  and  Concord  Effekten
("Concord")  of  Frankfurt,  Germany.  Mr. Mika is a shareholder  of CDMI.  This
investment  represented  a 6.6%  ownership for these  shareholders.  The Company
received   gross   proceeds  of  $2,800,000  and  recorded  this  as  an  equity
transaction.
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)

Note 3.  Sale of Shares in Subsidiary (continued)

No gain or loss was  recorded  on the sales of Toys  shares to Tudor,  CDMI,  or
Concord  per  Staff  Accounting  Bulletin  Topic 5 -  Miscellaneous  Accounting,
"Accounting  for Sales of Stock in a  Subsidiary",  as such sales of shares were
issued as part of a broader corporate reorganization contemplated by Toys in the
form of a public offering of Toys shares as discussed below.

Toys has granted an aggregate  250,000  options to purchase common stock of Toys
to certain directors, officers, and advisors with an exercise price of $4.24 per
share.  These  options are for a period of three years and may not be  exercised
until twelve months after the public offering on the Toys shares (see below). As
the Company and Toys utilize the provisions of APB 25 for stock options  granted
to employees,  no compensation expense was recorded for 224,000 of these options
as the exercise price was estimated by management to be  approximately  equal to
the fair value given the sales of Toys shares which  immediately  preceded these
grants.  However,  26,000 of the  options  were  granted to a legal  advisor for
services  related to the proposed public  offering.  These shares were valued by
management  at the  estimated  fair  value of  approximately  $118,000  and were
recorded as deferred offering costs which is included in other current assets at
September 30, 1999,  with an offsetting  effect to additional  paid-in  capital.
Upon recording the effects of the completed offering, this amount will be netted
against the proceeds of the offering credited to additional paid-in capital.  As
such, the compensation  recorded for these shares will have no net effect on the
Company's consolidated equity or results of operations.

Concurrently,  the Company granted an additional  450,000  incentive  options to
acquire  shares of Toys common  stock  which have an  exercise  period over nine
years at an exercise price of 3 Euro per share. The exercise price in US dollars
will  depend on the  conversion  rate at the time in the future when the options
are  exercised.  As of September  22, 1999,  the date of the option  grant,  the
exercise price was $3.06.  As these options were granted subject to Toys meeting
future performance criteria, no compensation expense has been recorded currently
as the  compensation  has  not yet  been  earned.  If the  Company  meets  these
performance  targets in the future,  the officers will  therefore be entitled to
the options, and the Company will record compensation expense on the measurement
date. As the Company utilizes the provisions under APB25, a compensation expense
for each option will be recognized for the difference  between the quoted market
price and the exercise price on the measurement date.

The  performance  parameters of these options are based on Toys' annual  audited
retail after tax profit. Retail after tax is defined as Toys' overall operations
excluding its Internet operations. The retail profit criteria are for any fiscal
year after the grant date.  Once the first  threshold of greater than $5 million
is achieved, a retail profit of greater than $6.5 million will need to be earned
in any subsequent year in order for the next options to become exercisable.  The
same  circumstance  is applicable  to the next  threshold  level.  These options
expire nine years after the grant date. The actual performance  criteria and the
parties to whom the  incentive  options  were issued are shown in the  following
table:
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)


Note 3.  Sale of Shares in Subsidiary (continued)
<TABLE>
<CAPTION>

                                                     Shares Exercisable

                           Retail Profit       Retail Profit       Retail Profit               Total
         Name               >$5 million        >$6.5 million        >$9 million         Options Achievable
----------------------   -----------------  ------------------  ------------------  --------------------------

<S>                                 <C>                 <C>                 <C>                  <C>
Richard Brady                       75,000              75,000              75,000               225,000

Harold Rashbaum                     45,000              45,000              45,000               135,000

James Frakes                        30,000              30,000              30,000                90,000
                         -----------------  ------------------  ------------------  --------------------

                                   150,000             150,000             150,000               450,000
                         =================  ==================  ==================  ====================
</TABLE>


As a result of the transactions involving Toys stock, the Company has recorded a
minority  interest  in its  consolidated  financial  statements  to reflect  the
ownership of the minority  owners.  This  represents the minority  shareholders'
basis in Toys,  along with their  respective  portion of the net losses recorded
for Toys from the transaction date through September 30, 1999.

Note 4.   Basic and Diluted Loss per Share

The basic and diluted loss per common share for the three and six month  periods
ending  September 30, 1999 and 1998, are the same as the effects of common stock
equivalents  are  anti-dilutive  given  the net  loss per  common  share in each
period.  Potentially  dilutive common shares aggregate  68,709,418,  which could
result from the exercise of options,  warrants, and the conversion of debentures
and/or the Series E and Series F  Preferred  Stock.  Exercise or  conversion  of
certain of these  instruments is restricted  based on defined holding periods or
vesting schedules.



