UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2009
For the quarterly period ended March 31, 2010
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _______.

Commission file number 0-49649

PLAYLOGIC ENTERTAINMENT, INC

(Exact Name of Registrant as Specified in Its Charter)

Delaware		23-3083371
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Strawinskylaan 1041, WTC Amsterdam, C-Tower, 10th floor		1077 XX
(Address of principal executive offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: + 31-20-676-0304

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files. Yes o ¨ No o¨

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o¨ Accelerated filer o¨ Non-accelerated filer o¨ (Do not check if a smaller reporting company) Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o ¨ No ý

As of ~~September~~ 30June 23, ~~2009~~2010, there were 4769,~~139~~717,~~635~~ 713 shares of the Registrant's Common Stock outstanding.

PLAYLOGIC ENTERTAINMENT, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I -- FINANCIAL INFORMATION			Page No.
	Item 1.	Financial Statements	43
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2322
	Item 4	Controls and Procedures	2423
PART II -- OTHER INFORMATION
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	24
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item 3.	Defaults Upon Senior Securities	24
	Item 4.	Submission of Matters to a Vote of Security Holders	24
	Item 5.	Other Information	24
	Item 6.	Exhibits	2524
	Signatures		2625
	Exhibit Index		2726
	Certifications		Attached

- 2 -

PART I -- FINANCIAL INFORMATION

Item 1 - Financial Statements

PLAYLOGIC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	September 30, 2009			December 31, 2008 (Derived from audited financial statements)
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	775,416		$	81,978
Receivables
Trade, net of allowance for doubtful accounts		4,736,634			380,993
Officers		178,297			109,876
Value Added Taxes from foreign governments		122,083			71,783
Current portion of software development costs		10,761,777			5,179,976
Inventory finished product		774,941			812,020
Intellectual property licenses		1,905,947			1,905,947
Prepaid expenses and other receivables		3,084,948			560,765
Total current assets		22,340,043			9,103,338
Property and equipment, net of accumulated depreciation		1,297,035			1,226,134
Other assets
Software development costs, net of current portion		2,722,945			3,401,058
Restricted cash		219,825			210,000
Total other assets		2,942,770			3,611,058
Total Assets	$	26,579,848		$	13,940,530
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilites
Accounts and notes payable
Accounts payable	$	7,622,897		$	5,453,262
Other current liabilities
Current maturities of long-term debt		4,843,965			3,342,000
Accrued liabilities		1,671,496			1,896,466
Deferred revenues		1,813,153			-
indebtedness to related party		18,928,513			3,794,000
Total current liabilities		34,880,024			14,485,728
Long-term debt, less current maturities		982,621			2,146,338
Total Liabilities		35,862,645			16,632,066
Shareholders' Deficit
Preferred stock - $0.001 par value. 20,000,000 shares authorized. None issued and outstanding		-			-
Common stock - $0.001 par value.100,000,000 shares authorized. 47,139,635 and 46,391,275 shares issued and outstanding, respectively		47,140			46,392
Additional paid-in capital		62,597,662			61,229,130
Deferred Compensation-Employee Stock Options		717,213			580,572
Accumulated other comprehensive loss		(5,402,609	)		(3,955,083	)
Accumulated deficit		(66,944,974	)		(60,220,690	)
Total Shareholders' Deficit of the Company		(8,985,568	)		(2,319,679	)
Non Controlling Interest		(297,229	)		(371,857	)
Total Shareholders' Deficit		(9,282,797	)		(2,691,536	)
Total Liabilities and Shareholders' Deficit	$	26,579,848		$	13,940,530

PLAYLOGIC ENTERTAINMENT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

	March 31, 2010 unaudited			December 31, 2009 Derived from audited financial statements
ASSETS
Current Assets
Cash and cash equivalents	$	417,926		$	918,943
Receivables
Trade, net of allowance for doubtful accounts		1,327,075			2,266,499
Officers		-			80,483
Value Added Taxes from foreign governments		66,496			68,184
Prepaid expenses and other receivables		871,585			637,345
Current portion of software development costs		4,279,205			4,721,666
Inventory finished product		1,165,612			1,872,589

Total current assets		8,127,899			10,565,709


Property and equipment, net of accumulated depreciation		967,050			1,055,874

Long term assets
Software development costs, net of current portion		2,171,604			1,674,390
Long term Receivables		1,117,947			-
Intellectual property licenses		1,722,471			1,807,926
Restricted cash		-			216,000

Total other assets		5,012,022			3,698,316

Total Assets	$	14,106,971		$	15,319,900

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current Liabilites
Accounts and notes payable
Accounts payable	$	7,883,470		$	7,638,962
Other current liabilities
Current maturities of long-term debt		40,431			43,200
Accrued liabilities		2,307,632			1,881,985
indebtedness to third parties					-
indebtedness to related parties		5,535,774			5,364,698

Total current liabilities		15,767,307			14,928,845


Long-term debt, less current maturities		733,064			973,145

Total Liabilities		16,500,371			15,901,990

Shareholders' Equity/(Deficit)
Preferred stock - $0.001 par value. 20,000,000 shares authorized. None issued and outstanding		-			-
Common stock - $0.001 par value.100,000,000 shares authorized. 69,717,713 and 58,012,513 shares issued and outstanding, respectively		69,718			58,013
Additional paid-in capital		85,781,258			85,731,396
Accumulated other comprehensive loss		(4,805,310	)		(5,050,189	)
Accumulated deficit		(82,751,850	)		(80,556,080	)
Total Shareholders' Equity/(Deficit) of the Company		(1,706,184	)		183,140

Non Controlling Interest		(687,216	)		(765,230	)
Total Equity/(Deficit)		(2,393,400	)		(582,090	)


Total Liabilities and Shareholders' Equity	$	14,106,971		$	15,319,900

See accompanying notes to unaudited condensed consolidated financial statements

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PLAYLOGIC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net revenues
Sales, net of returns and allowances	$	2,019,382		$	1,068,377		$	6,701,682		$	9,418,489
Cost of sales
Direct costs and license fees		(938,482	)		(405,806	)		(2,929,667	)		(2,656,048	)
Amortization of software development costs		(1,047,792	)		(397,642	)		(2,034,383	)		(2,120,432	)
		(1,986,274	)		(803,448	)		(4,964,050	)		(4,776,480	)
Gross profit		33,108			264,929			1,737,632			4,642,009
Operating expenses
Research and development		307,698			125,589			404,442			301,031
Selling and marketing		922,155			166,399			1,865,581			573,585
General and administrative		1,596,275			1,683,894			4,780,033			4,123,612
Depreciation		93,628			127,829			301,098			284,234
Asset impairment charges		-			1,000,000			-			1,000,000
Total operating expenses		2,919,756			3,103,711			7,351,154			6,282,462
Loss from operations		(2,886,648	)		(2,838,782	)		(5,613,522	)		(1,640,453	)
Other income/(expense)
Interest expense		(493,069	)		(142,172	)		(999,971	)		(259,890	)
Non cash Interest expense on discounted debt		(288,847	)		(49,000	)		(483,091	)		(98,000	)
Realized and unrealized exchange profit		407,849			35,653			446,927			44,848
Loss before provision for income taxes		(3,260,715	)		(2,994,301	)		(6,649,657	)		(1,953,495	)
Equity in non controlling interest		(123,837	)		-			(74,627	)		-
Provision for Income Taxes		-			-			-			-
Net Loss		(3,384,552	)		(2,994,301	)		(6,724,284	)		(1,953,495	)
Net loss per weighted-average share of common stock outstanding, computed on Net Loss
- basic		(0.07	)		(0.07	)		(0.14	)		(0.05	)
- fully diluted		(0.06	)		(0.07	)		(0.11	)		(0.05	)
Weighted-average number of shares of common stock outstanding
- basic		47,139,635			42,437,055			47,037,497			41,522,821
- fully diluted		58,614,563			42,437,055			58,512,425			41,522,821

PLAYLOGIC ENTERTAINMENT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended March 31,
	2010			2009

Net revenues
Sales, net of returns and allowances	$	2,569,730		$	1,216,823

Cost of sales
Direct costs and license fees		(881,133	)		(678,228	)
Amortization of software development costs		(570,770	)		(129,109	)
		(1,451,903	)		(807,337	)

Gross profit		1,117,827			409,486

Operating expenses
Research and development		288,444			41,944
Selling and marketing		433,537			330,729
General and administrative		1,429,541			1,395,761
Bad debt expense		286,581			-
Depreciation		195,199			75,435
Total operating expenses		2,633,302			1,843,869

Loss from operations		(1,515,475	)		(1,434,383	)

Other income/(expense)
Interest expense		(509,342	)		(254,914	)
Non cash Interest expense on discounted debt		(171,076	)		(49,000	)
Gain/(loss) on foreign exchange		12,046			(12,039	)

Loss before provision for income taxes		(2,183,847	)		(1,750,336	)

Equity in non controlling interest		(11,923	)		(245	)

Provision for Income Taxes		-			-

Net Loss		(2,195,770	)		(1,750,581	)

Net loss per weighted-average share of common stock outstanding, computed on Net Loss
- basic		(0.04	)		(0.04	)
- fully diluted		(0.04	)		(0.04	)

Weighted-average number of shares of common stock outstanding
- basic		58,792,860			46,900,984
- fully diluted		58,792,860			46,900,984

See accompanying notes to unaudited condensed consolidated financial statements

- 4 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT Unaudited
					Additional							Accumulated Other Comprehensive Loss			40% non controlling
	Common stock				Paid-in		Deferred Compensation		Accumulated						interest in
	Shares		Par Value		Capital				deficit						PlayV Ltd			Total
Balances at December 31, 2008		46,391,275		46,392		61,229,130		580,572		(60,220,690	)		(3,955,083	)		(371,857	)		(2,691,536	)
Non Controlling interest in Joint-Venture																74,628			74,628
Common stock issued for cash		643,360		643															643
Common stock issued for services		105,000		105															105
Capital contributed to support operations						75,000													75,000
Issuing costs																			-
Stock options issued pursuant to Employee Compensation Plan								136,641											136,641
Discount on debt					$	1,293,532													1,293,532
Change in currency translation adjustment													(1,447,526	)					(1,447,526	)
Net result for the year										(6,724,284	)								(6,724,284	)
Balances at September 30, 2009		47,139,635	$	47,140	$	62,597,662	$	717,213	$	(66,944,974	)	$	(5,402,609	)	$	(297,229	)	$	(9,282,797	)

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

					Additional						Accumulated Other			40% non controlling
	Common stock				Paid-in			Accumulated			Comprehensive			interest in
	Shares		Par Value		Capital			deficit			Loss			PlayV Ltd			Total

Balances at December 31, 2009		58,012,513		58,013		85,731,396			(80,556,080	)		(5,050,189	)		(765,231	)		(582,090	)

Non Controlling interest in Joint-Venture															78,015			78,015
Common stock issued through exercise of warrants		11,705,200		11,705		(11,705	)											(0	)
Capital contributed to support operations						25,000												25,000
Issuing costs																		-
Stock options issued pursuant to Employee Compensation Plan						36,567												36,567
Change in currency translation adjustment												244,879						244,879
Net result for the year									(2,195,770	)								(2,195,770	)
Balances at March 31, 2010		69,717,713	$	69,718	$	85,781,258		$	(82,751,850	)	$	(4,805,310	)	$	(687,216	)	$	(2,393,400	)

See accompanying notes to unaudited condensed consolidated financial statements

- 5 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	9 months ended September 30,
	2009			2008
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(6,724,284	)	$	(1,953,495	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		301,098			284,234
Amortization of software development		2,034,383			2,120,432
Impairment of software development		-			1,000,000
Bad debt expense		-			19,893
Expense charges for stock options		136,641			163,767
Management fees contributed as capital		75,000			75,000
Non-cash interest charge on warrants		483,091			98,000
Change in capitalized software development costs		(6,938,071	)		(6,267,998	)
(Increase)/ Decrease in cash attributable to changes in operating assets and liabilities
Restricted cash		(4,287	)		(227,852	)
Accounts receivable - trade and other		(4,224,708	)		(1,691,741	)
Inventory finished product		104,585			-
Prepaid expenses and other		(2,467,082	)		(363,140	)
Increase / (Decrease) in
Deferred revenues		1,737,155			(153,344	)
Accounts payable - trade		1,393,708			(557,807	)
Payroll taxes payable		(224,761	)		(932,348	)
Other current liabilities		175,908			170,974
Net cash used in operating activities		(14,141,625	)		(8,215,425	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid to acquire property and equipment		(323,809	)		(826,784	)
Net cash used in investing activities		(323,809	)		(826,784	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on bank line of credit		-			(1,089,186	)
Cash repaid on short term notes		-			(410,133	)
Principal payments on long-term debt		(247,219	)		(22,785	)
Cash received from shareholder loans		15,214,955			8,209,281
Cash repaid on shareholder loans		-			(3,850,500	)
Proceeds from sales of common stock		643			6,536,568
Net cash provided by financing activities		14,968,379			9,373,245
Effect of foreign exchange on cash		190,494			(373,941	)
Increase/(Decrease) in Cash		693,439			(42,905	)
Cash at beginning of period		81,978			349,464
Cash at end of period		775,417			306,559
Supplemental disclosures of interest and income taxes paid
Interest paid during the period		-			-
Income taxes paid (refunded)		-			-
Supplemental disclosures of non-cash investing and financing activities
Common stock issued to repay notes payable		-			-
Cost of acquiring capital paid with issuance of common stock		-			-

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	3 months ended March 31,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(2,195,771	)	$	(1,750,580	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		182,696			75,435
Amortization of software development		570,769			129,109
Bad debt expense		286,581			-
Expense charges for stock options		36,567			46,623
Management fees contributed as capital		25,000			25,000
Non-cash interest charge on warrants		171,076			49,000
(Increase)/ Decrease in cash attributable to changes in operating assets and liabilities
Change in capitalized software development costs		(613,024	)		(2,333,879	)
Restricted cash		-			-
Accounts receivable - trade and other		(464,921	)		(217,653	)
Inventory finished product		599,909			238,412
Prepaid expenses and other		(309,596	)		(123,657	)
Increase / (Decrease) in
Deferred revenues		-			87,531
Accounts payable - trade		647,313			1,565,742
Payroll taxes payable		129,078			(95,638	)
Other current liabilities		431,931			115,408
Net cash used in operating activities		(502,392	)		(2,189,147	)

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid to acquire property and equipment		(4,535	)		(56,948	)
Net cash used in investing activities		(4,535	)		(56,948	)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt		(188,420	)		(216,514	)
Cash received from shareholder loans		-			2,609,786
Proceeds from sales of common stock		-			643
Net cash (used in) provided by financing activities		(188,420	)		2,393,915

Effect of foreign exchange on cash		64,248			(338,779	)

Increase/(Decrease) in Cash		(631,099	)		(190,958	)
Cash at beginning of period		1,049,025			390,026

Cash at end of period		417,926			199,068

Supplemental disclosures of interest and income taxes paid
Interest paid during the period		-			-
Income taxes paid (refunded)		-			-

Supplemental disclosures of non-cash investing and financing activities
Common stock issued to repay notes payable		-			-
Cost of acquiring capital paid with issuance of common stock		-			-

See accompanying notes to unaudited condensed consolidated financial statements

- 6 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated balance sheet as of December 31, ~~2008~~2009 has been derived from audited financial statements and the accompanying unaudited condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September~~ 30March 31, ~~2009~~2010 and ~~2008~~2009 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes for complete consolidated financial statements as required by GAAP. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, ~~2008~~2009 as filed at the SEC on May 17, 2010.

