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

                                   FORM 10-QSB
                                   (Mark One)

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

                  For the quarterly period ended June 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)

<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:
5,548,857 shares outstanding as of August 12, 1999.

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



<PAGE>
                       PLAY CO. TOYS & ENTERTAINMENT CORP.


                                TABLE OF CONTENTS



                   PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                                                         Page Number
Item 1. FINANCIAL STATEMENTS

<S>                                                       <C> <C>                                                               <C>
                     Condensed Balance Sheets as of  June 30, 1999 (unaudited)                                                  3
                     and March 31, 1999.

                     Condensed Statements of Operations and Comprehensive Net Loss for the
                     Three Months Ended June 30, 1999 and 1998 (unaudited).                                                     4

                     Condensed Statements of Cash Flows for the Three Months Ended
                     June 30, 1999 and 1998 (unaudited).                                                                        5

                     Notes to Condensed Financial Statements                                                                  6-7

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                                                                                                             8-15
PART II. OTHER INFORMATION

                                                                                                                               16
Item 1.              LEGAL PROCEEDINGS

Item 2.              CHANGES IN SECURITIES AND USE OF PROCEEDS                                                                 16

Item 3.              DEFAULTS UPON SENIOR SECURITIES                                                                           16

Item 4.              SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                       16

Item 5.              OTHER INFORMATION                                                                                         16

Item 6.              EXHIBITS AND REPORTS ON FORM 8-K                                                                          16

                     Signatures                                                                                                17



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

                                                     ASSETS                                        June 30,1999    March 31, 1999

                                                                                                      (unaudited)    (audited)
                                                                                                ---------------   -------------
<S>                                                                                                <C>             <C>
Current ........................................................................................   $    392,745    $    125,967
Accounts receivable ............................................................................        131,836          98,276
Merchandise inventories ........................................................................     12,247,019      11,506,284
Other current assets ...........................................................................      1,387,622       1,660,263
                                                                                                   ------------    ------------
Total current assets ...........................................................................     14,159,222      13,390,790

Property and Equipment,
 net of accumulated
 depreciation and
 amortization of $4,283,071
 and $4,058,603, respectively ..................................................................      5,583,035       5,348,175
Deposits and other assets ......................................................................      2,922,838       2,411,427
                                                                                                   ------------    ------------
                                                                                                   $ 22,665,095    $ 21,150,392
                                                                                                   ============    ============

                                                  LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                                                   June 30, 1999   March 31, 1999

Current
Accounts payable ...............................................................................   $  7,931,269    $  5,611,442
Accrued expenses and other liabilities .........................................................        327,025         595,008
Current portion of notes payable and capital leases ............................................      1,212,088       1,352,197
                                                                                                   ------------    ------------
Total current liabilities ......................................................................      9,470,382       7,558,647
Borrowings under financing agreement ...........................................................      8,263,713       7,814,666
Notes payable, and capital leases, net of current portion ......................................        572,838         585,681
Deferred rent liability ........................................................................        129,533         126,769

Total liabilities ..............................................................................     18,436,466      16,085,763


Stockholders' equity
 Series E convertible preferred stock, $1 par value
 10,000,000 shares authorized;
 5,883,903 shares outstanding ..................................................................      6,160,074       5,682,101
Series F convertible preferred stock, $.01 par
 value, 5,500,000 shares authorized; 750,000
 and 0 shares outstanding, respectively (Note 3) ...............................................         62,500
Common stock, $.01 par value, 40,000,000 shares
 authorized; 5,548,857 and 5,503,519 shares
 Outstanding, respectively .....................................................................         55,488          55,035
Additional paid-in-capital .....................................................................     16,048,319      15,335,172

Accumulated deficit ............................................................................    (18,097,752)    (16,007,679)
                                                                                                   ------------    ------------
Total stockholders' equity .....................................................................      4,228,629       5,064,629
                                                                                                   ------------    ------------
                                                                                                   $ 22,665,095    $ 21,150,392
                                                                                                   ============    ============
</TABLE>