<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)



Note 5.  Restatement of Amounts Previously Reported

The March 31, 1999 and September 30, 1999 financial  statements  contain certain
restatements of amounts previously reported. 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  revision  for the grant of options  relates to the  Company  recognizing  a
prepaid  expense  for the fair value of options at the time it entered  into two
agreements  to  issue  options,  the  related  services  for  which  were  never
performed.   Therefore,   the  Company   reversed  the   accounting   for  these
transactions.  See Items 1 and 4 below for the impact on the  balance  sheet and
Item 2 below for the impact on the statement of operations and comprehensive net
income (loss). This reduction of other current assets is less than the amount of
the adjustment to additional  paid-in  capital in Item 4 because of the reversal
of the  amortization of the prepaid expense recorded during the year ended March
31, 1999.

The  revision  for the Series E  Preferred  Stock was to record the  issuance of
shares  to  officers  for  which  the  Company  did  not  previously   recognize
compensation expense during the year ending March 31, 1999. See Item 2 below for
the  impact  on the  balance  sheet,  and  Item 1 below  for the  impact  on the
consolidated statement of operations and comprehensive net income (loss).

The revision in Item 3 below is to reflect accounting necessary for a beneficial
conversion feature included in $650,000 of debentures convertible into shares of
Series E Preferred  Stock at a discount  from the trading  price of the Series E
Preferred Stock.


<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)



Note 5.  Restatement of Amounts Previously Reported (continued)

         The  following  is a summary of the impact of the  restatements  on the
March 31, 1999 consolidated balance sheet.
<TABLE>
<CAPTION>
<S>         <C>                                                                                      <C>
1.       Reduction  of other  current  assets for options not  ultimately issued
         (CRG for $35,000 and Typhoon for $44,000, net of amortization expense
         of $10,366)                                                                                 $ (68,634)

2.       Increase in Series E Preferred Stock for issuance of shares to officers                        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 the options never issued to
         CRG and Typhoon                                                                               (79,000)

5.       Additional net loss in accumulated deficit (from above items)                                 718,634

         The  following  is a summary of the impact of the  restatements  on the
         March 31, 1999  consolidated  statement of operations and comprehensive
         net income (loss).

1.       Increase in operating expenses from recognition of compensation expense
         from issuance of Series E Preferred Stock to officers                                       $  79,000

2.       Reduction in operating expenses from reversing amortization for options
         not ultimately issued                                                                         (10,366)

3.       Additional effective non-cash interest expense attributable to the
         beneficial conversion feature of convertible debentures                                       650,000

              Decrease in March 31, 1999 net income                                            $       718,634
                                                                                               ===============
</TABLE>
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)


Note 5.  Restatement of Amounts Previously Reported (continued)

The  effects  on the  Company's  previously  issued  March  31,  1999  financial
statements are summarized as follows.
<TABLE>
<CAPTION>

                                                             Previously         Increase
                                                              Reported         (Decrease)        Restated
                                                           ---------------  ----------------  ---------------

Consolidated Balance Sheet:
<S>                                                        <C>              <C>               <C>
       Other current assets                                $     1,310,263  $        (68,634) $     1,241,629

           Total assets                                    $    21,150,392  $        (68,634) $    21,081,758
                                                           ===============  ================  ===============

       Series E convertible preferred stock                $     5,682,101  $         79,000  $     5,761,101
       Additional paid-in capital                               15,335,172           571,000       15,906,172
       Accumulated deficit                                     (16,007,679)          718,634      (16,726,313)

          Total liabilities and stockholders' equity       $    21,150,392  $        (68,634) $    21,081,758
                                                           ===============  ================  ===============

Consolidated Statement of Operations and
    Comprehensive Income (Loss):
       Operating expenses                                  $    12,658,376  $         68,634  $    12,727,010
       Effective interest for beneficial
         conversion feature                                              -           650,000          650,000

       Net income (loss) and comprehensive
         net loss                                          $       140,868  $       (718,634) $      (577,766)
                                                           ===============  ================  ===============
       Net income (loss) applicable to
         common shares                                     $    (1,566,857) $       (718,634) $    (2,285,491)
                                                           ===============  ================  ===============
       Basic and diluted income (loss) per
         common share and share equivalents                $         (.34)  $         (.16)   $         (.50)
                                                           ==============   ==============    ==============
</TABLE>
<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)


Note 5.  Restatement of Amounts Previously Reported (continued)

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

Balance Sheet
<S>                                                                                                    <C>
1.       Reduction of other current assets for options not ultimately issued,
         net of previously recorded amortization                                                       $    (65,510)

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 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                                  650,000

6.       Reduction in additional paid-in capital for cancellation of options                                (79,000)

7.       Additional net loss in accumulated  deficit.  The increase in accumulated
         deficit is attributable to a cumulative increase of $718,634 for the year
         ended March 31, 1999, (see previous table outlining  changes  to the March
         31, 1999 balance sheet), less $3,124 in operating  expenses  attributed
         to the reversal of amortization expense of prepaid stock options that were
         not issued.                                                                                        715,510

8.       Net reduction in stockholders' equity                                                              (65,510)

</TABLE>
<PAGE>

                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)


Note 5.  Restatement of Amounts Previously Reported (continued)