The results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009~~2010 and ~~2008~~ 2009 presented are not necessarily indicative of the results to be expected for the year.

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

Description of business

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

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

We sell our products worldwide.

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

Going concern

The ~~accompanying~~ ~~condensed~~ accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. AtAs ~~September~~of 30March 31, ~~2009~~2010, ~~the~~ ~~Company~~we ~~had~~have an accumulated deficit of approximately $6682.98 million. ~~During~~ ~~the~~At ~~nine~~March ~~months~~31, ~~ended~~2010 ~~September~~and 30December 31, 2009, ~~the~~we ~~Company~~had ~~incurred~~ a ~~net~~ ~~loss~~working capital deficit of $6.7.6 million and $4.4 million, respectively, resulting from recurring negative operating cash ~~flows~~flow which raises substantial doubts about our ability to continue as a going concern. For the three months ending March 31, 2010 and March 31, 2009, we have recorded net losses of ~~approximately~~ $142.2 million and $1.8 million respectively. ~~These~~Furthermore, ~~circumstances~~we ~~raise~~showed ~~uncertainties~~negative ~~about~~cash ~~the~~flow ~~Company’s ability~~from operations for these periods amounting to ~~continue~~$0.5 million and $2.2 million respectively. Our continued existence as a going concern is dependent upon our ability to generate sufficient cash flows to support our ongoing operations by meeting our current obligations as they come due and servicing our long-term debt on a timely basis.

While the Company has contracts in place with several third-party developers and is developing titles through its Playlogic Game Factory B.V. subsidiary, and anticipates successful debuts of such titles; the market for interactive entertainment software is characterized by short product lifecycles and frequent introduction of new products. Many software titles do not achieve sustained market acceptance or do not generate a sufficient level of sales to offset the costs associated with product development. A significant percentage of the sales of new titles generally occur within the first three to six months following their release. Therefore, the Company’s profitability depends upon the Company’s ability to develop and sell new, commercially successful titles and to replace revenues from titles in the later stages of their lifecycles. Any competitive, financial, technological or other factor which delays or impairs the Company’s ability to introduce and sell the Company’s software could adversely affect future operating results.

- 7 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company’s continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis and its ability to raise debt and/or equity financing.

The Company anticipates future sales of equity securities to raise working capital to support and preserve the integrity of the corporate entity. However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

If no additional operating capital is received during the next ~~twelve~~few months, the Company will be forced to rely on existing cash in the bank and upon additional funds loaned by management and/or significant stockholders to preserve the integrity of the corporate entity at this time. In the event, the Company is unable to acquire advances from management and/or significant stockholders, the Company’s ongoing operations would be negatively impacted to the point that all operating activities are ceased.

While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach the Company’s goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.

No adjustment has been made in the accompanying financial statements to the amounts and classification of assets and liabilities which could result should the Company be unable to continue as a going concern.

Principles of consolidation

The consolidated financial statements include the consolidated financial statements of Playlogic Entertainment, Inc. a Delaware corporation, Playlogic International N.V. (a corporation domiciled in The Netherlands), its wholly-owned subsidiary Playlogic Game Factory B.V. (a corporation domiciled in The Netherlands) and Playlogic Suisse SA (a corporation domiciled in Switzerland). Furthermore, we have 60% controlling interest in a joint-venture founded in the United Kingdom. All inter-company accounts and transactions have been eliminated in consolidation.

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

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.

Currency translation

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

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

- 8 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

Financial statement element		Applicable rate

Assets		Balance sheet date *
Liabilities		Balance sheet date *
Equity		Historical
Revenues		Annual average**
Expenses		Annual average**
Gains		Annual average**
Losses		Annual average**

____________

* $1.~~46550~~3477 and $ 1.~~4000~~4400 at ~~September~~March 3031, ~~2009~~2010 and December 31, ~~2008~~2009, respectively.

** Average for the 93 months ended ~~September~~March 3031, ~~2009~~2010 was $1.~~3718~~3815

Average for the 93 months ended ~~September~~March 3031, ~~2008~~2009 was $1.~~5190~~3094

Earnings/(Loss) Per Share .

Basic ~~earnings/(loss)~~ ~~per~~EPS ~~common share~~ is computed by dividing the net income (loss) byapplicable ~~the weighted-average~~to ~~number of shares of~~ common ~~stock~~stockholders ~~outstanding~~ for the period~~. Basic~~ ~~earnings~~by ~~per~~the ~~share~~weighted ~~excludes~~average ~~the~~number ~~impact~~ of ~~unvested~~ shares of ~~restricted~~ common stock ~~issued~~outstanding ~~under~~during the ~~Company’s~~same ~~incentive stock compensation plan~~period. Diluted ~~earnings~~EPS ~~per~~is ~~share~~computed ~~reflects~~by ~~the~~dividing ~~potential impact of common stock options and unvested shares of restricted stock issued under~~ the ~~Company’s~~ ~~incentive~~net ~~stock~~income ~~compensation~~(loss) ~~plan,~~applicable ~~and~~to ~~outstanding~~ common ~~stock purchase~~stockholders ~~warrants. Diluted and basic earnings per share~~ for the ~~three~~period ~~and~~by ~~nine months ended September 30, 2009 and 2008 are~~ the ~~same~~weighted ~~because~~average ~~the~~number ~~impact~~ of shares ~~issuable~~of ~~under~~common ~~the incentive~~ stock ~~compensation plan~~ and common stock ~~purchase~~ ~~warrants~~equivalents ~~is anti-dilutive after applying the treasury stock method, as is required by FASB ASC 260 Earnings per Share~~ outstanding.

The Company incurred a net loss for the three months ended March 31, 2010 and 2009; therefore, the basic and diluted weighted average shares outstanding exclude the impact of all common stock equivalents because their impact would be anti-dilutive.

The Company defines common stock equivalents as unexercised stock options, unvested time-based and market-based restricted stock and warrants outstanding during the period.

Unexercised stock options to purchase 6,177,500 and 4,525,000 shares of the Company’s common stock as of March 31, 2010 and 2009, respectively, were not included in the computation of diluted earnings per share because the exercise of the stock options would be anti-dilutive to earnings per share.

Unexercised warrants to purchase 1,755,582 shares and 10,442,233 shares of our common stock as of March 31, 2010 and 2009, respectively, were excluded from the computation of diluted earnings per share because the exercise of warrants would be anti-dilutive to earnings per share.

Recently Issued Accounting Pronouncements

In ~~2008~~April 2009, the ~~Securities~~FASB ~~and~~issued ~~Exchange~~ASC ~~Commission~~805, ~~(the~~Accounting ~~“SEC”)~~for ~~adopted~~Assets ~~rule~~Acquired ~~amendments~~and Liabilities Assumed in a Business Combination that ~~replace~~ ~~the~~arise ~~category~~from ofContingencies ~~“Small~~, ~~Business~~which ~~Issuers”~~requires ~~with~~that assets acquired and liabilities assumed in a ~~broader~~business ~~category~~combination ~~of “Smaller~~that ~~Reporting~~arise ~~Companies.”~~from ~~Under~~contingencies ~~these~~be ~~rules~~recognized at fair value, aif ~~“Smaller~~fair ~~Reporting~~value ~~Company” is~~can abe ~~company~~determined ~~with~~during athe ~~public~~measurement ~~float~~period. ~~less~~ASC ~~than~~805 ~~$75,000,000~~specifies ~~(measured~~that an asset or liability should be recognized at ~~end~~time of ~~June).~~ ~~Companies~~acquisition ~~that~~if ~~meet~~the ~~this~~amount ~~definition~~of ~~are~~the ~~able~~asset toor ~~elect~~liability ~~“scaled~~can ~~disclosure standards”~~be onreasonably estimated and that it is probable that an ~~item-by-item~~asset existed or “that a~~-la-carte”~~ ~~basis.~~liability ~~With~~had ~~this~~been ~~change,~~incurred at the ~~SEC has~~acquisition ~~streamlined~~date. ~~and~~ASC ~~simplified~~805 ~~reporting~~is effective for ~~many~~all ~~companies~~fiscal years beginning after December 15, ~~and~~2008 ~~has~~(31 December 2009 for the Company). The adoption of this statement is not ~~added any~~expected ~~significant~~to ~~disclosure~~have ~~requirements~~a material effect on the Company's future financial position or results of operations.

In February 2007, the FASB issued Statement ASC 825, “The Fair Value Option for Financial Assets and Financial Liabilities”, or SFAS 159. SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. It is expected to expand the use of fair value measurements which is consistent with the Financial Accounting Standards Board’s long-term measurement objectives for accounting for financial instruments. The Company adopted this Statement as of January 1, 2009 but has not applied the fair value option to any eligible assets or liabilities as such. There was no impact to our financial condition or results of operations from the adoption of this Statement.

In December 2007, the FASB issued ASC 805, Business Combinations. This Statement provides greater consistency in the accounting and financial reporting of business combinations. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the nature and financial effect of the business combination. ASC 805 is effective for all fiscal years beginning after December 15, 2008 (January 1, 2009 for the Company) and interim periods within those years, with earlier adoption prohibited. We are evaluating the impact that the adoption of ASC 805 will have on our consolidated financial position, cash flows and results of operations. The effect will be dependent upon acquisitions at that time.

In December 2007, the FASB issued ASC 810, "Noncontrolling Interests in Consolidated Financial Statements--An Amendment of ARB No. 51, or ASC 810". FASB ASC 810 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. FASB ASC 810 is effective for fiscal years beginning on or after December 15, 2008. The Company believes that FASB ASC 810 should not have a material impact on the consolidated financial position or results of operations.

- 9 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In March 2008, the FASB issued ASC 815, "Disclosures about Derivative Instruments and Hedging Activities" ("ASC 815"). ASC 815 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" and how derivative instruments and related hedged items affect a company's financial position, financial performance and cash flows. ASC 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's future financial position or results of operations.

Also in May 2008, the FASB issued ASC 944, "Accounting for Financial Guarantee Insurance Contracts--an interpretation of FASB Statement No. 60" ("ASC 944"). ASC 944 interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that Statement. ASC 944 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of ASC 944 on its financial statements but does not expect it to have an effect on the Company's financial position, results of operations or cash flows.

In May 2008, the FASB issued ASC 470, "Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("ASC 470"). ASC 470 applies to convertible debt securities that, upon conversion, may be settled by the issuer fully or partially in cash. ASC 470 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. ASC 470 is effective for financial statements issued for fiscal years after December 15, 2008, and must be applied on a retrospective basis. Early adoption is not permitted. The adoption of this statement is not expected to have a material effect on the Company's future financial position or results of operations.

In June 2008, the FASB issued ASC 260, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("ASC 260"). ASC 260 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the earnings allocation in computing earnings per share under the two-class method as described in ASC 260, Earnings per Share. Under the guidance of ASC 260, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings-per-share pursuant to the two-class method. ASC 260 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and all prior-period earnings per share data presented shall be adjusted retrospectively. Early application is not permitted. The Company is assessing the potential impact of this ASC on the earnings per share calculation.

In June 2008, the FASB ratified ASC 815, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock" ("ASC 815"). ASC 815provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. ASC 815is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early application is not permitted. The Company is assessing the potential impact of this ASC 815on the financial condition and results of operations.

In April 2009, the FASB issued ASC 805, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination thatArise from Contingencies , which requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value, if fair value can be determined during the measurement period. ASC 805 specifies that an asset or liability should be recognized at time of acquisition if the amount of the asset or liability can be reasonably estimated and that it is probable that an asset existed or that a liability had been incurred at the acquisition date. ASC 805 is effective for all fiscal years beginning after December 15, 2008 (31 December 2009 for the Company). The adoption of this statement is not expected to have a material effect on the Company's future financial position or results of operations.

In May 2009, the FASB issued ASC 855, Subsequent Events which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 is effective for interim or annual financial periods ending after June 15, 2009 (the Company's second quarter ended June 30, 2009). The implementation of this standard did not have a material impact on the Company's financial statements. Subsequent events were evaluated through the date of issuance of these consolidated financial statements on November 18, 2009 at the time this Quarterly Report on Form 10-Q was filed with the Securities and Exchange Commission.

- 10 9-

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In June 2009, the FASB issued ASC 105 which replaces SFAS No. 162 , The Hierarchy of Generally Accepted Accounting Principles, to establish the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United States. ASC 105 is effective for interim and annual periods ending after September 15, 2009 (the Company's third quarter ended September 30, 2009). We do not expect the adoption of this standard to have an impact on our financial position or results of operations.

In October 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic 605) – Multiple-Deliverable Revenue Arrangements . This guidance modifies the fair value requirements of FASB ASC subtopic 605-25, Revenue Recognition-Multiple Element Arrangements , by allowing the use of the “best estimate of selling price” in addition to vendor specific objective evidence and third party evidence for determining the selling price of a deliverable. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence, (b) third-party evidence, or (c) estimates. In addition, the residual method of allocating arrangement consideration is no longer permitted. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010. We do not expect the adoption of ASU 2009-13 to have a material impact on our Condensed Consolidated Financial Statements.