            See accompanying notes to condensed financial statements




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

                       CONDENSED STATEMENTS OF OPERATIONS
                           AND COMPREHENSIVE NET LOSS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Three Months Ended June 31,

                                                                                           1999            1998

<S>                                                                                     <C>            <C>
Net sales ...........................................................................   $ 6,508,565    $ 6,357,395

            Cost of sales ...........................................................     3,763,214      3,706,331

            Gross profit ............................................................     2,745,351      2,651,064

                Operating expenses:
                                                                   Operating expenses     3,755,090      2,483,771
                                                        Depreciation and amortization       224,468        188,417

            Total operating expenses ................................................     3,979,558      2,672,188

                     Operating loss .................................................    (1,234,207)       (21,124)

                  Interest expense:

                                                         Interest and finance charges       284,664        138,452
                                                  Amortization of debt issuance costs        30,730         27,200

            Total interest expense ..................................................       315,394        165,652

                           Net loss .................................................    (1,549,601)      (186,776)

     Other comprehensive loss .......................................................          --             --

Comprehensive net loss ..............................................................   $(1,549,601)   $  (186,776)

                    Calculation of Basic and Diluted Loss Per Share:

                         Net loss ...................................................   $(1,549,601)   $  (186,776)
          Effect of non-cash dividends on preferred stock                                  (540,473)      (273,806)

                 Net loss applicable to common shares ...............................   $(2,090,074)   $  (460,582)

                    Basic and diluted loss per common

   Share and share equivalents ......................................................   $     (0.38)   $     (0.11)

Weighted average number of  common
Shares and share equivalents
   outstanding ......................................................................     5,525,936      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 STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                      Three Months Ended June 30,
                                                                                      ------------------------------------------
                                                                                             1999                    1998
                                                                                      --------------------      ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                        <C>                     <C>
           Net loss                                                                        $  (1,549,601)          $  (186,776)
           Adjustments used to reconcile net loss to net cash used for operating
           activities:

                   Depreciation and amortization                                                 224,468               188,417
                   Deferred rent                                                                   2,764                 4,552
                   Stock compensation                                                             56,100                10,938

           Increase (decrease) from changes in:
                   Accounts receivable                                                           (33,560)               26,618
                   Merchandise inventories                                                      (740,735)           (1,503,233)
                   Other current assets                                                          272,641              (127,228)
                   Deposits and other assets                                                    (511,410)              (93,072)
                   Accounts payable                                                            2,319,827             1,249,369
                   Accrued expenses and other liabilities                                       (267,983)             (527,702)
                                                                                 -------------------------      ----------------

                   Net cash used for operating activities                                       (227,489)             (958,117)
                                                                                   -----------------------      ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
           Purchases of property and equipment                                                  (196,653)             (377,028)
                                                                                   -----------------------      ----------------

                   Net cash used for investing activities                                       (196,653)             (377,028)
                                                                                   -----------------------      ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of preferred stock                                                   657,500                     --
     Borrowings under financing agreements                                                     8,561,047             8,099,497
     Repayments under financing agreements                                                    (8,112,000)           (7,023,000)
     Borrowings under notes payable                                                               200,000                    --
     Repayments of notes payable and capital leases                                             (615,627)             (100,883)
                                                                                   -----------------------      ----------------

                   Net cash provided by financing activities                                     690,920               975,614
                                                                                   ----------------------       ---------------

Net increase (decrease) in cash                                                                  266,778              (359,531)

Cash at beginning of period                                                                      125,967               648,986
                                                                                   ----------------------       ---------------

Cash at end of period                                                                        $   392,745            $  289,455
                                                                                   ======================       ===============

</TABLE>

            See accompanying notes to condensed financial statements

<PAGE>




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


Note 1.           General

     The interim accompanying unaudited condensed 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 for the year
ended March 31, 1999  included in its Annual  Report on Form  10-KSB.  Operating
results  for the  three-month  period  ended June 30,  1999 are not  necessarily
indicative of the results of operations that may be expected for the year ending
March 31, 2000.