Statement of Operations and Comprehensive Net Income (Loss)
<TABLE>
<CAPTION>

For the three months ended September 30, 1999:
<S>                                                                                             <C>
1.       Decrease in operating expenses from reversal of amortization of stock
         options not issued                                                                     $        (1,562)

For the six months ended September 30, 1999:

1.       Decrease in operating expenses from reversal of amortization of stock
         options not issued                                                                     $        (3,124)
2.       Additional  effective non-cash interest expense  attributable to the
         beneficial  conversion feature of revised  convertible debentures
         treated as new debt instruments                                                                650,000
3.       Extraordinary  gain from modification of debt terms,  since such
         modifications were significant to be considered as a debt
         extinguishment under EITF 96-19                                                        $      (650,000)
                                                                                                -------------------

              Decrease in net loss for the six-months ended    September 30, 1999               $        (3,124)
                                                                                                ===================
</TABLE>

The effects on the Company's  previously  submitted September 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                                $     2,425,601  $        (65,510) $     2,360,091

           Total assets                                    $    29,485,279  $        (65,510) $    29,419,769
                                                           ===============  ================  ===============

       Series E convertible preferred stock                $     6,638,047  $         79,000  $     6,717,047
       Additional paid-in capital                               17,960,428           571,000       18,531,428

          Total liabilities and stockholders' equity       $    29,485,279  $        (65,510) $    29,419,769
                                                           ===============  ================  ===============

</TABLE>
<PAGE>

                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)


Note 5.  Restatement of Amounts Previously Reported (continued)

Consolidated statement of operations and comprehensive loss:

For the six months ended September 30,1999:
<TABLE>
<CAPTION>

<S>                                                        <C>              <C>               <C>
       Operating expenses                                  $     7,545,358  $         (3,124) $     7,542,234
       Effective interest for beneficial
         conversion feature                                              -           650,000          650,000
       Extraordinary gain on extinguishment
          of debt                                                        -           650,000          650,000

       Comprehensive net income (loss)                     $    (2,506,108) $          3,124  $    (2,502,984)
                                                           ===============  ================  ===============
       Net income (loss) applicable to
         common shares                                     $    (3,890,625) $          3,124  $    (3,887,501)
                                                           ===============  ================  ===============
       Basic and diluted income (loss) per
         common share and share equivalents                $         (.70)  $              -  $         (.70)
                                                           ==============   ================  ==============

For the three months ended September 30,1999:

       Operating expenses                                  $     3,790,268  $         (1,562) $     3,788,706

       Comprehensive net income (loss)                     $      (956,507) $          1,562  $      (954,945)
                                                           ===============  ================  ===============
       Net income (loss) applicable to
         common shares                                     $    (1,755,909) $          1,562  $    (1,754,347)
                                                           ===============  ================  ===============
</TABLE>




<PAGE>

                       PLAY CO. TOYS & ENTERTAINMENT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999
                                   (Unaudited)


Note 6.  Subsequent Events

     In early October 1999, the Company loaned $200,000 to Shopnet.com, Inc. and
$50,000 to Breaking Waves,  Inc., both of which entities are affiliated with the
Company. The loans carry interest at 9% and are due in March 2000.

     On  October  25,  1999,  Tudor  lent the  Company  $127,922  under a Demand
Promissory  Note  ("Demand  Note").  The Demand Note carries an interest rate of
eight  percent per annum.  The Demand Note was a bridge loan designed to be paid
off after the completion of the then  contemplated  initial  public  offering of
Toys.

     On November  19,  1999,  Toys  completed an initial  public  offering  (the
"Offering") on the SMAX segment of the Frankfurt Stock Exchange in Germany.  The
Offering was  underwritten by Concord.  Toys sold 2 million  shares,  or a 16.7%
interest,  in the Offering for gross proceeds of approximately $27 million.  The
offering  was  priced at 13 Euro per  share,  which was  approximately  equal to
$13.52 per share. The Company retained  majority  ownership of Toys with a 58.4%
equity interest in the subsidiary and, as a result, will continue to consolidate
Toys' operations in its financial statements.

     In addition to the 2 million  shares sold by Toys in the offering,  Concord
and CDMI each sold  200,000  shares in the  offering  in the form of a greenshoe
allotment. Both Concord and CDMI invested in Toys in a private placement in July
1999.  The total  offering  size,  including  the greenshoe  allotment,  was 2.4
million shares.

     The Company  expects to complete the accounting for the net proceeds of the
Offering during the quarterly period ended December 31, 1999.


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

Results of Operations

Statements  contained  in this  report  which  are not  historical  facts may be
considered forward looking  information with respect to plans,  projections,  or
future  performance  of the  Company as  defined  under the  Private  Securities
Litigation Reform Act of 1995. These  forward-looking  statements are subject to
risks and  uncertainties  that could cause actual  results to differ  materially
from those projected.

At September 30, 1999, the Company's operations were significantly influenced by
United  Textiles & Toys Corp.  ("UTTC")  and  Breaking  Waves,  Inc.  ("Breaking
Waves")  which  owned  43.9% and  22.9%,  respectively,  of the then  issued and
outstanding shares of the Company's Common Stock (then totaling  5,548,857).  By
virtue of Breaking  Wave's status as a wholly-owned  subsidiary of  Shopnet.com,
Inc.  ("Shopnet"),  a  Delaware  public  company,  Shopnet  may  be  deemed  the
beneficial owner of the shares of Common Stock owned by Breaking Waves.