In October 2009, the FASB issued ASU 2009-14, Software (Topic 985) – Certain Revenue Arrangements that Include Software Elements . This guidance modifies the scope of FASB ASC subtopic 965-605, Software-Revenue Recognition , to exclude from its requirements non-software components of tangible products and software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. ASU 2009-14 is effective for fiscal years beginning on or after June 15, 2010. We do not expect the adoption of ASU 2009-14 to have a material impact on our Condensed Consolidated Financial Statements.

~~NOTE B~~The -FASB’s ~~SOFTWARE~~Accounting ~~DEVELOPMENT~~Standards ~~COSTS~~Codification (ASC) is effective for all interim and annual financial statements issued after September 15, 2009. The ASC is now the single official source of authoritative, nongovernmental generally accepted accounting principles (GAAP) in the United States. The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other than guidance issued by the Securities and Exchange Commission. Our accounting policies were not affected by the conversion to ASC. However, we have conformed references to specific accounting standards in these notes to our consolidated financial statements to the appropriate section of ASC.

~~The following~~In ~~table~~January ~~provides~~2010, the ~~details~~FASB issued guidance that requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of ~~software~~Level ~~development~~1 ~~costs~~and asLevel 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of ~~September~~ 30Level 3 fair value measurements. The guidance is effective for annual reporting periods beginning after December 15, 2009, ~~and~~except for ~~the~~Level ~~year~~3 ~~ended~~reconciliation disclosures that are effective for annual periods beginning after December 3115, ~~2008:~~ 2010. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

	September 30, 2009			December 31, 2008 (derived from audited statements)
	(Unaudited)
Beginning balance	$	8,581,034		$	7,285,353
Additions		6,938,071			8,032,832
		15,519,105			15,318,185
Less: Amortization		(2,034,383	)		(2,237,151	)
Less: Impairment charge		0			(4,500,000	)
		(2,034,383	)		(6,737,151	)
Total software development costs		13,484,722			8,581,034
Less: current portion		(10,761,777	)		(5,179,976	)
Non-current portion	$	2,722,945			3,401,058

There were various other accounting standards and interpretations issued during 2010 and 2009, none of which are expected to have a material impact on the Company’s consolidated financial position, operations, or cash flows.

~~The amount of software development costs resulting from advance payments and guarantees to third~~-party developers was approximately $7.4 million at September 30, 2009. In addition, software development costs at September 30, 2009 included an amount of $9.8 million related to titles that have not been released yet.10-

The non-current portion of the capitalized software development costs is expected to be amortized starting Q4 2010 and further.

- 11 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE C –B ~~RELATED~~- ~~PARTY~~SOFTWARE ~~TRANSACTIONS~~DEVELOPMENT COSTS

The following table provides the details of software development costs as of March 31, 2010 and for the year ended December 31, 2009:

	March 31, 2010			December 31, 2009 (derived from audited statements)
	(Unaudited)

Beginning balance	$	6,396,056		$	8,581,034
Additions		625,523			7,559,092
		7,021,579			16,140,126

Less: Amortization		(570,770	)		(4,994,070	)
Less: Impairment charge		0			(4,750,000	)
		(570,770	)		(9,744,070	)

Total software development costs		6,450,809			6,396,056

Less: current portion		(4,279,205	)		(4,721,666	)
Non-current portion	$	2,171,604			1,674,390

The amount of software development costs resulting from advance payments and guarantees to third-party developers was approximately $1.4 million at March 31, 2010. We are in default on payments to some third-party developers, which has resulted in projects that are put on hold until the next payment is made. This could cause a delay in release of our titles. In addition, software development costs at March 31, 2010 included an amount of $3.1 million related to titles that have not been released yet.

The non-current portion of the capitalized software development costs is expected to be amortized starting Q2 2011 and further.

NOTE C – SHAREHOLDER’S EQUITY

Common stock

~~On February~~During ~~10, 2009,~~ the ~~Company~~first ~~sold~~three ~~200,185~~months ~~shares~~ of ~~its~~2010, ~~common~~17 ~~stock~~million towarrants ~~an accredited~~were ~~investor~~exercized ~~based~~cashless inat ~~the~~an ~~Netherlands~~agreed atupon ~~nominal~~price ~~value~~ of $01.~~001~~25 per share. orThe ~~gross~~Company ~~proceeds~~has issued a total of ~~$200~~11,705,200 ~~pursuant~~new toshares ~~the~~in ~~terms~~connection ofwith athese ~~subscription agreement~~exercizes. ~~dated~~The ~~February~~warrants ~~10,~~had ~~2009~~exercise prices of $0.40 to $0.60 each.

On February 10, 2009, the Company sold 61,000 shares of its common stock to an accredited investor based in the Netherlands at nominal value of $0.001 per share or gross proceeds of $61, pursuant to the terms of a subscription agreement dated February 10, 2009.

On February 13, 2009, the Company sold 30,000 shares of its common stock to an accredited investor based in the Netherlands at nominal value of $0.001 per share or gross proceeds of $30, pursuant to the terms of a subscription agreement dated February 13, 2009.

On June 1, 2009, the Company issued 105,000 shares of its common stock for services provided by the PR and Marketing company the Company hired. This PR and Marketing company is based in the United States. The shares have a par value of $0.001 per share.

Stock option plan

On ~~January~~ 23March 18, ~~2009~~2010, the Board of Directors has agreed to grant 1,~~322~~652,500 options to key employees. This grant is in accordance with the ~~2006~~2007 approved Employee Stock Option Plan. The options have an exercise price of $0.6030 per share. These options vest ratably over three years and will expire in 4 years. The fair value of the options totaled $47114,~~610~~023 or $0.04069 per share, of which $111,~~462~~ 267 was recorded during the ~~nine~~three months, ended ~~September~~March 3031, ~~2009~~2010. The stock price on the day of grant amounted to $0.2521.

The fair value of options granted was estimated at the grant date using the Black-Scholes option-pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The following table summarizes the assumptions and variables used to compute the weighted average fair value of stock option grants:

Risk-free interest rate	1.3%
Dividend yield	0%
Volatility factor	47.5%
Weighted-average expected life	4 Years

-11-

Loans from shareholders

Loan agreement 1

On January 23, 2009, the Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of €1,500,000 (€750,000 each) or $ 2,200,000 ($1,100,000 each)). These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amounts have to be repaid on December 31, 2009. Under this loan agreement, the Company pledged as a collateral all Intellectual Property owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 1,500,000 (750,000 each) shares of the Company’s common stock at an exercise price of $0.50 per share. The warrants may be exercised starting January 23, 2009 and expire on January 22, 2013.

Loan agreement 2

On March 16, 2009, the Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of €250,000 (€125,000 each) or $ 365,000 ($182,500 each). These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amount was initially to be repaid before the end of June 2009. As of July 31, 2009 this loan agreement has been renewed and the repayment date has been extended to September 1, 2009. Under this loan agreement, the Company pledged as a collateral all Intellectual Property and receivables owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 318,182 (159,091 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants may be exercised starting July 31, 2009 and expire on July 31, 2013. Upon exercise, the warrants will be settled cashless.

In accordance with the contracts, the Company has issued additional 318,182 (159,091 each) cashless warrants at the same conditions as the Company has not repaid the principle amount to the loan provider on or before September 1, 2009. The Company has a verbal agreement with the loan providers to extend the term of the loan to April 1, 2010, and parties are currently working on renewal of the contract.

- 12 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Loan agreement 3

Risk-free interest rate	2.29%
Dividend yield	0%
Volatility factor	53.1%
Weighted-average expected life	4 Years

OnNOTE D ~~June 12,~~– ~~2009,~~RELATED ~~the~~PARTY Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of €3,900,000 (€1,950,000 each) or $ 5,700,000 ($2,850,000 each)). These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amounts have to be repaid on September 1, 2009. Under this loan agreement, the Company pledged as collateral all Intellectual Property and accounts receivable owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 4,963,636 (2,481,818 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants may be exercised starting April 7, 2009 and expire on April 7, 2013. Upon exercise, the warrants will be settled cashless.TRANSACTIONS

~~In accordance~~As ~~with~~of ~~the~~March ~~contracts~~31, 2010 the Company has ~~issued~~ an ~~additional 4,963,636~~outstanding ~~cashless~~loan ~~warrants~~payable atto related parties amounting to $ 6 million. This loan is the ~~same~~remaining ~~conditions~~balance asof loans provided during 2008 and 2009. In connection with these loans the Company ~~has~~issued ~~not~~warrants. ~~repaid~~ In accordance with APB 14, the ~~principle~~debt ~~amount~~proceeds tohave been allocated between the ~~loan~~debt ~~provider~~and ondetachable orstock ~~before~~purchase ~~September~~warrants 1,based ~~2009~~on relative fair values. ~~The Company~~As ~~has~~of aMarch ~~verbal~~31, ~~agreement~~2010 ~~with~~we ~~the~~have ~~loan~~unamortized ~~providers~~debt discount amounting to ~~extend~~$464,226. ~~the~~We ~~term~~have ofrecorded the ~~loan~~ tonet ~~April~~of 1$5, ~~2010~~535,774 ~~and~~as indebtedness to related parties ~~are~~in ~~currently~~the ~~working~~balance onsheet. We ~~renewal~~have verbal agreement to extend the term of the ~~contract~~ loan to December 31, 2010.

~~Loan~~The ~~agreement 4~~total amortization on the debt discount amounts to $171,076 for the three months ended March 31, 2010.

OnUnder ~~July 30,~~this ~~2009~~loan agreement, the Company ~~entered~~pledged ~~into~~as ~~two~~collateral ~~bridge~~all ~~loan~~current ~~agreements~~and ~~with~~future ~~two~~Intellectual ~~principal shareholders~~Property, ~~based~~receivables inand ~~the~~bank ~~Netherlands,~~balances ~~pursuant~~owned toby ~~which~~ the Company. ~~borrowed a principal amount of €1~~Furthermore,~~800,000~~ (€the ~~900,000~~loan ~~each)~~providers orhave $a ~~2,638,000~~first ~~($1,319,000 each)). These~~right ~~loans bear an interest~~ of ~~10%~~pledge ~~per annum and will be paid~~ on aall ~~monthly basis. The principle amounts have to be repaid on September 1, 2009. Under this loan agreement,~~ the ~~Company~~issued ~~pledged as collateral all Intellectual Property~~ and ~~accounts~~outstanding ~~receivable~~shares ~~owned~~of byPlaylogic ~~the~~Game ~~Company~~Factory B.V. ~~Concurrent with~~for ~~these loan agreements,~~ the ~~Company~~principle ~~issued~~amount toof ~~these~~$ ~~shareholders warrants to purchase 2~~6,~~290~~000,~~908~~000 ~~(1,145,454~~plus ~~each)~~any ~~shares~~accrued ofcosts ~~the~~and ~~Company’s~~unpaid ~~common~~interest ~~stock~~with ata ~~an exercise~~maximum ~~price~~ of $01,000,000.40 ~~per share.~~ The ~~warrants~~total ~~may~~pledge begranted ~~exercised~~is ~~starting~~therefore ~~July 30,~~maximized ~~2009 and expire~~ on ~~July~~$7 ~~30, 2013~~million. ~~Upon exercise, the warrants will be settled cashless.~~

~~In accordance~~Starting ~~with~~January ~~the~~1, ~~contracts~~2010, the Company ~~has~~owes ~~issued~~ an ~~additional 2~~interest on the loan of $6,~~290~~000,~~908~~000 ~~cashless~~equal ~~warrants~~to at31.21% ~~the~~per ~~same~~year ~~conditions~~(which aswas ~~the~~calculated ~~Company~~based ~~has~~on ~~not~~a ~~repaid the~~weekly ~~principle~~interest ~~amount~~payment toof Euro 25,000), which interest must be paid in weekly installments in arrear on or before every Friday of the ~~loan~~week, ~~provider~~for the first time on or before ~~September~~April 12, ~~2009~~2010. We ~~The Company~~have ~~has~~recorded aan ~~verbal~~interest ~~agreement~~expense ~~with~~of ~~the~~Euro ~~loan~~325,000 ~~providers~~(or to$449,000) ~~extend~~for the ~~term~~first three months of ~~the loan~~2010. toThe ~~April~~Company 1,has ~~2010,~~a ~~and~~grace ~~parties~~period ~~are~~with ~~currently~~respect ~~working~~to onthe ~~renewal~~interest payments of 5 weeks. The Company is currently in default with the ~~contract~~ interest payments.

Loan agreement 5

On August 19, 2009, the Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of €1,000,000 (€ 500,000 each) or $ 1,465,500 ($ 732,750 each)). These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amounts have to be repaid on September 1, 2009. Under this loan agreement, the Company pledged as collateral all Intellectual Property and accounts receivable owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 1,272,728 (636,364 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants may be exercised starting August 19, 2009 and expire on August 19, 2013. Upon exercise, the warrants will be settled cashless.

In accordance with the contracts, the Company has issued an additional 1,272,728 cashless warrants at the same conditions as the Company has not repaid the principle amount to the loan provider on or before September 1, 2009. The Company has a verbal agreement with the loan providers to extend the term of the loan to April 1, 2010, and parties are currently working on renewal of the contract.

Loan agreement 6

On September 22, 2009, the Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of €1,550,000 (€ 775,000 each) or $ 2,271,525 ($ 1,135,763 each)). These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amounts have to be repaid on April 1, 2010. Under this loan agreement, the Company pledged as collateral all Intellectual Property and accounts receivable owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 1,972,726 (986,363 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants may be exercised starting September 22, 2009 and expire on September 22, 2013. Upon exercise, the warrants will be settled cashless.

In accordance with APB 14, we allocated the debt proceeds between the debt and detachable stock purchase warrants based on relative fair values. We have recognized a total discount of all the debts (loans 1 to 6) amounting to approximately $1,293,532 which will be amortized over the term of the loan. During the 9 months ended September 30, 2009, $482,671 was amortized as interest expense in the accompanying consolidated financial statements.

On July 30, 2009, the Company renewed the terms of six bridge loans that were in default.