Note 2.           Capital Leases

     During the three-month period ended June 30, 1999, the Company entered into
several  capital  leases and loans to help  finance  the cost of opening its new
stores.  The leases are for an  aggregate  principal  amount of  $262,675.  They
generally carry terms of five years and bear interest at rates between 13.3% and
18.0%.

Note 3.           Series F Private Placement

     On May 27, 1999,  pursuant to a Securities  Purchase Agreement entered into
by and between the Company and several unaffiliated investors,  the Company sold
750,000  unregistered shares of Series F Preferred Stock ("Series F Stock") in a
private transaction.  As part of the Securities Purchase Agreement,  the Company
undertook to register the Common Stock underlying the Series F Stock through the
filing of a registration  statement with the Securities and Exchange Commission.
Each share of Series F Stock is convertible  into two shares of Common Stock, at
the  option of the  holder,  at any time  following  the  effective  date of the
registration statement. 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 least $5.00
for a consecutive 30 day period.  The Company  received net proceeds of $657,500
after deduction of all investment banking and legal and administrative fees.

     Due to the  beneficial  conversion  feature  of the  Series  F  Stock,  the
proceeds have been recorded initially as additional paid in capital,  which will
amortize over a 12-month period in the form of a non-cash dividend.



<PAGE>
Note 4.           Subsequent Events

     On July 15, 1999, Tudor  Technologies,  Inc. ("Tudor") - an entity of which
Mr. Moses Mika (a director of the Company) is a shareholder - as the assignee of
an option to acquire 25% of the  outstanding  shares of the common  stock of the
Company's subsidiary,  Toys International.COM,  Inc. ("Toys"), which shares were
then owned by the Company and which  option price was set at Toys' book value on
the date of election to exercise  the option,  elected to exercise  its right to
purchase the stock and requested  that the exercise  price be amended to reflect
the book value of Toys at the most recent  fiscal  quarter,  June 30, 1999.  The
Company agreed to Tudor's request. As the book value of Toys as of June 30, 1999
is not yet determined, the Company has not yet provided Tudor with the basis for
the option  exercise  and, as a result,  Tudor has not yet  provided the Company
with the appropriate consideration. The Company anticipates that it will provide
Tudor the June 30, 1999 book value determination by the end of August 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,  the Company sold a 6.6% interest in its Toys  subsidiary
to two  investors for $2.8 million in gross  proceeds in a private  transaction.
The  investors  were an  unaffiliated  investment  banking firm and CDMI Capital
Corporation  ("CDMI"),  a British  Virgin  Islands  corporation.  Mr.  Mika is a
shareholder of CDMI. Each party invested $1.4 million in the transaction.

     On August 4, 1999, the Company  entered into a sixth  amendment to its Loan
and Security Agreement with FINOVA Capital Corporation  ("FINOVA").  As a result
of this amendment, the Company's aggregate credit facility with FINOVA increased
from $8.3 million to $11.3 million.

     The amendment also (1) increased the minimum net worth  financial  covenant
from  $750,000  to $2.9  million  as of June 30,  1999  with  the  $2.9  million
threshold  increasing  by 60% of any equity  raised by the Company and by 60% of
any annual  profits  generated by the Company;  (2) allows the Company to sell a
minority equity interest (up to 49%) in its Toys  subsidiary;  and (3) increased
the maximum  levels of capital  expenditures,  capital leases and unsecured debt
allowed under the Financing Agreement.




<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  which could cause actual results to differ  materially
from those projected.