UTTC is a Delaware  corporation  and public company which was organized in March
1991 and  operates  solely as a holding  company.  Breaking  Waves is a New York
corporation and private company which manufactures swimwear.

For the three months ended September 30, 1999 compared to the three months ended
September 30, 1998

The  Company  generated  net  sales of  $6,867,119  in the  three  months  ended
September 30, 1999. This represented an increase of $768,804, or 12.6%, from net
sales of  $6,098,315 in the three months ended  September 30, 1998.  All of this
sales growth came from the Company's new stores as same store sales  declined by
24.8% for the period.

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) because in the three months ended  September  30, 1999,  the
flow of allocated  or "hot"  selling  merchandise  is being spread over 25% more
stores.  This  shortfall in allocated or "hot" selling  inventory is a result of
the current  credit  lines that the Company  has with some of its  vendors.  The
Company is  working to  increase  its lines of credit  with its  vendors to more
adequately  address not only the past growth but its expected  future  growth as
well.  In  addition,  the  Company  held back a  substantial  amount of critical
inventory  from its  existing  stores  for the six new  stores  it opened in the
September through late October timeframe.

The  Company  posted a gross  profit of  $3,266,218  in the three  months  ended
September 30, 1999, an increase of $581,957,  or 21.7%, from the gross profit of
$2,684,261  in the three months  ended  September  30,  1998.  This gross profit
increase  was due to the  increase  in sales  noted above and an increase in the
Company's  gross margin.  The gross margin of 47.6% in the September 1999 period
was an  increase  of 3.6%  over  the  Company's  gross  margin  of  44.0% in the
September 1998 period.


<PAGE>
Operating  expenses  (excluding  depreciation and amortization  expenses) in the
three  months ended  September  30, 1999 were  $3,788,706.  This  represented  a
$1,178,586,  or  45.2%,  increase  over  the  Company's  operating  expenses  of
$2,610,120 in the three months ended September 30, 1998. The primary reasons for
the operating  expense increase were an increase in payroll and related expenses
of $525,871  and an increase in rent expense of  $519,877.  The payroll  expense
increase was due to the addition of several middle  managers and of employees at
new  stores.  The growth of rent  expense  was the  result of adding  additional
stores.  Also  included in operating  expenses for the 1999 period was a $63,000
accrual related to the on-going litigation with a former landlord.  This accrual
was made  based on the  advice of the  Company's  counsel  and on the  status of
settlement negotiations.  The accrual in the September 1999 period increased the
aggregate accrual to $104,000 for this matter as of September 30, 1999.

During the three months ended September 30, 1999, the Company recorded  non-cash
depreciation  and  amortization  expenses  of  $228,514,  a  $34,720,  or 17.9%,
increase from $193,794 in the period ended  September 30, 1998.  Total operating
expenses (operating expenses combined with depreciation and amortization) in the
September 1999 period were  $4,017,220,  a $1,213,306,  or 43.3%,  increase from
total operating expenses of $2,803,914 in the September 1998 period.

Since  the  $581,957  increase  in gross  profit  was less  than the  $1,213,306
increase in total operating expenses,  the Company's operating loss increased by
$631,349  from  $119,653  during the three  months ended  September  30, 1998 to
$751,002 during the three months ended September 30, 1999.

Interest expense totaled $347,440 for the three months ended September 30, 1999.
This  represented a $163,378  increase from interest  expense of $184,062 in the
three months ended  September  30, 1998.  The primary  reason for the  increased
level of interest  expense was a higher level of  borrowings in the three months
ended September 30, 1999 than in the September 1998 period.

During the three  months  ended  September  30,  1999,  the  Company  recorded a
minority  interest in the loss of  consolidated  subsidiary  of  $143,497.  This
minority  interest  arose  out of the  sale  of  stock  of  the  Company's  Toys
International.COM,  Inc. ("Toys") subsidiary in July 1999 to Tudor Technologies,
Inc.  ("Tudor"),   CDMI  Capital  Corporation  ("CDMI"),  and  Concord  Effekten
("Concord"),  as described  in Note 3 to the  condensed  consolidated  financial
statements  and below.  Since Toys incurred a loss during the three months ended
September  30,  1999,  this  minority  interest  represented  a reduction in the
Company's net loss.



<PAGE>
As a result of the above-mentioned  factors,  the Company recorded a net loss of
$954,945 for the three months ended  September  30,  1999.  This  represented  a
$651,230  increase  over the net loss of $303,715  recorded in the three  months
ended September 30, 1998. For the  three-month  periods ended September 30, 1999
and 1998, the net losses of $954,945 and $303,715,  respectively, were increased
by non-cash  dividends of $799,402  and  $1,200,000,  respectively,  in order to
determine  the net loss  applicable  to common  shares.  The non-cash  dividends
represent  amortization  of the discount  recorded upon the issuance of Series E
Preferred  Stock ("Series E Stock") and the Series F Preferred  Stock ("Series F
Stock")  with a  beneficial  conversion  feature.  No  dividends  in the form of
securities or other assets were actually paid out.