Two bridge loans with a total principle amount of €800,000 (€400,000 each), initially signed on November 7, 2008, had a repayment date of April 1, 2009. As the Company is in default the Company agreed to renew the contract and change the repayment date to September 1, 2009. Under this loan agreement, the Company pledged as collateral all Intellectual Property and accounts receivable owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 500,000 (250,000 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants have a cashless exercise and have a 4 year term.

- 13 -

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Two bridge loans with a total principle amount of €1,200,000 (€600,000 each), initially signed on December 11, 2008, had a repayment date of May 1, 2009. As the Company is in default the Company agreed to renew the contract and change the repayment date to April 1, 2010. Under this loan agreement, the Company pledged as collateral all Intellectual Property and accounts receivable owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 700,000 (350,000 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants have a cashless exercise and have a 4 year term.

Two bridge loans with a total principle amount of €250,000 (€125,000 each), initially signed on March 16, 2009, had a repayment date of June 30, 2009. As the Company is in default the Company agreed to renew the contract and change the repayment date to September 1, 2009. Under this loan agreement, the Company pledged as collateral all Intellectual Property and accounts receivable owned by the Company. Concurrent with these loan agreements, the Company issued to these shareholders warrants to purchase 318,182 (159,091 each) shares of the Company’s common stock at an exercise price of $0.40 per share. The warrants may be exercised starting July 31, 2009 and expire on July 31, 2013. Upon exercise, the warrants will be settled cashless.

In accordance with the contracts, the Company needs to issue an additional 318,182 (159,091 each) cashless warrants at the same conditions if the Company has not repaid the principle amount to the loan provider on or before September 1, 2009.

The total amount of bridge loans outstanding as of September 30, 2009 amounts to €13,800,000 (or $20,200,000). An amount €11,100,000 (or $ 16,250,000) of this total has been received during the first nine months of 2009. The total number of warrants issued in connection with these 2009 loans is 22,763,636. The warrants all have a four year term and have exercise prices of $0.40 and $0.50.

SUBSEQUENT EVENTS

On October 1, 2009, the Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of €1,600,000 (€800,000 each) or $2,344,800 ($1,172,400 each). An amount of €1,100,000 (or $1,612,000) of this loan has been received in September 2009 and is therefore included in the balance sheet. These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amounts have to be repaid before April 1, 2010. Under this loan agreement, the Company pledged as a collateral all Intellectual Property and receivables owned by the Company. Concurrent with these loan agreements, the Company will adjust current outstanding warrants with an exercise price higher than $0.60 to an exercise price of $0.60 per share. This will be done for warrants to purchase 870,000 (435,000 each) shares of the Company’s common stock The warrants may be exercised starting October 1, 2009 and expire on October 1, 2013. Upon exercise, the warrants will be settled cashless.

On October 16, 2009, the Company entered into two bridge loan agreements with two principal shareholders based in the Netherlands, pursuant to which the Company borrowed a principal amount of € 470,000 (€235,000 each) or $ 688,785 ($344,393 each). These loans bear an interest of 10% per annum and will be paid on a monthly basis. The principle amounts have to be repaid before April 1, 2010. Under this loan agreement, the Company pledged as a collateral all Intellectual Property and receivables owned by the Company. Concurrent with these loan agreements, the Company will adjust current outstanding warrants with an exercise price higher than $0.60 to an exercise price of $0.60 per share. This will be done for warrants to purchase 870,000 (435,000 each) shares of the Company’s common stock The warrants may be exercised starting October 16, 2009 and expire on October 16, 2013. Upon exercise, the warrants will be settled cashless.

Contributed capital

Willem M. Smit, the Company’s Chief Executive Officer, has agreed to not receive any cash compensation until such time that the Company achieves positive cash flows from operations. However, the Company does reimburse Mr. Smit for his business related expenses and provides him with an automobile. As Mr. Smit provides executive management and oversight services to the Company, an amount of $100,000 per annum (or $25,000 per quarter) is imputed as the value of his services and recorded as additional contributed capital to the Company.

Receivables due from officers

Effective January 1, 2006 the Company entered into a service agreement with Altaville Investments B.V., a company beneficially owned by its CEO Willem M. Smit. The Company pays for certain service among others housekeeping and cleaning services provided by Altaville to the Company an annual aggregate amount of approximately $50,000 which is paid in 4 quarterly installments. As of March 31, 2010, the Company has no receivables from officers.

~~- 14~~NOTE E - COMMITMENTS AND CONTINGENCIES

Litigation

Due to the Company’s cash flow situation, we are in default on payments to some of our vendors. Some of these vendors have gone legal to collect their outstanding receivables. We are in continuous discussions with both vendors and collection agencies and law firms to settle these issues in a way that it doesn’t harm our business. A significant part of our accounts payable balance is overdue. All amounts claimed have been recorded in the financial statements as accounts payable. We could incur costs for legal advice in some cases (if we hire external lawyers) which we will recognize upon the date of the action. If a vendor with a significant outstanding amount demands immediate payment in full, our ability to continue as a going concern will be at risk. The Company is actively searching for new funding and/or financing, to resolve these matters and we are in continuous open dialogue with the vendors involved.

-12-

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~NOTE D~~ In 2009, we have lost a lawsuit started by Visionvale, the developers of the title Ancient Wars: Sparta (released in 2007), in which Visionvale had claimed the final payment for the development of the title. Visionvale also claimed that the software development agreement was, because of non-payment, ~~COMMITMENTS~~legally ~~AND~~terminated ~~CONTINGENCIES~~and that the licensing rights reverted back to Visionvale. Playlogic has disputed that the agreement had been terminated and claimed that parties did not agree on a license but a transfer of IP rights. The court decided that the IP rights had been transferred to Playlogic, but Playlogic had to pay the remaining outstanding amounts, including interest and costs. The costs amounting to approximately $100,000 have been included in the Statement of Operations for the year 2009.

~~Litigation~~Visionvale has published the game as well and additionally they have published a sequel of the game, which both portray an infringement on the IP rights owned by Playlogic. We have not been granted any penalty payments by Visionvale for this infringement, on which we have appealed. We have recorded all costs related to this lawsuit in 2009, but have not recorded the potential benefit.

~~The~~ Furthermore, the Company is involved in a ~~few~~number of minor legal actions incidental to its ordinary course of business.

With respect to the above matters, the Company believes that it has adequate legal claims or defenses and/or provided adequate accruals for related costs such that the ultimate outcome will not have a material adverse effect on the Company’s future ~~consolidated financial position or~~ results of operations .

We have started legal cases against a number of customers for non payment. Some relate to sales of our games in 2007. We have recorded these items as receivables in our books, but have provided the most part of this. The main lawsuits in which we claim money from our customers relate to:

Evolved: we entered into a license deal in 2006 for a number of our titles, to be sold in the USA. Although Evolved, even today, is selling our product, we have not received any payment from them. Evolved claims they had to incur costs on the titles that should have been paid by Playlogic and are offsetting the revenues against that.

Koch Media: We are facing a payment issue from our main customer for our distribution in the Europe, Koch Media. Amounts due for payment in December 2009 have not yet been paid by Koch to us. As Koch is a significant customer, we are facing cash flow issues over the last months. We have started legal proceedings against Koch Media Group. As the contract is written in accordance with Austrian Laws, we have hired an Austrian law firm to assist us in this matter. We are claiming a total of Euro 1.7 million (or approximately $2.4 million), which is build up on unpaid sales of our products plus damages from our side. We have not recorded the claim of damages in the financial statements.

We have classified the above receivables, among others, as net long term receivables.

Office leases

The Company has entered into a lease agreement with the World Trade Center in Amsterdam for a period of 5 years ending July 31, 2013. The lease requires annual payments of approximately $~~400~~420,000 (€ 291,500) for the offices and $2830,~~250~~000 (€20,600) for parking spaces at the building, all payable in quarterly installments. The offices total approximately 8,000 square feet (or 900 square meter). This lease agreement contains an extension option, which if exercised by the Company, will extend the expiration date to July 31, 2018. The Company has negotiated a rent-free period with the WTC for the period up to December 31, 2008. First payments have started in January 2009. The Company has accrued for the rent free period and will release the accrual over the term of the lease.

Our wholly-owned subsidiary, Playlogic Game Factory, B. V., leases offices located at Hambroeklaan 1 in Breda from Neglinge BV pursuant to a lease agreement which expires on October 1, 2013. This lease agreement contains an extension option, which if exercised, will extend the expiration date to October 1, 2018. At the execution of this lease agreement, the landlord committed itself to invest approximately $~~410~~425,000 (€300,000) in leasehold improvements which are scheduled to be repaid by Playlogic Game Factory B.V. over a 10 year period. The lease requires annual payments of approximately $~~410~~360,000 (€~~300~~250,000) per year, payable in quarterly installments.

We have recorded a rent expense for the three months ended March 31, 2010 and March 31, 2009 amounting to approximately $210,000 and $240,000 respectively (difference due to foreign exchange).

-13-

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

September 30,
March 31,
2009	$	202,500
2011	$	810,000
2010		820,000
2012		810,000
2011		820,000
2013		515,000
2012		820,000
2014		-
2013		405,000
2015		-
Thereafter		-
Total	$	32,~~067~~135,~~500~~000

Transportation leases

The Company leases 95 automobiles for certain officers and employees pursuant to the terms of their individual employment agreements under operating lease agreements. These agreements are for terms of 3 to 4 years. The leases require monthly aggregate payments of approximately $126,000.

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

September 30,
March 31,
2009	$	12,000
2011	$	72,000
2010		48,000
2012		72,000
2011		34,000
2013		39,000
2012		-
2014		-
2013		-
2015		-
Thereafter		-
Total	$	94183,000

Software development contracts

The Company has entered into ~~five~~three (53) separate software development contracts with unrelated entities. These contracts require periodic payments of agreed-upon amounts upon the achievement of certain developmental milestones, as defined in each individual contract. All of these contracts have completion deadlines of less than one (1) year from the contract execution and will require an aggregate funding liability of approximately $10.58 million through completion, for which invoices have not yet been included in accounts payable.

- 15 14-

PLAYLOGIC ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE E F - SEGMENT INFORMATION AND REVENUE CONCENTRATIONS

The Company sells its products to wholesale distributors in various domestic and foreign markets. The following table shows the Company’s gross revenue composition:

	For the nine months ended September 30,
	For the three months ended March 31,
	2009						2008
	2010		2009
	(Unaudited)						(Unaudited)
Europe and United Kingdom
Europe and United Kingdom
Customer A	737,790	28.3%	452,290	37.2%
Customer A *		1,533,670			22.9	%		2,117,511	25.4	%
Customer B	953,248	36.6%	47,373	3.9%
Customer C	0	~~1,535,320~~0.0%	82,400	6.8%	~~22.9~~	%		~~1,354,465~~	~~16.2~~	%
Customer D	0	~~102,953~~0.0%	198,789	16.3%	~~1.5~~	%		~~440,823~~	~~5.3~~	%
Customer E		40,257			0.6	%		1,416,842	17.0	%
	2,121,043	82.8%	1,216,823	100.0%
Customer F		42,487			0.6	%		599,642	7.2	%
Asia and Australia
Others		569,777			8.5	%		1,673,494	20.0	%
Customer F	0	0.0%	0	0.0%
		3,824,464			57.1	%		7,602,777	91.1	%
Customer G	0	0.0%	0	0.0%
Asia
	0	0.0%	0	0.0%
Others		0			0.0	%		32,970	0.4	%
United States & Canada
		0			0.0	%		32,970	0.4	%
Customer I	448,687	17.2%	0	0.0%
United States & Canada
	448,687	17.2%	0	0.0%
Customer G		61,875			0.9	%		714,365	8.6	%
Total	2,569,730	100.0%	1,216,823	100.0%
Customer H		2,815,343			42.0	%			0.0	%
others		0			0.0	%			0.0	%
		2,877,218			42.9	%		714,365	8.6	%
Total		6,701,682			100.0	%		8,350,112	100.0	%

- 16 15-

Item 2. Management’s Discussion and Analyses of Financial Condition and Results of Operation

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects," "seeks," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company's future business and financial performance. Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including, but not limited to, those ~~contained~~discussed inunder the ~~Company's~~heading ~~Annual~~"Item ~~Report~~1A. onRisk Factors” in our Form ~~10-K~~10K for the ~~fiscal~~ year ended December 31, ~~2008~~2009, beginning inon ~~the~~page ~~section entitled "Risk Factors," and the Company's other periodic filings with the SEC~~12. All forward- looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

~~Our Management's~~Given ~~Discussion~~these ~~and~~uncertainties, ~~Analysis~~readers of ~~Financial~~this ~~Condition~~Annual Report and ~~Results~~investors ~~of Operations~~are ~~("MD&A")~~cautioned isnot ~~provided~~to inplace ~~addition~~undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding our results of operations, financial condition and cash flows. The following discussion should be read in conjunction with the MD&A included in our annual consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2009.

condition and cash flows. The following discussion should be read in conjunction with the MD&A included in our annual consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Overview

Playlogic is a publisher of interactive entertainment products, such as video game software and other digital entertainment products. We publish ~~for~~on ~~most~~all major interactive entertainment hardware platforms, like Sony’s PlayStation 3,and Playstation2, Microsoft’s Xbox 360 and Nintendo’s Wii, PCs and handheld devices (such as Nintendo DS, and PSP) and mobile devices. Our principal sources of revenue are derived from publishing operations. Publishing revenues are derived from the sale of our digital entertainment products. We own most of the intellectual properties of our products, which we believe positions us to maximize profitability.

AsOur ~~a publisher,~~principal wesources of revenue are ~~responsible~~derived ~~for~~from publishing, ~~production,~~operations. ~~localization,~~Publishing QArevenues ~~and testing,~~are PRderived ~~and~~from ~~marketing,~~the ~~manufacturing~~sale ~~and sales~~ of our digital entertainment products. ~~Playlogic’s products~~We ~~are~~own ~~sold~~most toof ~~distributors~~the ~~who~~intellectual ~~supply~~properties ~~retailers~~of ~~worldwide.~~our ~~Furthermore~~products, which we ~~sell~~believe ~~directly~~positions us to ~~consumers~~maximize ~~through~~profitability. ~~online~~Owning ~~distribution~~our ~~channels~~Intellectual Properties increases the value of our company as our portfolio increases every quarter with ~~various partners~~new titles published.