     The Company's operations are substantially  controlled by United Textiles &
Toys Corp.  ("UTTC"),  the Company's parent.  UTTC currently owns  approximately
44.9% of the issued and outstanding  shares of the Company's common stock.  UTTC
is a Delaware  corporation  and public company which was organized in March 1991
and commenced  operations in October 1991. It formerly  designed,  manufactured,
and marketed a variety of lower priced  women's  dresses,  gowns,  and separates
(blouses,  camisoles,  jackets,  skirts,  and pants) for special  occasions  and
formal  events.  In April 1998,  UTTC ceased all  operating  activities;  it now
operates solely as a holding company.

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

     The Company  generated  net sales of  $6,508,565  in the three months ended
June 30, 1999. This represented an increase of $151,170, or 2.4%, from net sales
of $6,357,395 in the three months ended June 30, 1998.  All of this sales growth
came from the Company's  new stores as same store sales  declined by 27% for the
period.

     The Company  believes  that its same store sales  showed a decline  after a
period of two years of  continuous  increases  because in the three months ended
June 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 openings of its Toys  International
stores located in the Venetian  Resort and Casino (the  "Venetian") in Las Vegas
and in Pier 39 in San Francisco.  The Venetian store opened in mid-June,  a full
two  months  late,  and due to  major  site  construction  delays,  the  Company
currently expects to open Pier 39 in early September, four months late.

     The Company  posted a gross profit of  $2,745,351 in the three months ended
June 30, 1999, reflecting an increase of $94,287, or 3.6%, from the gross profit
of $2,651,064 in the three months ended June 30, 1998.  This increase was due to
the above  noted  growth  in sales and to an  increase  in the  Company's  gross
margin.  The gross  margin of 42.2% in the June 1999 period was 0.5% higher than
the Company's  gross margin of 41.7% in the June 1998 period.  This gross margin
improvement   was  the  result  of  the  continuing   change  in  the  company's
merchandising  mix to  augment  its  historical  product  base of  lower  margin
traditional  toys with  educational and specialty toys which  generally  produce
better margins than traditional  toys. This change in merchandising mix has been
the centerpiece of the Company's  business plan for approximately the past three
business years.


<PAGE>
     Operating expenses (excluding  depreciation and amortization  expenses) for
the three  months  ended  June 30,  1999 were  $3,755,090.  This  represented  a
$1,271,319,  or  51.2%,  increase  over  the  Company's  operating  expenses  of
$2,483,771 in the three months ended June 30, 1998. The primary  reasons for the
operating  expense  increase were an increase in payroll and related expenses of
$436,000  and an  increase in rent  expense of  $548,000.  The  payroll  expense
increase was due to the addition of 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, 1999, the Company recorded  non-cash
depreciation and amortization expense of $224,468, a $36,051, or 19.1%, increase
from  $188,417  in the period  ended June 30,  1998.  Total  operating  expenses
(operating  expenses  combined with  depreciation and  amortization) in the June
1999 period were $3,979,558,  representing a $1,307,370, or 48.9%, increase from
total operating expenses of $2,672,188 in the June 1998 period.

         As a result of the $94,287 increase in gross profit less the $1,307,370
increase in total operating expenses,  the Company's operating loss increased by
$1,213,083  from  $(21,124)  during  the three  months  ended  June 30,  1998 to
$(1,234,207) during the three months ended June 30, 1999.

     Interest expense totaled $315,394 for the three months ended June 30, 1999.
This  represented  a  $149,742,  or 90.4%,  increase  from  interest  expense of
$165,652 for the three months  ended June 30, 1999.  The primary  reason for the
increased  level of interest  expense was a higher  level of  borrowings  in the
three months ended June 30, 1999 than in the June 1998 period.

     As a result of the above-mentioned factors, the Company recorded a net loss
of  $(1,549,601)  for the three months ended June 30, 1999.  This  represented a
$1,362,825 increase over the net loss of $(186,776) recorded in the three months
ended June 30, 1998.