The basic and diluted net loss per common  share for the  September  1999 period
was $0.32  compared  to a basic and  diluted  net loss per  common  share in the
September 1998 period of $0.37.

For the six months  ended  September  30,  1999  compared  to six  months  ended
September 30, 1998

The Company  generated net sales of  $13,375,684  in the six-month  period ended
September 30, 1999. This represented an increase of $919,974,  or 7.4%, from net
sales of  $12,455,710 in the six-month  period ended  September 30, 1998. All of
this  sales  growth  came from the  Company's  new  stores as same  store  sales
declined by 26% for the period.

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)  because in the six-month  period ended  September 30, 1999,
the flow of allocated or "hot" selling merchandise is being spread over 25% more
stores.  This  shortfall in allocated or "hot" selling  inventory is a result of
the current  credit  lines that the Company  has with some of its  vendors.  The
Company is  working to  increase  its lines of credit  with its  vendors to more
adequately  address not only the past growth but its expected  future  growth as
well.  In  addition,  the  Company  held back a  substantial  amount of critical
inventory  from its  existing  stores  for the six new  stores  it opened in the
September through late October timeframe.

The Company  posted a gross profit of $6,011,569  in the six-month  period ended
September 30, 1999, an increase of $676,244,  or 12.7%, from the gross profit of
$5,335,325 in the six-month  period ended  September 30, 1998. This gross profit
increase was due to the increase in sales noted above and in the Company's gross
margin.  The gross margin of 44.9% for the six-month  period ended September 30,
1999 was an increase  of 2.1% over the  Company's  gross  margin of 42.8% in the
six-month period ended September 30, 1998.



<PAGE>
Operating  expenses  (excluding  depreciation and amortization  expenses) in the
six-month  period ended September 30, 1999 were  $7,542,234.  This represented a
$2,448,343,  or  48.1%,  increase  over  the  Company's  operating  expenses  of
$5,093,891 in the six-month period ended September 30, 1998. The primary reasons
for the  operating  expense  increase  were an  increase  in payroll and related
expenses  of  $962,066  and an  increase  in rent  expense  of  $1,067,934.  The
increased  expenses were due to the lease  payments on the new stores opened and
the addition of several middle managers and of employees at the new stores.

During the  six-month  period ended  September  30, 1999,  the Company  recorded
non-cash  depreciation  and  amortization  expenses of $452,982,  a $70,771,  or
18.5%,  increase  from  $382,211 in the period ended  September  30, 1998.  This
increase was largely due to depreciation  on the fixed assets  purchased for the
newly opened stores.  Total operating expenses (operating expenses combined with
depreciation and  amortization) in the September 1999 period were $7,995,216,  a
$2,519,114,  or 46%, increase from total operating expenses of $5,476,102 in the
September 1998 period.

Since  the  $676,244  increase  in gross  profit  was less  than the  $2,519,114
increase in total operating expenses,  the Company's operating loss increased by
$1,842,870 from $140,777 during the six-month period ended September 30, 1998 to
$1,983,647 during the six-month period ended September 30, 1999.

Interest expense totaled $1,312,834 for the six-month period ended September 30,
1999. This represented a $963,120, or 275.4%, increase over the interest expense
of $349,714 in the six-month period ended September 30, 1998. The primary reason
for the increased  level of interest  expense was the recognition of $650,000 in
non-cash effective interest expense,  which was allocable to the proceeds of the
beneficial  conversion  feature of the  amended  Frampton  and EACF  convertible
debentures  in the  six-month  period ended  September  30, 1999.  The effective
interest  expense  represents a non-cash item that is effectively  offset dollar
for dollar in stockholders' equity by an increase in additional paid-in capital.

The Company also recorded an  extraordinary  gain of $650,000 as a result of the
modification of terms for the Frampton and EACF convertible debentures.

During the six months ended September 30, 1999, the Company  recorded a minority
interest  in the loss of  consolidated  subsidiary  of  $87,150.  This  minority
interest arose out of the sale of stock of the Company's Toys subsidiary in July
1999 to Tudor,  CDMI,  and  Concord,  as  described  in Note 3 to the  condensed
consolidated  financial  statements and above. Since Toys incurred a loss during
the three months ended September 30, 1999, this minority interest  represented a
reduction in the Company's net loss.



<PAGE>
As a result of the above-mentioned  factors,  the Company recorded a net loss of
$2,502,984 for the six-month period ended September 30, 1999. This represented a
$2,012,493  increase  over the net loss of $490,491  recorded  in the  six-month
period ended  September 30, 1998. For the six-month  periods ended September 30,
1999 and 1998,  the net losses of $2,502,984  and $490,491,  respectively,  were
increased by non-cash dividends of $1,384,517 and $1,200,000,  respectively,  in
order to  determine  the net loss  applicable  to common  shares.  The  non-cash
dividends  represent  amortization of the discount recorded upon the issuance of
Series E Stock with a beneficial conversion feature. No dividends in the form of
securities or other assets were actually paid out.