~~Development studios~~As ~~throughout~~a ~~the~~publisher, ~~world~~we ~~help~~are ~~create~~responsible ~~the~~for ~~games~~publishing, ~~which~~sales ~~are~~and ~~published~~marketing ~~by Playlogic. One~~ of ~~these~~our ~~studios~~products. isWe sell our ~~fully~~products ~~owned~~to ~~subsidiary~~distributors, ~~Playlogic~~who ~~Game Factory~~sell ~~B.V.,~~to ~~located in The Netherlands~~retail. ~~Other~~Furthermore, ~~independent~~we ~~studios~~sell indirectly ~~various countries~~to ~~develop~~consumers ~~our~~through ~~games~~online ~~under~~distribution ~~Software Development Agreements (SDA)~~channels. ~~These development~~Since ~~contracts~~2008 ~~generally~~we ~~provide~~have ~~that~~been weselling ~~pay~~our anproducts ~~advance~~online onthrough ~~future royalties~~our ~~earned~~own ~~upon~~website ~~achievement~~in ofa ~~milestones~~specifically ~~successfully~~designed ~~completed and delivered~~store. In ~~addition,~~2009 wefurther ~~license~~strategic, ~~the~~operational ~~rights~~and oforganizational ~~existing~~changes ~~Playlogic~~have IPbeen tomade ~~other development~~for ~~studios~~publishing ~~who~~titles ~~then~~digitally ~~adapt~~through ~~these~~PSN ~~products to the specifications~~ and ~~abilities~~ ofXbox ~~other (console) platforms~~Live.

~~Studios and~~Various ~~developers~~studios ~~contact~~throughout usthe ~~daily~~world ~~requesting~~develop ~~financing~~games ~~and~~which ~~publishing~~we publish. One of ~~their games~~these orstudios ~~concepts~~is our subsidiary, Playlogic Game Factory B.V., Welocated ~~evaluate~~in ~~each~~The ofNetherlands. ~~these~~Other ~~offers~~independent ~~based~~studios onin ~~several~~various ~~factors, including~~countries ~~sales~~develop ~~potential~~our ofgames ~~concept~~under ordevelopment ~~product~~contracts. These development contracts generally provide that we pay the studio an upfront payment, ~~technology~~which &is ~~tools~~an ~~used~~advance on future royalties, ~~track~~ ~~record~~earned, and ~~project~~a ~~management~~payment upon achievement of various milestones. In addition, we license the ~~studio~~rights to our existing titles to other studios who then develop those titles for other platforms.

WeGame ~~select which~~development ~~games~~studio’s werequire ~~develop~~financing ~~based~~for ontheir ~~our~~titles ~~analysis~~to ofbe ~~consumer~~developed ~~buying trends~~ and ~~behavior~~ ~~and~~published. ~~our~~We ~~experience~~evaluate ~~with~~each ~~similar~~of orthese ~~competitive~~offers ~~products.~~based ~~Once~~on weseveral ~~select a~~factors, ~~game~~including tosales ~~develop~~potential, wemarket ~~then assign a development studio~~conditions, ~~based~~technology ~~upon its qualifications~~used, ~~previous~~track ~~experience~~record and ~~prior~~human ~~performance.~~resources ~~Once~~of ~~developed~~the studio, ~~we distribute~~production ~~our~~pipeline ~~games~~and ~~worldwide~~project ~~through~~management ~~existing distribution channels with global or local distributors~~skills. ~~When~~Determining ~~appropriate~~factors weis ~~have~~ the ~~ability~~implementation toof ~~release~~ our ~~titles~~product ~~simultaneously~~strategy ~~across~~in athe ~~range~~face ofrapidly ~~hardware~~changing ~~formats~~market toconditions ~~maximize~~consumer ~~overall sales~~choice ~~for a particular product with a minimum augmentation in development time~~ and ~~resources~~behavior.

We ~~believe~~ ~~that~~select ~~greater~~which ~~online~~games ~~functionalities~~we develop, ~~applications~~based on our analysis of consumer trends and ~~digital distribution~~ onbehavior ~~the~~and ~~new~~our ~~platforms~~experience ~~will~~with ~~improve~~similar ~~revenue~~or ~~margins~~competitive products. Full due diligence and ~~encourage further~~a ~~industry~~financial ~~growth~~risk analysis / assessment are part of this process. InOnce ~~addition,~~a ~~according~~title tohas ~~DFC~~been ~~Intelligence,~~selected ~~new~~a ~~sales potential,~~development ~~revenue~~studio ~~opportunities~~is ~~from~~assigned ~~wireless~~based ~~gaming~~upon its qualifications, ~~online~~previous ~~console~~experience ~~gaming,~~ and ~~in-game~~prior ~~advertising~~performance. ~~are~~Once ~~expected~~developed, towe ~~grow~~distribute ~~substantially~~our games worldwide through existing distribution channels with experienced distributors.

We generally aim to release our titles simultaneously across a range of hardware formats leveraging development risks and increasing potential total unit sales per SKU with a marginal augmentation in development time, resources and associated costs.

We believe that greater online functionality and the vast processing capabilities, as well as games with simplified and innovative controls (i.e. Nintendo Wii motion plus, Nintendo DSi, Playstation 3 Sixaxis, Playstation Eye, Playstation Move and Microsoft’s Natal) of the new platforms will further increase the total world wide installed base, diversifying the consumer base and foster further growth in our industry.

-16-

Playlogic has created a balance between games available in various genres for all exisiting platforms. To spread risk and broaden Playlogic’s portfolio a greater focus will be towards digital releases minimizing retail exposure and associated costs.

Industry Overview

~~Over~~We ~~the past~~believe ~~two~~that ~~decades,~~at ~~the~~a ~~video~~high level the game ~~industry~~market ~~has~~is ~~advanced~~divided into three broad segments: hard-core consumers, moderate consumers and ~~become~~mass-market a(or ~~valuable contributor~~casual toconsumers). Of course, the ~~entertainment~~market ~~consumption~~is ~~business~~much more complex than this basic analysis. ~~The~~Hard-core ~~estimated~~consumers ~~break~~can be further subdivided into hard-~~down of~~core PC gamers inand UShard-core ~~households~~console isgamers. ~~61%~~We ~~male~~think ~~and~~these ~~39%~~are ~~female,~~two ~~with~~very ~~47%~~different types of consumers. These groups could be further divided into such segments as hard-core simulation gamers ~~between~~, 13hard-core ~~and~~FPS 24gamers, ~~years~~hard-core ~~old~~fighting gamers, ~~30%~~hard-core ~~between~~Nintendo 25fans, ~~and~~etc. 39However, ~~years~~before ~~old;~~understanding ~~and~~these ~~23%~~smaller ~~over~~sub-segments, ~~40 years~~it ~~old~~is important to understand the broader classification of gamer types.

We believe, the most important point to note is that there is little movement between the groups. Think of it as a pyramid, with the mass- 17market gamer at the base and the hard-core gamer at the pinnacle. The majority of gamers will be at the bottom. As a general rule of thumb, about 50-75% of the game-playing population sits at the base in the mass-market gamer category.

~~Worldwide, the~~Somewhere ~~video~~between ~~game~~15% ~~market is projected~~ to ~~increase~~30% ~~from~~are ~~$26.2 billion~~ in ~~2004~~the ~~to $46.5~~moderate ~~billion~~gamer inslots ~~2010,~~and ~~growing~~the atrest anare ~~11.4~~the ~~percent~~hardcore ~~compound annual rate~~gamers. ~~Asia Pacific~~Of course, ~~the~~it ~~largest~~will ~~market~~vary atby ~~$9.6~~type ~~billion~~of inproduct ~~2004,~~and ~~is projected to maintain its dominance~~market, ~~growing~~but atas a ~~12.3~~general ~~percent~~rule ~~compound~~of ~~annual~~thumb ~~rate through 2010 to reach $17.4 billion. The United States has~~ the ~~second~~pyramid ~~largest~~theory ~~market~~should ~~and~~apply ~~is expected~~ to ~~grow~~most ~~from $8~~analysis.~~4 billion in 2005 to $13.0 billion in 2010, an 8.9 percent compounded annual according to Company Annual Reports of Crandell & Sidak. (WedBush Morgan).~~

~~The video~~ ~~game~~We believe it is very hard to take an established mass market ~~reflects~~gamer ~~consumer~~and ~~spending~~make onthem ~~console~~a ~~games~~moderate ~~(including~~or ~~handheld games)~~hard-core gamer. However, ~~personal~~that ~~computer~~is ~~(PC)~~not ~~games,~~to ~~online~~say ~~games,~~that ~~and~~the ~~wireless~~overall ~~games~~pyramid is not growing. ~~The category~~DFC's ~~excludes~~entire ~~spending~~forecast onfor the ~~hardware~~interactive ~~and~~entertainment ~~accessories~~industry ~~used~~is tobased ~~play~~on the ~~games~~ premise that the overall pyramid is growing. However, this growth is occurring slowly over time.

~~With the~~ ~~launch~~We ofthink ~~the~~that ~~Nintendo~~adults ~~Wii~~playing ~~and~~games ~~Sony~~has ~~PlayStation~~been 3, the ~~gaming~~biggest ~~industry~~growth ~~had~~driver ~~a record-breaking~~for ~~year~~the ingame ~~2006~~industry. ~~According to NPD Group's industry tracking sales figures~~Obviously, ~~overall~~this ~~profits~~starts ~~are~~to upbenefit 19companies ~~percent,~~like ~~and~~Nintendo ~~the~~that ~~combined~~have ~~hardware,~~brands ~~software, and~~that ~~accessories~~were ~~sales~~popular ~~reached~~25 ~~$12.5~~years ~~billion in the U~~ago.~~S. alone, making it the highest grossing year in the video game industry to date.~~

~~Market Trends~~We –believe ~~Worldwide~~it is hard to take a casual gamer and all of the sudden make them a hard-core gamer. However, demographics naturally grow the pyramid over time. DFC's argument was a simple two-fold analysis where we said: 1) there will be growth in the pyramid as the core audience ages and continues to play games when they reach adulthood, and 2) advances in technology will allow for people to have access to games anytime, anyplace, anywhere. In other words, gamers will not be limited to playing in front a TV set. They can also play on a PC or all kinds of future portable devices.

~~The fastest-growing~~When ~~segment~~looking ~~during~~at the ~~next~~concept ~~five~~of ~~years~~anytime, ~~global~~anyplace, ~~video~~anywhere, ~~game~~we ~~spending~~ believe a key issue is ~~expected~~what totype ~~increase~~of ~~significantly~~products ~~over~~will ~~the~~be ~~next~~suitable ~~years~~for specific platforms. ByIn ~~2009~~other words, ~~online~~is ~~and wireless~~a ~~will~~hard-core begamer ~~major~~looking ~~distribution~~to ~~channels,~~play ~~spurred~~first-person byshooters ~~broadband~~on ~~penetration and~~a ~~new~~portable ~~mobile~~game ~~phones~~system? DFC's theory has been that ~~will~~hard-core begamers ~~used~~tend asto ~~much~~play ~~for~~a ~~entertainment~~wide asrange ~~for communication~~of products depending on location and availability. ~~The~~Thus, PCdelivering ~~game~~an intense FPS on a cell phone doesn't necessarily make sense. While it is difficult to get a mass-market ~~will~~gamer ~~shrink,~~to ~~and~~play ~~console~~a hard-core game, ~~spending~~hard-core ~~will grow~~gamers asalso ~~next~~like ~~generation~~to ~~consoles~~play ~~are~~more ~~introduced~~mass market games. This is especially true when it comes to playing on a portable system that simply doesn't have the power of a PC or Xbox 360.

~~The~~To ~~video game~~test ~~market~~our ~~was~~anytime, ~~in a transition year in 2005~~anyplace, ~~awaiting~~anywhere ~~the introduction of the next-generation consoles. Growth slumped to 3.3 percent~~thesis, ~~the~~DFC ~~slowest~~recently ~~increase during~~conducted ~~the~~a ~~past~~survey ~~five years. The next generation~~ of ~~consoles~~over ~~and~~6000 ~~recently introduced handheld games will spur the console/handheld market in the U~~users.~~S., EMEA,~~ ~~Asia~~A ~~Pacific,~~major ~~and~~portion ~~Canada,~~of ~~while~~this PCsurvey ~~games~~focused ~~will~~on ~~continue to decline or see little growth in~~ the ~~U.S.~~usage ~~and EMEA. The introduction~~ of ~~new~~portable ~~wireless~~devices ~~phones capable of downloading games will boost the wireless game market in the U.S., EMEA, Asia Pacific,~~ and ~~Canada.~~mobile ~~Overall, the video game market will expand at an 11~~phones.~~4 percent CAGR to $46 billion in 2010 from $27 billion in 2005.~~

~~Console Installed~~We ~~Base~~believe the results clearly showed that most PC gamers are "multiplatform gamers." In other words, they also play console and portable games. Of course, the dedicated game platforms still dominate with this audience. When it comes to portable systems, the Nintendo DS is the strongest (based on units sold), but it is closely followed by the Sony PSP. However, a surprising number of consumers also own an iPhone or an iPod Touch.

~~Since the~~ ~~introduction~~Furthermore, ofamong ~~PlayStation~~these 2users inthe ~~2000,~~iPod ~~the~~Touch ~~console~~is ~~has~~very ~~sold~~popular. When specifically asked, over ~~140~~22% ~~million units~~of ~~worldwide~~respondents ~~according~~said tothey ~~games~~either ~~industry.~~owned ~~biz.~~or ~~The~~planned ~~PlayStation~~to 3buy ~~has~~an ~~been introduced~~iPod toTouch. In the ~~market~~recent inDFC report on the ~~second~~iPhone ~~half~~game ofmarket ~~2006.~~we ~~Microsoft~~argued ~~introduced~~that ~~its next~~the ~~generation~~iPod ~~console,~~Touch ~~the~~was ~~Xbox~~an ~~360,~~important indriver ~~November~~for ~~2005.~~the ~~Playlogic~~overall ~~will~~iPhone ~~continue development~~market ofand ~~PlayStation2~~is ~~titles,~~why ~~because~~the ofiPhone ~~their~~is ~~large~~a ~~installed~~more ~~base~~compelling ~~of over~~platform ~~140~~than ~~million~~other ~~units~~mobile phones.