     For the three months ended June 30, 1999, the net loss of $(1,549,601)  was
reduced by non-cash  dividends  of $540,473 in order to  determine  the net loss
applicable to common shares.  This compares with $273,806 of non-cash  dividends
recorded in the three month period ended June 30, 1998.  The non-cash  dividends
represent  amortization  of the discount  recorded upon issuance of the Series E
Preferred  Stock  ("Series E Stock")  and Series F  Preferred  Stock  ("Series F
Stock") with a beneficial conversion feature.

     The basic and diluted  loss per share for the three  months  ended June 30,
1999 was $(0.38) compared to basic and diluted loss per share of $(0.11) for the
three months ended June 30, 1998.  The weighted  average number of common shares
outstanding increased from 4,103,519 in the June 1998 period to 5,525,936 in the
June 1998 period.


<PAGE>
Liquidity and Capital Resources

     At June 30, 1999, the Company had a working capital  position of $4,688,840
compared to a working  capital  position of  $5,832,143  at March 31, 1999.  The
primary factors in the $1,143,303  decrease in working capital were a $1,579,092
reduction  in  the  Company's  net  investment  in   inventories   (increase  in
inventories less increase in accounts payable).

     The Company  believes  that its same store sales  showed a decline  after a
period of two years of  continuous  increases  because in the three months ended
June 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.

     The Company has generated  operating  losses for the past several years and
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,  however,
that the Company will be able to generate sufficient revenues or have sufficient
control over expenses and other charges to achieve profitability.

     During  the  three-month  period  ended June 30,  1999,  the  Company  used
$227,489 of cash in its  operations  compared to $958,117  used in operations in
the  three-month  period  ended  June  30,  1998.  The  Company's  net  loss was
$1,549,601 and $186,776,  respectively, in those periods. The primary reason the
Company used a far lower level of cash in its operating activities than its loss
was due to a  decrease  in its net  investment  (increase  in  inventories  less
increase in accounts payable) in inventories of $1,579,092.

     The Company used  $196,653 of cash in its investing  activities  during the
three-month  period ended June 30, 1999 compared to $377,028 in the  three-month
period  ended June 30,  1998.  Investing  activity  consisted of the purchase of
equipment and fixtures for new stores.

     The Company generated $690,920 of cash from its financing activities in the
three-month  period ended June 30, 1999  compared to the  generation of $975,614
from  financing  activities in the  three-month  period ended June 30, 1998. The
primary  contributors to the Company's  financing  activities in the 1999 period
were $657,500 in proceeds from the sale of Series F Stock and net  borrowings on
the Company's line of credit.  Those proceeds were used to finance the Company's
working capital  requirements  and capital  expenditures  during the three-month
period  ended  June 30,  1999.  The  primary  factor  in the  prior  period  was
$1,076,497 in net borrowings on the Company's line of credit.

     As a result of the above factors, the Company had a net increase in cash of
$266,778  in the  three-month  period  ended  June 30,  1999  compared  to a net
decrease in cash of $359,531 in the three-month period ended June 30, 1998.


<PAGE>
     In November  1998,  the Company  entered into an  agreement  with ZD Group,
L.L.C. ("ZD"), a related party, to secure additional financing. ZD is a New York
trust,  the  beneficiary  of which is a member of the  family  of the  Company's
chairman. Pursuant to the ZD agreement, ZD issued a $700,000 irrevocable standby
letter of credit  ("L/C")  in favor of  FINOVA.  FINOVA  then  loaned a matching
$700,000  to the  Company in the form of a term loan.  The term loan  expires on
August 3, 2000 and bears  interest at prime plus one percent.  As  consideration
for its issuance of the L/C, ZD will receive a one-third profit percentage after
application  of  corporate  overhead  beginning  April 1, 1999 from three of the
Company's stores  (Woodfield Mall in Schaumburg,  Illinois now scheduled to open
in the late fall of 1999;  Auburn Hills,  Michigan;  and Gurnee,  Illinois).  As
those stores did not generate a profit after  application of corporate  overhead
in the three-month  period ended June 30, 1999, no payments were accrued or made
to ZD during the June period.