The basic and diluted net loss per common  share for the  September  1999 period
was $0.70  compared  to a basic and  diluted  net loss per  common  share in the
September 1998 period of $0.41.

Liquidity and Capital Resources

At September 30, 1999, the Company had a working  capital  deficit of $2,795,541
compared to a working  capital  position of  $5,763,509  at March 31, 1999.  The
primary  factors  in  the  $8.56  million  decrease  in  working  capital  was a
reclassification  of the Company's  credit line with FINOVA Capital  Corporation
("FINOVA")  from  a  long  term  liability  to  a  short  term  liability.  This
reclassification was due to the expiration date of the credit facility of August
3, 2000 falling within one year of the September 30, 1999 balance sheet date.

Prior to its most recent fiscal year ended March 31, 1999, the Company generated
operating  losses in the past several years as well as in the  six-month  period
ended September 30, 1999. The Company has historically financed those losses and
its working capital requirements through loans and sales of the Company's equity
securities,  primarily  through the sale of the Company's Series E Stock.  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
profitability.

During  the  six-month  period  ended  September  30,  1999,  the  Company  used
$3,777,012 of cash in its operations  compared to $3,416,720  used in operations
in the six-month  period ended  September  30, 1998.  The Company's net loss was
approximately  $2,500,000  and $490,000,  respectively,  in those  periods.  The
primary  reason the cash used for operating  activities  was larger than the net
loss in the  six-month  period ended  September 30, 1999 was due to increases in
deposits and other current assets related to the opening and planned openings of
additional  stores and deferred expenses related to the public offering of Toys'
common stock.

The Company  used  $1,919,427  of cash in its  investing  activities  during the
six-month  period  ended  September  30,  1999  compared  to  $1,149,757  in the
six-month  period ended September 30, 1998. The primary  investing  activity was
the purchase of equipment and fixtures for new stores.



<PAGE>
The Company generated  $5,947,650 from its financing activities in the six-month
period ended  September 30, 1999 compared to the  generation of $4,341,125  from
financing  activities in the  six-month  period ended  September  30, 1998.  The
primary  contributors to the Company's  financing  activities were borrowings on
the Company's line of credit and proceeds from the sale of the Company's  Series
F  Preferred  Stock  and the sale of  common  stock of the Toys  subsidiary,  as
discussed  below.  Those  proceeds  were used to finance the  Company's  working
capital  requirements,  capital  expenditures  and  operating  losses during the
six-month period ended September 30, 1999.

As a result of the above  factors,  the  Company  had a net  increase in cash of
$251,211 in the  six-month  period ended  September  30, 1999  compared to a net
decrease in cash of $225,352 in the six-month period ended September 30, 1998.

During the  three-month  period ended September 30, 1999, the Company opened one
new store. This store was located in Pier 39 in San Francisco,  California. Pier
39 is a  tourist-oriented  destination that has a history of heavy foot traffic.
The capital investment for building this store was approximately  $425,000,  net
of landlord contributions.

In October 1999, the Company  opened five new stores  located in Concord,  North
Carolina (two stores),  near Houston,  Texas (two stores) and in Mission  Viejo,
California.  These stores are located in high traffic shopping malls. These five
stores  represented  an  aggregate  capital  investment  of  approximately  $1.3
million, net of landlord  contributions.  The Company postponed the construction
of its planned new store in  Schaumburg,  Illinois until the spring of 2000. The
Company now has 32 stores located in seven states.

As of September 30, 1999,  the Company is a defendant in a lawsuit with a former
landlord of a retail site the Company  vacated in August  1997.  A trial in this
matter was originally  scheduled for September  1999, but was postponed  pending
the outcome of preliminary settlement negotiations, which commenced in September
1999. For the period ended September 30, 1999, the Company increased its accrual
in this  matter  $63,000  to an  aggregate  $104,000  based on the advice of the
Company's counsel and on the status of settlement negotiations.

The  Company had planned to finance  the above  store  opening  costs  through a
combination of capital lease  financing,  use of the Company's  working capital,
and the sale of  additional  equity.  The  Company  has  obtained  approximately
$431,500 in capital lease financing this fiscal year.

In May 1999, pursuant to ss.506 of Regulation D, the Company sold 750,000 shares
of Series F Preferred Stock ("Series F Stock"), at a purchase price of $1.00 per
share,  through Robb Peck McCooey  Clearing  Corporation as placement agent. The
Company received  $657,500 in net proceeds from the sale. Each share of Series F
Stock  is  convertible,   at  the  holder's  option,  into  two  full  paid  and
non-assessable  shares of Common Stock,  at any time  commencing on the date the
registration  statement registering the Common Stock underlying same is declared
effective  by the  Securities  and Exchange  Commission.  Each share of Series F
Stock shall convert  automatically on the occurrence of the earlier of either of
the following events,  without action on the part of the holder thereof: (i) two
years from  issuance or (ii) in the event the closing  price per share of Common
Stock has been at lease $5.00 for a consecutive 30-day period.
<PAGE>
Due to the  beneficial  conversion  feature of the Series F Stock,  the proceeds
have  initially  been recorded as  additional  paid-in  capital,  which is being
amortized over an 7-month period in the form of a non-cash dividend.  Management
has used an 8-month period to correspond to the estimated time necessary to have
a  registration  statement  declared  effective by the  Securities  and Exchange
Commission.