~~Microsoft’s Xbox360~~We believe the growth in portable games is really about a growth in the overall pyramid and new technology that allows for play anytime, anyplace, anywhere. The Nintendo DS has ~~sold~~set 32all ~~million~~kinds ~~units~~of sorecords ~~far~~for best-selling game system ever. AsWe think that it will be hard for other dedicated game systems to match the success of ~~September~~the 30DS in the next few years. However, ~~2009~~that does not mean that non-dedicated game devices and mobile phones will replace or overtake the dedicated devices. The dedicated devices should still account for the bulk of revenue, ~~Sony~~even if total sales remain stagnant. The iPhone/iPod Touch platform is a compelling alternative but it has ~~shipped~~ ~~approximately~~a 26long ~~million~~way ~~Playstation~~to 3come ~~units~~close ~~worldwide.~~ to replacing a Nintendo~~’s next~~ ~~generation~~DS ~~console~~or Sony PSP. Nevertheless, ~~called~~the ~~‘Wii’~~game market has ~~sold~~grown ~~more~~to ~~than~~the 55point ~~million~~where ~~units~~multiple ~~so far~~devices can co-exist, and even overlap in consumer ownership.

~~Nintendo Dual~~The ~~Screens~~report, ~~(‘Nintendo~~“Consumer ~~DS’)~~Trends in Virtual Goods and ~~PlayStation~~Downloadable ~~Portable~~Gaming ~~(‘PSP’)~~in ~~were~~North ~~both successfully~~America ~~introduced~~and toEurope,” ~~the~~found ~~market.~~that ~~The~~gamers ~~sales~~are ~~volume~~quite comfortable purchasing virtual items. 88 percent of ~~the~~respondents ~~Nintendo~~said ~~DS reached~~they ~~110~~had ~~million~~purchased ~~units~~some byform ~~September~~of ~~30,~~digital ~~2009~~content (including music, movies and ~~PSP~~games), ~~reached~~and ~~the~~60 ~~sales volume~~percent of 50those ~~million~~responding ~~units~~indicated ~~sold~~they had purchased an in-game virtual good.

~~PC Games~~-17-

~~Playlogic will~~We ~~continue~~believe tothe ~~also~~current ~~release~~Xbox PC360/PS3/Wii ~~games~~console ~~since,~~cycle inis ~~comparison~~already toon ~~next~~a ~~generation consoles~~path ~~games,~~to ~~these~~be ~~products~~much ~~are~~longer ~~less~~than ~~expensive~~previous ~~to develop~~cycles, ~~address~~and aby ~~very wide~~the ~~target~~time ~~audience~~new ~~and~~consoles ~~contribute~~do ~~significant~~hit ~~better~~the ~~margins.~~market, ~~Furthermore Playlogic~~advances ~~will~~in ~~focus~~online ongaming ~~new~~and ~~successful~~distribution ~~platforms~~could ~~like~~mean the ~~Nintendo~~next ~~DSi~~cycle ~~and Nintendo~~will ~~Wii~~be the last.

~~Consumer Facts~~While the traditional video game business is still a safe bet for the short term, longer term prospects are more hazy, and Merel isn't sure if there will be another console cycle after the next one.

~~Thirty percent~~Whether ofon ~~most~~consoles ~~frequent~~or ~~game~~PC, ~~players~~online ~~are~~gaming ~~under~~has ~~eighteen~~really ~~years~~taken ~~old~~off ~~while twenty-six~~in ~~percent~~recent ~~of most frequent game players are between 18 and 35~~ years ~~old~~. ~~Forty-four~~The ~~percent~~rise of ~~most~~casual ~~frequent game players are over 35 years old. Forty percent of most frequent console game players are under eighteen years old while thirty-five percent of most frequent game players are between 18~~ and ~~35 years~~social ~~old.~~games ~~Twenty-five~~has ~~percent~~certainly ofbeen ~~most~~a ~~frequent~~big ~~console game players are over 35 years old~~contributor. ~~Thirty-eight~~Lazard ~~percent~~Capital ofMarkets ~~game~~recently ~~players~~held ~~are women. Women age 18 or older represent~~ a ~~significantly~~meeting ~~greater~~with ~~portion~~PlaySpan, ofwhich ~~the~~helps ~~game-playing~~facilitates ~~population~~payments ~~(30%) than~~for ~~boys~~virtual ~~age~~goods 17in oronline ~~younger (23%).The average adult woman plays~~ games, ~~7.4~~and ~~hours per~~the ~~week. The~~firm ~~average~~noted ~~adult~~that ~~man~~there ~~plays~~are ~~7.6~~big ~~hours~~growth ~~per~~opportunities ~~week.~~in ~~Though males spend more time playing than do females, the gender/time gap has narrowed significantly~~micro-transactions.

~~Females are~~ Lazard's ~~being~~Colin ~~significantly~~Sebastian ~~attracted~~said tothe ~~playing~~worldwide ~~certain~~market for online ~~multi-user video~~ games ~~that~~should ~~offer~~surpass a$15 ~~more~~billion ~~communal~~this ~~experience~~year, and asales ~~small hardcore group~~ of ~~young females~~virtual ~~are~~goods ~~playing aggressive games that~~ are ~~usually~~likely ~~thought of as being "traditionally male" games. The most loyal fan-base is reported~~ to beexceed ~~for~~$1 ~~large role-playing games (Nielsen Active Gamer Study)~~billion. 2

~~According to the ESRB almost 41% of video and PC gamers are women.~~Consumers

We think that several Demographic trends and fundamental market drivers will determine the the size of the interactive entertainment software market. The most compelling of these include the widening age demographic of the interactive game consumer, rapid growth of teen and twenty- 18something population, Growth of the female gamer market, penetration of Nintendo Wii among people over 40, and the increasing disposable incomes of teens and pre-teens. The trends will continue to drive sales growth in both the hardware and software sectors.

We believe that the primary driver behind the industry’s growth is the dramatic expansion in age profile of the interactive game consumer.

The first mass-market generation of interactive consumers (and now the oldest) started playing video games with the release of the Atari home console during the late 1970s. It is estimated that the age range of consumers in this period was approximately between 8-20. Since the 1970s succeeding generations of video game consumers have embraced more advanced systems and complex technology. Some older consumers drop out of the market each year, replaced by a large number of children receiving their first DS or Playstation consoles. The mean number of the original generation of ‘Atari Kids’ is now approaching 40, with an emerging group of ‘Nintendads’ right behind them and many still play games on PC or home consoles. The age demographic of 90% of the gamers is believed to be in the range of 6- 40 years of age, dramatically older than the 1970s generation.

We believe there will be a continuing expansion of the age demographic for at least another 20 years, as the oldest gamers stay interested in games well into their 60s and children continue to embrace games.

1 Source: DFC Intelligence

2 Source: Lazard

-18-

We believe the demographics of game players will widen, and be a major source of the growth of the industry. The first generation gamers are now in their 30s and are still playing games and new consumers enter the market, including children at the age of 6 to 8 and an increasing number of women players.

			(Expected) Release
Game	Studio	Platform	date to retail
Completed Games
Alpha Black Zero	Khaeon (NL)	PC	Released
Airborne Troops	Widescreen Games (F)	PS2, PC	Released
Cyclone Circus	Playlogic Game Factory (NL)	PS2	Released
Xyanide	Overloaded (NL)	Mobile Phones	Released
World Racing 2	Synetic (G)	PS2, Xbox, PC	Released
Knights of the Temple 2	Cauldron (SK)	PS2, Xbox, PC	Released
Gene Troopers	Cauldron (SK)	PS2, Xbox, PC	Released
Xyanide	Playlogic Game Factory (NL)	Xbox	Released (1)
Age of Pirates: Caribbean Tales	Akella (Russia)	PC	Released Q3 2006
Infernal	Metropolis (Poland)	PC	Released Q1 2007
Ancient Wars: Sparta	World Forge (Russia)	PC	Released Q2 2007
Xyanide Resurrection	Playlogic Game Factory (NL)	PSP	Released Q3 2007
Evil Days Of Luckless John	3A Entertainment (Great Britain)	PC	Released Q3 2007
Xyanide: Resurrection	Playlogic Game Factory (NL)	PS2	Released Q3 2007
Obscure 2	Hydravision (F)	PC	Released Q3 2007
Obscure 2	Hydravision (F)	PS2	Released Q3 2007
Obscure 2	Hydravision (F)	Wii	Released Q1 2008
Xyanide: Resurrection	Playlogic Game Factory (NL)	PC	Released Q1 2008
Dragon Hunters	Engine software (NL)	DS	Released Q1 2008
Aggression 1914	Buka (Russia)	PC	Released Q1 2008
Dimensity	Dagger Studio (Bulgaria)	PC	Released Q2 2008
Red Bull Break Dancing	Smack Down Productions (F)	DS	Released Q2 2008
Simon the Sorcerer 4	RTL /Silverstyle Studio (GER)	PC	Released Q2 2008
Worldshift	RTL Games (Germany)	PC	Released Q2 2008
Stateshift	Engine Software (NL)	PC	Released Q2 2008
Building & Co	Electrogames (F)	PC	Released Q3 2008
Vertigo	Icon Games Entertainment Ltd (GB)	PC, Wii	Released Q1 2009
Pool Hall Pro	Icon Games Entertainment Ltd (GB)	PC, Wii	Released Q1 2009
Age of Pirates 2: City of Abandoned Ships	Akella (Russia)	PC	Released Q1 2009
Sudoku Ball Detective	White Bear (NL)	Wii/PC/DS	Released Q2 2009
Infernal returns	Metropolis (Poland)	Xbox360	Released Q2 2009
Obscure 2	Hydravision (F)	PSP	Released Q3 2009
Aliens in the Attic	Engine Software (NL)	DS	Released Q3 2009
Aliens in the Attic	Revisotronic	PC, PS2, Wii,	Released Q3 2009
Aliens in the Attic	Engine Software (NL)	DS	Released Q3 2009
Fairytale Fights	Playlogic Game Factory (NL)	PS3, Xbox360, PC	Released Q4 2009

- 19 -

Under Development
Fairytale Fights	Playlogic Game Factory (NL)	PS3, Xbox360, PC	Q4 2009
Crazy Garage	White Birds	Wii, PSN, PC	Q3/Q4 2010
Crazy Garage	White Birds	Wii, PSN, PC	Q1 2010
The Strategist	Humagade/Canada	Wii, PSN, XBLA, PC	Q3/Q4 2010
The Strategist	Humagade/Canada	Wii, PSN, XBLA, PC	Q1 2010
Young Archeologist	White birds	Wii, PC	Q3/Q4 2010
Zooloretto	White Bear (NL)	PC, Wii, DS	Q1 2010
Undisclosed Title	TBA	PS3, Xbox360, PC	Q4 2010/Q1 2011
Young Archeologist	White birds	Wii, PC	Q1 2010
Undisclosed Title	TBA	PS3, Xbox360, PC	Q4 2010/Q1 2011
Obscure 2	Hydravision (F)	DSi	Q1 2010
Undisclosed Title	TBA	PS3, Xbox360, PC	Q4 2010/Q1 2011
Undisclosed Title	TBA	PS3, Xbox360, PC	Q3/Q4 2010
Undisclosed Title	TBA	PS3, Xbox360, PC	Q3/Q4 2010

_______________

1 Released in the US only

The games industry is currently in a transition period. The current and Next Gen consoles (Xbox360, PlayStation 3, Wii) and DS platforms have broadened the market, appealing to an even larger mass consumer audience than ever before, providing increased publishing opportunities. The investments in next generation platforms are however larger than for the previous generation platforms. Playlogic has created a healthy balance between games available for the current and the next generation platforms.

Material agreements

During the ~~nine~~three months ended ~~September~~March 3031, ~~2009,~~2010 the Company did not entered into aany ~~number~~material of publishing and distribution agreements.

Critical Accounting Policies and Estimates

Our most critical accounting policies, which are those that require significant judgment, include: capitalization and recognition of software development costs and licenses; share-based compensation and revenue recognition. In-depth descriptions of these can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2008~~2009 (the “~~2008~~2009 Form 10-K”). There have been no material changes in our existing accounting policies from the disclosures included in our ~~2008~~2009 Form 10-K.

Recently Issued Accounting Pronouncements

In ~~February~~May ~~2007~~2009, the FASB issued ~~Statement~~ ASC ~~825~~855, ~~“The~~Subsequent ~~Fair~~Events ~~Value~~which ~~Option~~establishes ~~for~~general ~~Financial~~standards ~~Assets~~of accounting for and ~~Financial Liabilities”,~~disclosure orof ~~SFAS~~events ~~159. SFAS~~that ~~159~~occur ~~permits~~after ~~companies~~the tobalance ~~choose~~sheet ~~to measure~~date ~~many~~but before financial ~~instruments~~statements ~~and~~are ~~certain~~issued ~~other~~or ~~items~~are atavailable ~~fair value~~to be issued. It isIn ~~expected~~particular, toSFAS ~~expand~~165 sets forth the ~~use~~period ofafter ~~fair~~the ~~value~~balance ~~measurements~~ sheet date during which ismanagement ~~consistent~~of ~~with~~a ~~the~~reporting ~~Financial~~entity ~~Accounting~~should ~~Standards~~evaluate ~~Board’s~~events ~~long-term measurement~~or ~~objectives~~transactions ~~for~~that ~~accounting~~may occur for potential recognition or disclosure in the financial ~~instruments. The Company~~statements; ~~adopted~~the ~~this~~circumstances ~~Statement~~under aswhich ofan ~~January~~entity 1,should ~~2009~~recognize ~~but~~events ~~has~~or ~~not~~transactions ~~applied~~occurring after the ~~fair~~ ~~value~~balance ~~option~~sheet todate ~~any~~in ~~eligible~~its ~~assets~~financial statements; and the disclosures that an entity should make about events or ~~liabilities~~transactions asthat ~~such~~occurred after the balance sheet date. ~~There~~ASC ~~was~~855 ~~no impact~~is toeffective ~~our~~for interim or annual financial ~~condition~~periods orending ~~results~~after ofJune ~~operations~~15, ~~from~~2009 (the ~~adoption~~Company's second quarter ended June 30, 2009). The implementation of this ~~Statement~~standard did not have a material impact on the Company's financial statements.

