Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with the consolidated condensed financial statements, including notes thereto, appearing in this Form 10-Q and in our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2007 filed on January 14, 2008.

Some of the information in this Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may", "will"', "believes", "anticipates", "estimates", "expects", "continues"' and/or words of similar import. Forward-looking statements are based upon our management's current expectations and beliefs concerning future developments and their potential effects upon us. There may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results could differ materially from those anticipated for many reasons in these forward-looking statements. Factors that could cause or contribute to the differences include, but are not limited to, availability of financial resources adequate for short-, medium- and long-term needs, demand for our products and services and market acceptance, as well as those factors discussed and set forth under "Risk Factors", "Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report.

We believe it is important to communicate our expectations, however, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

A more detailed discussion of these factors is presented in our September 30, 2007 Annual Report on Form 10-KSB.

Application of Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations as of and for the three and nine month periods ended June 30, 2008 are based upon our reviewed consolidated condensed financial statements. As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. We base these estimates on our historical experience, future expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments that may not be readily apparent from other sources. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated condensed financial statements and the reported amounts of revenue and expenses during the reporting periods. These estimates and assumptions relate to such items as the methods and terms of depreciation and amortization, realization of assets, the expected term of subscriber relationships, accruals and other factors. We evaluate these estimates and assumptions on an ongoing basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material.

Our consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments necessary for a fair statement of the consolidated condensed results of operations, financial position, and cash flows for each period presented. Our consolidated condensed financial statements reflect the results of operations, financial position, changes in stockholders' deficit and cash flows.

A summary of the significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating the accompanying consolidated condensed financial statements include the following:

Revenue Recognition and Deferred Revenues

In accordance with the SEC's Staff Accounting Bulletin No. 104, "Revenue Recognition", revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable.

We classify our revenues into the following two categories:

A. Subscriptions. We offer a ten-day free subscription trial. At any time during the initial ten-day period, a new subscriber has the right to rescind their trial period agreement. If the subscriber does not cancel during the ten-day period, we will then charge his/her credit card account according to the plan selected by the subscriber, and until the subscriber cancels his/her subscription. We recognize subscription revenue ratably during each subscriber's monthly subscription period. For financial reporting purposes, we allocate subscription fees over the number of days in the month for which the fee was charged and will then record deferred revenue at month end for subscription fees received, but not yet earned, which will be fully recognized in the following month. The Company recognized $14,629 of deferred revenues as of June 30, 2008. All authorized refunds to subscribers are recorded as a reduction of revenues.

A subscriber has the option to select from one of three rental plans: (a.) for $12.95 per month, the subscriber is allowed one video game in his possession,
(b.) for 20.95 per month, the subscriber is allowed up to two video games in his possession, and (c.) for $28.95 per month, the subscriber is allowed up to three video game's in his possession.

B. Retail/Wholesale. We also sell previously owned DVD games and recognize revenue from these sales upon shipment of the product, at which time, the title and risk of loss transfer to the customer. Because sales of this category first occurred during the three months ended March 31, 2008, there has been no history of bad debts. Accordingly, we have not recognized an allowance for doubtful accounts.

Fair Value of Financial Instruments

Financial instruments consist principally of cash, accounts and related party receivables, trade and related party payables, accrued liabilities, and short and long-term debt obligations. The carrying amounts of such financial instruments in the accompanying consolidated condensed balance sheets approximate their fair values due to their relatively short-term nature. It is our opinion that we are not exposed to significant currency or credit risks arising from these financial instruments.

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Use of Estimates

The preparation of the consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates.

Stock-Based Compensation

We account for stock-based compensation in accordance with the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 123 (R), "Share-Based Payment", which establishes standards for transactions in which an entity exchanges its equity instruments for goods and services. This standard replaces SFAS No. 123 and supercedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock-Based Compensation". This standard requires a public entity to measure the cost of employee services, using an option-pricing model, such as the Black-Scholes Model, received in exchange for an award of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic method previously allowable under APB No.
25. Shares of common stock issued for services rendered by a third party are recorded at fair market value, generally the quote at the close of market trading on the day.

Loss Per Common Share

We compute basic and diluted loss per share of common stock by dividing the net loss by the weighted average number of common shares outstanding available to common stockholders during the respective reporting period. However, common stock equivalents have been excluded from the computation of diluted loss per share of common stock for the three and nine months ended June 30, 2008 and 2007, respectively, because their effect would be anti-dilutive.

Reclassifications

Certain reclassifications have been made to the previously reported amounts to conform to our Company's current year presentation.