In  connection  with the private  placement  of the Series F Stock,  the Company
granted  options to the  placement  agent to purchase  350,000  shares of Common
Stock at an  exercise  price of $3.00 per share for a period of four  years from
the date of closing of the  private  placement.  The  Company  has valued  these
options at  approximately  $507,000  using the  Black-Scholes  option  valuation
model. As the options were granted in connection with the private placement, the
compensation  effect of these was  effectively  offset against the proceeds into
additional  paid-in  capital with no net effect on the  Company's  stockholders'
equity or  result  of  operations.  The  placement  agent  also  received  a 10%
commission,  or $75,000, and a 1% allowance,  or $7,500, to cover administrative
expenses. The private placement closed on May 27, 1999.

On July 15,  1999,  Tudor - an entity of which Mr. Moses Mika (a director of the
Company)  is a  shareholder  - elected to  exercise  its right to purchase a 25%
ownership  interest in the Company's Toys subsidiary.  Tudor was the assignee of
an option to acquire 25% of the  outstanding  shares of the common stock of Toys
at book value.  The book value of Toys as of June 30, 1999 was  determined to be
$2,894,711.  In October,  Tudor paid the Company $723,678 (25% of the book value
as of June 30, 1999).

This option arose out of the June 30, 1998 conversion, by ABC Fund, Inc. ("ABC,"
an affiliate of the Company), of a $1.5 million debenture into Series E Stock as
of June 30, 1998. Pursuant to the terms of the debenture, in September 1998, ABC
assigned its right to purchase the Toys common stock to Tudor.

On July 20, 1999, Toys sold a 6.6% interest to two investors for $2.8 million in
gross  proceeds in a private  transaction.  The investors  were an  unaffiliated
investment-banking  firm,  Concord of  Frankfurt,  Germany  and CDMI,  a British
Virgin  Islands  corporation.  Mr.  Mika is a  shareholder  of CDMI.  Each party
invested $1.4 million in the transaction.

The Company accounted for this as a capital  transaction,  and therefore did not
recognize  any  gain  or loss  on the  transaction.  The  Company  followed  the
guidelines  established  by the SEC under Staff  Accounting  Bulletin  Topic 5 -
Miscellaneous Accounting, "Accounting for Sales of Stock in a Subsidiary", since
Toys sold shares of its own stock.  Management  does not believe  recognizing  a
gain or loss would be  appropriate  due to the fact that the sale was "part of a
broader  corporate  reorganization  contemplated or planned by the  registrant".
Toys  is in  the  process  of  completing  a  foreign  public  offering  of  the
subsidiary's stock, which is deemed to be "a broader corporate  reorganization".
In these instances,  the Staff Accounting Bulletin indicates that recognition of
a gain is not appropriate.
<PAGE>
In  early  October  1999,  the  Company loaned $200,000 to Shopnet.com, Inc. and
$50,000 to Breaking Waves, Inc., both of which entities are affiliated  with the
Company. The loans carry interest at 9% and are due in March 2000.

On October 25, 1999, Tudor lent the Company  $127,922 under a Demand  Promissory
Note ("Demand Note").  The Demand Note carries an interest rate of eight percent
per annum.  The Demand Note was a bridge loan  designed to be paid off after the
completion of the then contemplated initial public offering of Toys.

On November 19, 1999, the Company's Toys subsidiary  completed an initial public
offering (the "Offering") on the SMAX segment of the Frankfurt Stock Exchange in
Germany. The Offering was underwritten by Concord.

Toys sold 2 million  shares,  or a 16.7%  interest,  in the  Offering  for gross
proceeds of  approximately  $27 million.  The offering was priced at 13 Euro per
share,  which was approximately  equal to $13.52 per share. The Company retained
majority  ownership of Toys with a 58.4% equity  interest in the subsidiary and,
as a result,  will  continue to  consolidate  Toys'  operations in its financial
statements.

In addition to the 2 million  shares sold by Toys in the  offering,  Concord and
CDMI  each  sold  200,000  shares  in the  offering  in the form of a  greenshoe
allotment. Both Concord and CDMI invested in Toys in a private placement in July
1999.  The total  offering  size,  including  the greenshoe  allotment,  was 2.4
million shares.

The  Company  expects to complete  the  accounting  for the net  proceeds of the
Offering during the quarterly period ending December 31, 1999.

The Company  anticipates,  based on  currently  proposed  plans and  assumptions
relating to its operations, that the proceeds of the Offering will be sufficient
to satisfy its contemplated cash requirements for at least 12 months.