     Planned new store openings remain a significant  capital  commitment of the
Company.  The Company entered into leases to open eight new stores by the end of
calendar  year 1999.  The Company  expects that the costs of building  those new
stores,  net of  landlord  tenant  improvement  contributions  and of  inventory
requirements,  will be approximately $2.8 million.  The Company plans to finance
the costs of opening  those new stores  through a  combination  of capital lease
financing,  use of the  Company's  working  capital,  and the sale of additional
equity.

     The first of those  stores  opened in June in the  Venetian  in Las  Vegas,
Nevada. The costs of opening that store (excluding inventory) were approximately
$825,000.  This store was projected to be the most capital  intensive of all the
stores scheduled to be opened this fiscal year.

     The following transactions entered into after April 1, 1999 were equity and
debt  transactions  structured  to help the Company with the cost of the capital
expenditures associated with opening the total of eight new stores in 1999.

     The Company received approximately $240,000 in lease financing in the three
month period ended June 30,1999 period. The Company continues to seek additional
capital lease financing.

     In May 1999,  pursuant to ss.506 of  Regulation D, the Company sold 750,000
shares of 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 fully 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 least  $5.00 for a  consecutive  30 day  period.  The  Company
received net proceeds of $657,500 after deduction of all investment  banking and
legal and administrative fees.


<PAGE>
     Due to the  beneficial  conversion  feature  of the  Series  F  Stock,  the
proceeds have initially  been recorded as additional  paid in capital which will
amortize over a 12-month period in the form of a non-cash dividend.

     On July 15, 1999, Tudor  Technologies,  Inc. ("Tudor") - an entity of which
Mr. Moses Mika (a director of the Company) is a shareholder - as the assignee of
an option to acquire 25% of the  outstanding  shares of the common  stock of the
Company's subsidiary,  Toys International.COM,  Inc. ("Toys"), which shares were
then owned by the Company and which  option price was set at Toys' book value on
the date of election to exercise  the option,  elected to exercise  its right to
purchase the stock and requested  that the exercise  price be amended to reflect
the book value of Toys at the most recent  fiscal  quarter,  June 30, 1999.  The
Company agreed to Tudor's request. As the book value of Toys as of June 30, 1999
is not yet determined, the Company has not yet provided Tudor with the basis for
the option  exercise  and, as a result,  Tudor has not yet  provided the Company
with the appropriate consideration. The Company anticipates that it will provide
Tudor the June 30, 1999 book value determination by the end of August 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,  the Company sold a 6.6% interest in its Toys  subsidiary
to two  investors for $2.8 million in gross  proceeds in a private  transaction.
The  investors  were an  unaffiliated  investment  banking firm and CDMI Capital
Corporation  ("CDMI"),  a British  Virgin  Islands  corporation.  Mr.  Mika is a
shareholder of CDMI. Each party invested $1.4 million in the transaction.

     On August 4, 1999, the Company  entered into a sixth  amendment to its Loan
and Security Agreement with FINOVA Capital Corporation  ("FINOVA").  As a result
of this amendment, the Company's aggregate credit facility with FINOVA increased
from $8.3 million to $11.3 million.

     The amendment also (1) increased the minimum net worth  financial  covenant
from  $750,000  to $2.9  million  as of June 30,  1999  with  the  $2.9  million
threshold  increasing  by 60% of any equity  raised by the Company and by 60% of
any annual  profits  generated by the Company;  (2) allows the Company to sell a
minority equity interest (up to 49%) in its Toys  subsidiary;  and (3) increased
the maximum  levels of capital  expenditures,  capital leases and unsecured debt
allowed under the Financing Agreement.

