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

[ ] 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, $0.01 par value:
5,548,857 shares outstanding as of August 12, 1999.

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

PLAY CO. TOYS & ENTERTAINMENT CORP.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Page Number
Item 1. FINANCIAL STATEMENTS

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

PLAY CO. TOYS & ENTERTAINMENT CORP.
(A SUBSIDIARY OF UNITED TEXTILES & TOYS CORP.)
CONDENSED BALANCE SHEETS

ASSETS June 30,1999 March 31, 1999

(unaudited) (audited)
--------------- -------------

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
============ ============

See accompanying notes to condensed financial statements

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

CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE NET LOSS
(Unaudited)

Three Months Ended June 31,

1999 1998

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

See accompanying notes to condensed financial statements

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

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended June 30,
------------------------------------------
1999 1998
-------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:

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
====================== ===============

See accompanying notes to condensed financial statements

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.

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.

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.

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.

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 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.

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.

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.

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.

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.

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.

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.

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.

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

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