Year 2000

Many installed  computer systems and software products are currently  programmed
to  accept  two-digit  entries  in the date  field.  Beginning  in the year 2000
("Y2K"),  however, the programmed fields will have to accept four-digit entries,
so as to be able to  distinguish  dates from the 21st  century from those of the
20th century. However, even four-digit date entries do not necessarily guarantee
a smooth  transition to the year 2000. Data lost during the archiving process or
the  overwriting of old information  with new  information may initially  remain
undiscovered and cause problems.  As a result,  computer systems and/or software
utilized by many companies must still be upgraded before the end of this year to
become year 2000 compatible.



<PAGE>
The Company  believes that all of its systems are year 2000  compatible and that
the Company does not face any Y2K  problems in the U.S. The services  offered by
the Company  are not  affected by the year 2000  compatibility  of its  systems.
According to the  wholesalers,  their  systems will be year 2000  compatible  as
well.

The Company has no current knowledge of any outside third party year 2000 issues
that would result in a material  negative impact on its  operations.  Management
has reviewed its significant  vendors' (i.e., Mattel, Inc. and Hasbro, Inc.) and
financing  arm's  (FINOVA)  recent  SEC  filings  vis-a-vis  year 2000 risks and
uncertainties and, on the basis thereof, is confident that the steps the Company
has taken to become year 2000 compliant are sufficient.  In continuation of this
review,  the Company shall continue to monitor or otherwise obtain  confirmation
from the  aforesaid  entities - and such other  entities,  as  management  deems
appropriate - as to their respective  degrees of preparedness.  To date, nothing
has come to the  attention of the Company that would lead it to believe that its
significant vendors and/or service providers will not be year 2000 ready.

Year 2000 readiness is a priority of the Company,  and the Company believes that
it is taking such  reasonable and prudent steps as are necessary to mitigate the
risks associated with potential year 2000  difficulties.  The effect, if any, of
year 2000  problems on the  Company's  results of operations if the Company's or
its customers,  vendors,  or service providers are not fully compliant cannot be
estimated  with any degree of certainty.  It is  nonetheless  possible that year
2000  problems  could  have a  material  adverse  effect  in that  holiday  1999
purchases  may be  stunted  due to  consumer  uncertainty  and that the  overall
business environment may be disrupted in the Company's fourth fiscal quarter.

The budget for the  Company's Y2K issue was  approximately  $100,000 to $120,000
(including upgraded hardware), and the Company spent all of it. The Company used
an external consultant, Data Pro Consulting, which has done the vast majority of
the Company's Y2K compliance work.

Despite the measures that have been taken by the Company,  there is no guarantee
that the  transition  to the year 2000 will be without  problems.  Correction of
these problems may be associated with additional financial burdens. Moreover, it
cannot be ruled out that wholesalers will encounter  problems beyond the control
of the Company. The complexity of today's networked systems,  internally as well
as externally,  poses a general risk. The Company strives to keep this risk to a
minimum.



<PAGE>
Trends Affecting Liquidity, Capital Resources and Operations

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)  because in the six-month  period ended  September 30, 1999,
the flow of allocated or "hot" selling merchandise is being spread over 25% more
stores.  This  shortfall in allocated or "hot" selling  inventory is a result of
the current  credit  lines that the Company  has with some of its  vendors.  The
Company is  working to  increase  its lines of credit  with its  vendors to more
adequately  address not only the past growth but its expected  future  growth as
well. As noted above,  the Company has recently  significantly  strengthened its
balance sheet by raising  approximately $30 million in additional equity,  which
should result in expanded lines of credit with its trade vendors.

The Company  believes that its growth and the availability of "hot" or allocated
merchandise  within  certain  sectors  of its  core  business  - such as  action
figures,  video games,  and collector plush - could have an impact on continuing
store sales in the future.  The Company is working  diligently  to address  this
issue.

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, Zainy Brainy, and Noodle Kidoodle. The
Company  also  competes  both through its  electronic  commerce  operations  and
through its stores against Internet  oriented toy retailers such as eToys,  Inc.
There can be no assurance that the Company's business strategy will enable it to
compete effectively in the toy industry.

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.  Also, the Company opened five new stores in October,
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.
<PAGE>
PART II

Item 1.           Legal Proceedings

In October 1997, in the Superior Court of the State of California, County of San
Bernardino,  Foothill Marketplace  commenced suit against the Company for breach
of contract pertaining to premises leased by the Company in Rialto,  California.
The lease for the premises has a term from February 1987 through  November 2003.
The Company vacated the premises in August 1997.  Under California State law and
the  provisions  of the lease,  plaintiff  has a duty to mitigate  its  damages.
Plaintiff  seeks damages,  of a continuing  nature,  for unpaid rent,  proximate
damages, costs, and attorneys' fees, in the approximate amount of $300,000. This
action has been taken off the trial  calendar with a settlement  review  hearing
scheduled  to occur in late  December  1999 or early  January  2000.  Management
believes that this case will reach a settlement by that date.

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:

10.137    Amendment to Lease Agreement - Concord Mills (Toy Co.)
27.1      Financial Data Schedule

(b)      During the quarter  ended  September  30, 1999,  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 day of 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