In ~~December~~ ~~2007~~June 2009, the FASB issued ASC ~~805,~~105 ~~Business~~which ~~Combinations.~~replaces ~~This Statement~~SFAS ~~provides~~No. ~~greater~~162, ~~consistency~~The inHierarchy ~~the~~of ~~accounting~~Generally ~~and~~Accepted ~~financial~~Accounting ~~reporting of~~Principles, ~~business~~to ~~combinations.~~establish ~~It requires~~ the ~~acquiring~~FASB ~~entity~~Accounting inStandards aCodification ~~business combination~~as tothe ~~recognize~~source ~~all~~of ~~assets~~authoritative ~~acquired~~accounting ~~and~~principles ~~liabilities~~recognized ~~assumed~~by in the ~~transaction,~~ ~~establishes~~FASB ~~the~~to ~~acquisition-date~~be ~~fair~~applied ~~value~~by asnongovernmental ~~the~~entities ~~measurement objective~~in ~~for~~preparation ~~all~~of ~~assets~~financial ~~acquired~~statements ~~and~~in ~~liabilities~~conformity ~~assumed,~~with ~~and~~generally ~~requires~~accepted ~~the acquirer~~accounting toprinciples ~~disclose~~in the ~~nature~~United ~~and financial effect of the business combination~~States. ASC ~~805~~105 is effective for ~~all~~interim ~~fiscal~~and ~~years~~annual ~~beginning~~periods ending after ~~December 15,~~ ~~2008~~September ~~(January 1~~15, 2009 ~~for~~ (the Company)'s ~~and~~third ~~interim periods~~quarter ~~within~~ended ~~those~~September ~~years~~30, ~~with earlier adoption prohibited~~2009). We ~~are~~do ~~evaluating the~~not ~~impact~~expect ~~that~~ the adoption of ~~ASC~~this ~~805~~standard ~~will~~to have an impact on our ~~consolidated~~ financial position, ~~cash~~or ~~flows and~~ results of operations. ~~The effect will be dependent upon acquisitions at that time.~~

In ~~December~~ ~~2007~~October 2009, the FASB issued ~~ASC~~Accounting ~~810~~Standards Update (“ASU”) 2009-13, ~~"Noncontrolling~~Revenue ~~Interests~~Recognition ~~in Consolidated~~(Topic ~~Financial~~605) ~~Statements~~– Multiple-~~-An~~Deliverable ~~Amendment~~Revenue ofArrangements. ~~ARB~~This ~~No.~~guidance ~~51,~~modifies orthe ~~ASC~~fair ~~810".~~value requirements of FASB ASC ~~810~~subtopic ~~establishes~~605-25, ~~new~~Revenue ~~accounting~~Recognition-Multiple Element Arrangements, by allowing the use of the “best estimate of selling price” in addition to vendor specific objective evidence and ~~reporting~~third ~~standards~~party evidence for determining the ~~noncontrolling~~ ~~interest~~selling inprice of a ~~subsidiary~~deliverable. ~~and~~This guidance establishes a selling price hierarchy for determining the ~~deconsolidation~~selling price of a ~~subsidiary~~ deliverable, which is based on: (a) vendor-specific objective evidence, (b) third-party evidence, or (c) estimates. ~~FASB~~In ~~ASC~~addition, ~~810~~the residual method of allocating arrangement consideration is no longer permitted. ASU 2009-13 is effective for fiscal years beginning on or after ~~December~~ June 15, ~~2008~~2010. ~~The~~We ~~Company~~do ~~believes~~not ~~that~~expect ~~FASB~~the ~~ASC~~adoption ~~810~~of ~~should~~ASU ~~not~~2009-13 to have a material impact on ~~the~~our ~~consolidated~~Condensed ~~financial~~Consolidated ~~position~~Financial ~~or results of operations~~Statements.

- 20 -

In ~~March 2008~~October 2009, the FASB issued ~~ASC~~ASU ~~815~~2009-14, ~~"Disclosures~~Software ~~about~~(Topic ~~Derivative~~985) ~~Instruments~~– ~~and Hedging~~Certain ~~Activities"~~Revenue ~~("ASC~~Arrangements ~~815").~~that ~~ASC~~Include ~~815~~Software ~~requires~~Elements. ~~companies~~This ~~with~~guidance ~~derivative instruments~~modifies tothe ~~disclose~~scope ~~information~~of ~~that~~FASB ~~should~~ASC ~~enable~~subtopic ~~financial~~965-~~statement~~605, ~~users to~~Software-Revenue ~~understand~~Recognition ~~how~~, ~~and~~to ~~why~~exclude afrom ~~company~~its ~~uses~~requirements ~~derivative~~non-software ~~instruments,~~components ~~how~~of ~~derivative instruments~~tangible products and ~~related~~software ~~hedged~~components ~~items~~of ~~are~~tangible ~~accounted~~products ~~for~~that ~~under~~are ~~FASB~~sold, ~~Statement~~licensed, ~~No. 133~~or ~~"Accounting~~leased ~~for~~with ~~Derivative~~tangible ~~Instruments~~products ~~and~~when ~~Hedging~~the ~~Activities"~~software components and ~~how derivative~~non-software ~~instruments~~components ~~and~~of ~~related~~the ~~hedged~~tangible ~~items~~product ~~affect~~function atogether ~~company's~~to ~~financial position,~~deliver ~~financial~~the ~~performance~~tangible ~~and~~product’s ~~cash~~essential ~~flows~~functionality. ~~ASC~~ASU ~~815~~2009-14 is effective for ~~financial~~ ~~statements issued for~~ fiscal years ~~and~~beginning ~~interim~~on ~~periods~~or ~~beginning~~ after ~~November~~ June 15, ~~2008~~2010. ~~The~~We ~~adoption~~do ofnot ~~this~~expect ~~statement~~the isadoption ~~not~~of ~~expected~~ASU 2009-14 to have a material ~~effect~~impact on ~~the~~our ~~Company's~~Condensed ~~future~~Consolidated ~~financial~~Financial ~~position or results of operations~~Statements.

~~Also~~The ~~in May~~FASB’s ~~2008,~~Accounting ~~the~~Standards ~~FASB~~Codification ~~issued~~ (ASC) ~~944,~~is ~~"Accounting~~effective for ~~Financial~~all ~~Guarantee~~interim ~~Insurance Contracts--an~~and ~~interpretation~~annual offinancial ~~FASB~~statements ~~Statement~~issued ~~No.~~after ~~60"~~September ~~("ASC~~15, ~~944")~~2009. The ASC ~~944 interprets~~is ~~Statement~~now 60the ~~and~~single ~~amends~~official ~~existing~~source ~~accounting~~of ~~pronouncements~~authoritative, tonongovernmental ~~clarify their~~generally ~~application~~accepted toaccounting ~~the~~principles ~~financial~~(GAAP) ~~guarantee~~in ~~insurance contracts included within~~ the ~~scope~~United ~~of that Statement~~States. The ~~ASC~~historical ~~944~~GAAP ishierarchy ~~effective~~was ~~for~~eliminated ~~financial~~and ~~statements issued~~the ~~for~~ASC ~~fiscal~~became ~~years~~the ~~beginning~~only ~~after~~level ~~December~~of ~~15,~~authoritative ~~2008~~GAAP, ~~and~~other ~~all~~than ~~interim periods~~guidance ~~within~~issued ~~those~~by ~~fiscal years. As such,~~ the ~~Company~~Securities isand ~~required~~Exchange toCommission. Our ~~adopt these~~accounting ~~provisions~~policies atwere ~~the~~not ~~beginning~~affected ofby the ~~fiscal~~conversion ~~year~~to ~~ended~~ASC. However, ~~December~~we ~~31,~~have ~~2009. The~~conformed ~~Company~~references isto ~~currently~~specific ~~evaluating~~accounting ~~the~~standards ~~impact~~in ofthese ~~ASC~~notes ~~944~~to onour ~~its~~consolidated financial statements ~~but does not expect it~~ to ~~have an effect on~~ the ~~Company's~~appropriate ~~financial position,~~section ~~results~~ of ~~operations or cash flows~~ASC.

In ~~May 2008~~January 2010, the FASB issued ~~ASC~~guidance ~~470,~~that ~~"Accounting~~requires ~~for~~reporting ~~Convertible~~entities ~~Debt~~to ~~Instruments~~make ~~that may~~new bedisclosures ~~Settled~~about inrecurring ~~Cash~~or ~~upon~~nonrecurring ~~Conversion~~fair-value ~~(Including~~measurements ~~Partial~~including ~~Cash~~significant ~~Settlement)" ("ASC~~transfers ~~470").~~into ~~ASC~~and ~~470~~out ~~applies~~of toLevel ~~convertible~~1 ~~debt~~and ~~securities~~Level ~~that,~~2 ~~upon conversion,~~fair ~~may~~value bemeasurements ~~settled~~and byinformation ~~the~~on ~~issuer~~purchases, ~~fully~~sales, orissuances, ~~partially~~and insettlements ~~cash.~~on ~~ASC~~a ~~470 specifies~~gross ~~that~~basis ~~issuers~~in ofthe ~~such~~reconciliation ~~instruments~~of ~~should~~Level ~~separately~~3 ~~account~~fair ~~for~~value ~~the liability~~measurements. ~~and~~The ~~equity~~guidance ~~components~~is ineffective afor ~~manner~~annual ~~that~~reporting ~~will~~periods ~~reflect~~beginning ~~the~~after ~~entity's nonconvertible~~December ~~debt~~15, ~~borrowing~~2009, ~~rate~~except ~~when~~for ~~interest~~Level ~~cost~~3 isreconciliation ~~recognized~~disclosures ~~in subsequent~~that ~~periods.~~are ~~ASC 470 is~~ effective for ~~financial~~annual ~~statements~~periods ~~issued~~beginning ~~for fiscal years~~ after December 15, ~~2008, and must be applied on a retrospective basis~~2010. ~~Early~~We ~~adoption~~do is not ~~permitted.~~expect ~~The~~the adoption of this ~~statement~~guidance ~~is not expected~~ to have a material ~~effect~~impact on ~~the~~our ~~Company's~~consolidated ~~future~~ financial ~~position or results of operations~~statements.

InThere ~~June 2008,~~were ~~the~~various ~~FASB~~other ~~issued~~accounting ~~ASC~~standards ~~260,~~and ~~"Determining~~interpretations ~~Whether~~issued ~~Instruments~~during ~~Granted~~2010 in Share-Based Payment Transactions Are Participating Securities" ("ASC 260"). ASC 260 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and ~~therefore need to be included in the earnings allocation in computing earnings per share under the two-class method as described in ASC 260~~2009, ~~Earnings~~none ~~per Share. Under the guidance~~ of ~~ASC 260,~~which ~~unvested~~are ~~share-based~~expected ~~payment awards that contain non-forfeitable rights~~ to ~~dividends~~ orhave ~~dividend~~a ~~equivalents~~material ~~(whether~~impact ~~paid~~on ~~or unpaid) are participating securities and shall be included in~~ the ~~computation~~Company’s ofconsolidated ~~earnings-per-share pursuant to the two-class method. ASC 260 is effective for~~ financial ~~statements issued~~position, ~~for fiscal years beginning after December 15~~operations, ~~2008~~or ~~and~~cash ~~all prior-period earnings per share data presented shall be adjusted retrospectively~~flows. ~~Early application is not permitted~~. ~~The Company is assessing the potential impact of this ASC on the earnings per share calculation.~~

In May 2009, the FASB issued ASC 855, Subsequent Events which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855is effective for interim or annual financial periods ending after June 15, 2009 (the Company's second quarter ended June 30, 2009). The implementation of this standard did not have a material impact on the Company's financial statements. Subsequent events were evaluated through the date of issuance of these consolidated financial statements on November 18, 2009 at the time this Quarterly Report on Form 10-Q was filed with the Securities and Exchange Commission.

- 21 -

Results of Operations

Three ~~and~~ ~~nine~~ months ended ~~September~~March 3031, ~~2009~~ 2010 compared to three ~~and nine~~ months ended ~~September~~ 30March 31, ~~2008~~2009

Net sales . Net sales for the ~~nine~~ three months ended ~~September~~March 3031, ~~2009~~2010 were $62,~~701~~569,~~682~~730 as compared to $91,~~418~~216,~~489~~ 823 for the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~2009. This ~~decrease~~increase of $21,~~716~~352,~~807~~907 or 28111% in revenue is primarily related to the ~~release~~higher ~~of fewer~~ number of titles compared toin ~~2008. For~~ the ~~three~~market ~~months~~compared ~~ended~~to ~~September~~early ~~30 the net revenue was $2,019,382 in~~ 2009. ~~compared to $1~~Also,~~068,377~~ inan ~~the~~amount ~~same period 2008. This increase~~ of $~~951~~346,~~005~~482 ~~or 89%~~ is ~~caused~~generated bythrough ~~the~~distribution ~~fact that we have released more titles in the third quarter of 2009 than the third quarter of 2008~~activities.