     Electronic  commerce represents another area that may result in significant
capital  expenditures  for the Company in fiscal 2000.  It is also a major focus
for management.  In April 1999, The Company debuted the first of three dedicated
electronic commerce websites. This site, www.ToysWhyPayRetail.com,  represents a
new trade  name for the  Company  and  allows  consumers  to  purchase,  at near
wholesale  prices,  overstocks,  special buys, and overruns on mostly name-brand
toys  purchased  by the  Company  out of  season.  The  Company  plans  to offer
approximately 1000 items for sale on the website.


<PAGE>
     The second and third  electronic  commerce  websites  are  currently  being
developed  to a  state-of-the-art  standard  in  conjunction  with two  Internet
consulting  firms.  These sites will offer  collectible  and imported  specialty
merchandise such as die-cast cars, dolls,  plush toys,  trains,  and collectible
action figures and are expected to open in the late fall of 1999. In conjunction
with the website  launch,  the Company plans to place computer kiosks in several
of its retail  locations  in order to permit  customers  to place  orders on the
website for goods otherwise not sold in such store.

     The Company has entered into a letter of intent with an investment  banking
firm to raise  additional  equity in the  approximate  amount of $20-25  million
through the public sale of a minority interest in the Company's Toys subsidiary.
This public  offering  currently is expected to close in 1999.  This  investment
banking firm also  participated  in the $2.8 million  private  placement in July
1999.

     The  Company  is  pursuing  this  opportunity  and is  continuing  to  seek
additional lease  financing.  There can be no assurance that the Company will be
able to obtain sufficient financing to successfully open the planned new stores.
Additionally, the Company has incurred significant capital expenditures over the
past twelve  months.  To date,  the Company has deployed its working  capital to
cover a significant  portion of these  capital  expenditures.  As a result,  the
Company is also seeking  additional  working  capital  from the  above-mentioned
equity  offerings.  Should  the  Company be unable to raise  sufficient  working
capital,  it may be  unable to  purchase  product  directly  from  factories  at
advantageous  pricing,  thereby  resulting in a negative impact on gross margins
and results of operations.

Year 2000

     In 1998,  the Company  developed a plan to upgrade its existing  management
information system and computer hardware and to become year 2000 compliant.  The
Company  has  completed  the  hardware  upgrade  and has  installed  a year 2000
compliant upgrade to its accounting software.  The Company expects to finish the
year 2000 compliance work in the September  quarter of 1999. To finance the cost
of the new hardware in the computer upgrade project,  the Company entered into a
lease in the amount of $82,472 bearing an interest rate of 10.8%. The total cost
of the  hardware  and  software  purchased  for the  project  was  approximately
$100,000.

     Beyond the above noted internal year 2000 system issue,  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.


<PAGE>
     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.

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  because 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   significantly   strengthened   its   balance   sheet  by  raising
approximately  $3.5  million in  additional  equity over the past three  months,
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.




<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.








<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 and
its former guarantor 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.   The  Company  is  engaged  in   settlement
negotiations  with  plaintiff  with  respect  to this  action;  in the  event no
settlement  is  reached,  however,  trial  has been  scheduled  by the court for
September 1999.

     Neither the Company's officers, directors, affiliates, nor owners of record
or beneficially  of more than five percent of any class of the Company's  Common
Stock is a party to any  material  proceeding  adverse  to the  Company or has a
material interest in any such 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:

(b) During the quarter ended June 30, 1999, no reports on Form 8-K were
filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>

<S>                  <C>
10.131               ABC Fund, Inc. Assignment of Debenture to Tudor Technologies, Inc. dated September 15, 1998
10.132               Tudor Technologies, Inc. Election to Exercise dated July 15, 1999
10.133               Sixth Amendment to Loan and Security Agreement by and between the Company and FINOVA Capital Corporation,
                     dated August 1999
10.134               Fixture Financing Agreement with Longwater Capital Corporation
27.1                 Financial Data Schedule
</TABLE>





<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 16th day of August 1999.

                                             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



<PAGE>