Gross Profit .Gross profit totaled $1,~~737~~117,~~632~~827 for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010. For the ~~nine~~ three months ended ~~September~~March 3031, ~~2008~~2009, gross profit totaled $4409,~~642,009~~486. This ~~decrease~~ increase is mainly caused by the fact that our revenue has increased compared to the first three months of 2009. Furthermore, our gross profit as a percentage of sales can vary significantly from period to period due to the sales mix and the type of sales deals included. ~~Furthermore,~~The ~~the~~part ~~Company~~of ~~has~~our ~~shortened~~revenue ~~the lifecycle~~that ~~per game on which the amortization~~ is ~~calculated.~~generated ~~Therefore~~through indistribution ~~some cases~~activities ~~straight~~has ~~line~~lower ~~amortization~~margins ~~could~~than ~~exceed~~revenues ~~the~~generated ~~percentage~~through ofpublishing ~~sales amortization for a certain period~~activities. ~~For the three months ended September 30 the gross profit was $33,108 in 2009 compared to $264,929 in the same period 2008. The decrease of $231,821 is also due to the fact described above.~~

Selling, Marketing, General and Administrative Expenses . Selling, marketing, general and administrative expenses totaled $62,~~645~~149,~~614~~659, for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010. For the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~2009, selling, general and administrative expenses totaled $41,~~697~~726,~~197~~490. This represents an increase of $1423,~~948,417~~169 or 4224%. This increase in selling, general and administrative expenses is due to higher spending in marketing ~~expenses, such as trade shows, but also game by game marketing~~. ~~We presented our 2009 line up at the E3 trade show in Los Angeles in June 2009 and at the GamesCom in Cologne in August 2009. In the three months ended September 30~~Also, ~~2009~~we ~~the Selling,~~have ~~Marketing,~~provided ~~General~~for &some ~~Administrative~~aged ~~expenses~~debts ~~amounted~~amounting to $2160,~~518,430 compared~~216 torecorded ~~$1,850,293~~ in ~~2008. This~~General ~~represents~~and anAdministrative ~~increase of $668,137 compared to prior year~~expenses. ~~This is due to the reason mentioned above.~~

Research and Development . Research and development expenses totaled $~~404~~288,~~442~~444 for the ~~nine~~three months ended ~~September~~ 30March 31, ~~2009~~2010. For the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~2009, research and development totaled $~~301~~41,~~031~~944. This represents an increase of $~~103~~246,~~411~~500or ~~or 34~~588%. This increase is due to the fact that our in-house studio ishas ~~focusing~~completed onour ~~the development~~internally ofdeveloped a game toFairytale beFights ~~released in Q2 2011. For the three months ended September 30, 2009, the Research~~ and ~~Development~~has ~~expenses~~spent ~~amounted~~time toon ~~$307,698 compared~~developing tonew ~~$125,589 in the same period 2008~~titles. ~~This~~As ~~increase~~per isUS ~~also due to the fact that one in-house studio is focusing on the development of a game to be released in Q2 2011. Furthermore~~GAAP, ~~the~~we ~~studio~~have isexpensed ~~investing~~these ~~time~~internal inhours ~~the development~~as ofResearch ~~future~~and ~~downloadable~~Development ~~content~~expenses.

Depreciation . Depreciation expenses totaled $~~301~~195,~~098~~199 for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010. For the ~~nine~~ three months ended ~~September~~March 3031, ~~2008~~2009, the depreciation expense totaled $~~284~~75,~~234~~435. The increase is due to ~~new investments made due to~~ the ~~move~~depreciation of ~~the~~a ~~Company’s headquarters~~new ~~during~~software ~~2008.~~tool ~~Mainly~~that ~~investments~~we ~~in leasehold improvement and furniture~~ have ~~been~~started ~~made. For the three months ended September 30, 2009 the depreciation amounted $93,628 compared~~ to ~~$127,829~~use in ~~the~~Q4 ~~same period 2008. This decrease is due to the fact that some fixed assets of our in-house studio have been fully depreciated during the third quarter of~~ 2009.

~~- 22~~Interest -Expense .Interest expense totaled $509,342 for the three months ended March 31, 2010. For the three months ended March 31, 2009, interest expense totaled $254,914. This represents an increase of $254,428 or 100%. This increase in interest expense is due to the current loan outstanding. As disclosed in our 2009 10K, we pay a weekly interest of €25,000 on the current outstanding loan of $6,000,000. Also, in 2009 the Company issued warrants in connection with these loans. The amortization of the debt discount is recorded as interest expense (expenses amount to $171,076 for the first three months of 2010 compared to $47,000 for the same period in 2009. These expenses are shown on a separate line in the P&L).

~~Interest~~Net ~~Expense~~ Result.~~Interest expense~~ ~~totaled~~Our net loss was $~~999~~2,~~971~~195,770 for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010. For the ~~nine~~ three months ended ~~September~~March 3031, ~~2008~~2009, ~~interest~~the ~~expense~~net loss totaled $~~259~~1,~~890. This represents an increase of $740~~750,~~081~~581. ~~This~~The ~~increase~~decrease in ~~interest~~the ~~expense~~net result is ~~primarily~~ due to the ~~increase~~higher ofexpenses ~~interest~~in ~~bearing short term loans during~~ the ~~year. Also,~~ ~~the~~first ~~Company~~three ~~issued~~months ~~warrants in connection with these loans. The amortization~~ of ~~the~~2010 ~~debt discount is recorded~~ as ~~interest expense~~disclosed ~~(expenses~~above. ~~amount to $483~~Furthermore,~~091~~ ~~for~~ the ~~first~~need ~~nine months of 2009 compared~~ to ~~$98,000~~spend ~~for~~more ~~the~~money ~~same~~on ~~period~~PR inand ~~2008.~~Marketing ~~These~~of ~~expenses~~the ~~are~~products ~~shown~~has onled ato ~~separate line~~higher ~~in the P&L)~~costs. ~~For the three months ended September 30~~Also, ~~2009~~ the interest ~~expense~~ ~~amounted~~charge tofor ~~$493,069 compared to $191,172 in~~ the ~~same~~ period ~~2008.~~is ~~This increase~~much ishigher ~~caused~~than byin the same ~~facts~~period ~~as described above~~2009.

Net Result. Our net loss was $6,724,284 for the nine months ended September 30, 2009. For the nine months ended September 30, 2008, the net loss totaled $1,953,495. The decrease in the net result is due to the lower sales in the first nine months of 2009 as disclosed above. Furthermore, the need to spend more money on PR and Marketing of the products has led to higher costs. For the three months ended September 30, 2009 the net loss amounted to $3,384,552 compared to a net loss of $2,994,301 in the same period 2008. The decrease in the result is due to increased expenses in PR and Marketing as well as a lower gross margin due to higher cost of goods due to console games as opposed to PC titles.-21-

Other comprehensive income . Other comprehensive income represents the change of the Currency Translation Adjustments balance during the reporting period. The Currency Translation Adjustments balance that appears in the stockholders’ equity section is cumulative in nature and is a consequence from translating all assets and liabilities at current rate whereas the stockholders’ equity accounts are translated at the appropriate historical rate and revenues and expenses being translated at the weighted-average rate for the reporting period. The change in currency translation adjustments was $(1254,~~447,527)~~ 008 for the ~~nine~~three months ended ~~September~~ 30March 31, ~~2009~~2010 and $~~(975~~94,~~302)~~ 232 for the ~~nine months ended September 30, 2008. For the~~ three months ended ~~September~~March 3031, 2009 ~~the comprehensive income amounted to $(1,082,831) compared to $(104,667) in the same period 2008~~. The amounts are relatively high this year due to the sharp fluctuations of the US Dollar compared to the EURO.

Liquidity and Capital Resources

As of ~~September~~March 3031, ~~2009~~2010 our cash balance was $~~775~~417,~~416~~926.

We expect our capital requirements to increase over the next several years as we continue to develop new products both internally and through our third-party developers, increase marketing and administration infrastructure, and embark on in-house business capabilities and facilities. Our future liquidity and capital funding requirements will depend on numerous factors, including, but not limited to, the cash generation from the released games, the cost of hiring and training production personnel who will produce our titles, the cost of hiring and training additional sales and marketing personnel to promote our products, and the cost of hiring and training administrative staff to support current management.

Our net accounts receivable, after providing an allowance for doubtful accounts, at ~~September~~ 30March 31, ~~2009~~2010 was $41,~~736~~327,~~634~~075.

The Company’s management states that in order to satisfy its working capital requirements through the second quarter of 2010, it will need to obtain additional financing from third parties. If the Company does not obtain any necessary financing in the next month, we may need to cease operations. There is no legal obligation for either management or significant shareholders to provide additional future funding. Consequently, there is substantial doubt about our ability to continue as a going concern. We have no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities prior to the location of a merger or acquisition candidate. Accordingly, there can be no assurance that sufficient funds will be available to us to allow us to cover the expenses related to such activities.

Fluctuations in Quarterly Operating Results and Seasonality

We have experienced fluctuations in quarterly operating results as a result of the timing of the introduction of new titles; variations in sales of titles developed for particular platforms; market acceptance of our titles; development and promotional expenses relating to the introduction of new titles; sequels or enhancements of existing titles; projected and actual changes in platforms; the timing and success of title introductions by our competitors; product returns; changes in pricing policies by us and our competitors; the accuracy of retailers’ forecasts of consumer demand; the size and timing of acquisitions; the timing of orders from major customers; and order cancellations and delays in product shipment. Quarterly comparisons of operating results are not necessarily indicative of future operating results.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We ~~transact~~ ~~business in foreign currencies and~~ are ~~exposed~~subject to market risks ~~resulting from fluctuations~~ in ~~foreign currency exchange rates. Accounts relating to foreign operations are translated into United States dollars using prevailing exchange rates at~~ the ~~relevant~~ordinary ~~quarter~~course ~~end. Translation adjustments are included as a separate component~~ of ~~stockholders’~~our ~~equity.~~business; ~~For~~primarily ~~the~~risks ~~nine~~associated ~~months~~with ~~ended~~interest ~~September 30,~~rate ~~2009,~~and ~~our accumulated~~ foreign currency ~~translation adjustment loss was approximately $5~~fluctuations.~~4 million.~~

~~- 23~~Interest -Rate risk

After signing the waiver agreement we have agreed to pay an amount of Euro 25,000 (or $36,000) interest per week to the loan providers. This means an effective interest percentage of 31% per year. This interest is only calculated on the remaining loan of $6 million.

Foreign Currency Exchange Rate Risk

We transact business in foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates. Accounts relating to foreign operations are translated into United States dollars using prevailing exchange rates at the relevant quarter end. Translation adjustments are included as a separate component of stockholders' equity. For the year ended December 31, 2009, our foreign currency translation adjustment loss was approximately $4.8 million.

We recognized a foreign exchange transaction gain in interest and other expense, net in our consolidated statement of operations for the three months ended March 31, 2010 of $254,008 (gain) and a foreign exchange transaction loss for the three months ended March 31, 2009 of $94,232 (gain).

-22-

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) were effective as of ~~September~~March 3031, ~~2009~~2010 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~third~~ first quarter of ~~2009~~2010, which were identified in connection with management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In June 2007, Playlogic Entertainment Inc. was sued in class action before the US district court in Manhattan, with respect to alleged damage as a result of copy protection software included in Age of Pirates – Caribbean Tales. We do not foresee any liability in this matter, as plaintiffs have clearly sued the wrong company and the wrong entity. Playlogic acts only as a publisher of the game and therefore is not liable for possible faults in production or distribution. Moreover, as far as any claim could be brought against Playlogic, it would be the Dutch subsidiary Playlogic International NV, with its statutory seat in Amsterdam, The Netherlands, that would have to be sued. As a consequence, the pending case should fail on both grounds and any new action against the Dutch subsidiary would have to be brought before the Dutch courts that are even more likely than the US courts to reject class actions like this.Litigation

~~Except~~Due ~~as referred~~to the Company’s cash flow situation, we are in default on payments to ~~above~~some ~~there~~of ~~were~~our novendors. ~~new~~Some ~~material~~of these vendors have gone legal ~~proceedings~~to orcollect ~~material developments~~their outstanding receivables. We are in continuous discussions with both vendors and collection agencies and law firms to ~~the~~settle ~~pending~~these ~~legal~~issues ~~proceedings~~in a way that it doesn’t harm our business. A significant part of our accounts payable balance is overdue. All amounts claimed have been ~~previously reported~~ recorded in ~~Part I,~~the ~~Item 3~~financial ofstatements ~~our~~as ~~2008~~accounts ~~Form 10-K~~payable. A ~~full discussion~~We ofcould ~~our~~incur ~~pending~~costs for legal ~~proceedings~~advice isin ~~also~~some ~~contained~~cases (if we hire external lawyers) which we will recognize upon the date of the action. If a vendor with a significant outstanding amount demands immediate payment in ~~Part I~~full, ~~Item 1,~~ ~~“Notes~~our ability to ~~Unaudited~~continue ~~Condensed~~as ~~Consolidated~~a ~~Financial~~going ~~Statements”~~concern ~~of this~~will ~~Report~~be at risk. The Company is actively searching for new funding and/or financing, to resolve these matters and we are in continuous open dialogue with the vendors involved.

In 2009, we have lost a lawsuit started by Visionvale, the developers of the title Ancient Wars: Sparta (released in 2007), in which Visionvale had claimed the final payment for the development of the title. Visionvale aldo claimed that the software development agreement was, because of non-payment, legally terminated and that the licensing rights reverted back to Visionvale. Playlogic has disputed that the agreement had been terminated and claimed that parties did not agree on a license but a transfer of IP rights. The court decided that the IP rights had been transferred to Playlogic, but Playlogic had to pay the remaining outstanding amounts, including interest and costs. The costs amounting to approximately $100,000 have been included in the Statement of Operations for the year 2009.

Visionvale has published the game as well and additionally they have published a sequel of the game, which both portray an infringement on the IP rights owned by Playlogic. We have not been granted any penalty payments by Visionvale for this infringement, on which we have appealed. We have recorded all costs related to this lawsuit in 2009, but have not recorded the potential benefit.

Furthermore, the Company is involved in a number of minor legal actions incidental to its ordinary course of business.

-23-

Except as referred to above there were no new material legal proceedings or material developments to the pending legal proceedings that have been previously reported in Part I, Item 3 of our 2009 Form 10-K. A full discussion of our pending legal proceedings is also contained in Part I, Item 1, “Notes to Unaudited Condensed Consolidated Financial Statements” of this Report.

Item 1A. Risk Factors

There have been no material changes to the Risk Factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2008~~ 2009.

Item 2 - Changes in Securities.

No response required.

Item 3 - Defaults Upon Senior Securities.

No response required.

Item 4 - Submission of Matters to a Vote of Security Holders.

No response required.

Item 5 - Other Information.

No response required.

- 24 -

Item 6. Exhibits

Exhibits :

31.1		Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

- 25 24-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Playlogic International, Inc.
Date: November 18, 2009	By:	/s/ Willem M. Smit
Date: June 24, 2010	By:	/s/ Willem M. Smit
		Willem M. Smit Chief Executive Officer

- 26 25-

Exhibit Index

Exhibits

31.1		Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

- 27 26-

Filing Compare · Playlogic Entertainment, Inc.