Recently Issued Authoritative Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board ("FASB") issued two new statements: (a.) SFAS No. 141(revised 2007), Business Combinations, and (b.) No. 160, Noncontrolling Interests in Consolidated Financial Statements. These statements are effective for fiscal years beginning after December 15, 2008 and the application of these standards will improve, simplify and converge internationally the accounting for business combinations and the reporting of noncontrolling interests in consolidated financial statements. We are in the process of evaluating the impact, if any, on SFAS 141 (R) and SFAS 160 and do not anticipate that the adoption of these standards will have any impact on its consolidated condensed financial statements.

(a.) SFAS No. 141 (R) requires an acquiring entity in a business combination to:
(i) recognize all (and only) the assets acquired and the liabilities assumed in the transaction, (ii) establish an acquisition-date fair value as the measurement objective for all assets acquired and the liabilities assumed, and
(iii) disclose to investors and other users all of the information they will need to evaluate and understand the nature of, and the financial effect of, the business combination, and, (iv) recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase.

(b.) SFAS No. 160 will improve the relevance, comparability and transparency of financial information provided to investors by requiring all entities to: (i) report noncontrolling (minority) interests in subsidiaries in the same manner, as equity but separate from the parent's equity, in consolidated condensed financial statements, (ii) net income attributable to the parent and to the non-controlling interest must be clearly identified and presented on the face of the consolidated statement of income or operations, and (iii) any changes in the parent's ownership interest while the parent retains the controlling financial interest in its subsidiary be accounted for consistently.

In February 2008, the FASB issued Financial Staff Positions ("FSP") FAS 157-2, "Effective Date of FASB Statement No. 157" ("FSP FAS 157-2"), which delays the effective date of SFAS No. 157, "Fair Value Measurement" ("SFAS 157"), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. FSP FAS 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. FSP FAS 157-2 is effective for us beginning January 1, 2009. We are currently evaluating the potential impact of the adoption of those provisions of SFAS 157, for which the effectiveness was delayed by FSP SFAS 157-2, on our consolidated financial position and results of operations.

In March 2008, FASB the issued Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures about Derivative Instruments and Hedging Activities", an amendment of FASB Statement No. 133 ("SFAS No. 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We do not believe that SFAS No. 161 will have a material impact on our consolidated condensed financial statements.

In May 2008, the FASB released SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that presented in conformity with generally accepted accounting principles in the United States of America. SFAS No. 162 will be effective 60 days following the SEC's approval of the PCAOB amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". We do not believe SFAS 162 will have a significant impact on our consolidated condensed financial statements.

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Overview and Business

Overview

On July 24, 2006, Gottaplay Interactive, Inc., formerly known as Donobi, Inc. ("Donobi"), a publicly held company, merged with Gotaplay Interactive, Inc. ("Gotaplay"), a privately held Nevada corporation.

On February 28, 2007, our wholly owned subsidiary, Gottaplay Management, Inc. ("GMI"), a Nevada corporation, merged with a privately held Florida company, an on-line video game trading company, called Gamershare, Inc. ("GSI"), into its operations. In consideration for the merger, we paid the former sole shareholder of GSI $60,000 in cash and issued him 220,000 shares of our $0.001 par value common stock. The shares were valued at market, or $2.55 per share, on the date of closing. The total value of these shares was $561,000.

On August 1, 2007, we sold all the stock of Donobi, Inc. (a wholly-owned subsidiary and commonly referred to as the internet service provider division) for $100. This core business activity was an internet service provider ("ISP"). In consideration for the stock, the purchaser received all the assets and assumed significantly all the liabilities, associated with this division's operation. We accounted for this transaction under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Accordingly, the operating results, less applicable provision for any income taxes, of the discontinued operations have been segregated from continuing operations for the prior periods presented and are reported as a separate line item on the accompanying Consolidated Condensed Statements of Operations and Cash Flows. As such, by segregating the results of the discontinued operations allows for a more meaningful and enhanced comparability of the results of operations from continuing operations. Any reference to our revenues and expenses in our discussion and analysis will pertain only to our "continuing operations".

Since the beginning of our current fiscal year, we have consolidated and materially restructured our operations in an effort to reduce overhead and expenses. During this last quarter, we have closed three distribution centers and an administrative office. As of July 31, 2008 we have four employees in which to conduct our day-to-day business affairs. We believe these strategic moves to close and consolidate our operations will 105,939reate a more cost effective and efficiently run business.

Business

Our primary business is the on-line video game rental subscription business, which is dedicated to providing customers with a quality rental experience when accessing our web site, www.gottaplay.com. This service is an alternative to store based gaming rentals. We offer our customers an extensive selection of video games for a monthly subscription fee which is based upon one of three subscription plans. Customers sign-up via our web page and once credit is processed and approved, we send them the video game(s) of their choice. All games are shipped to the customer via U. S. Postal Service first class mail. Active subscribers can retain the games for an indefinite period of time as long as they are active paying subscribers. Customers return/exchange their selections at anytime by returning their game(s) in our pre-paid, pre-addressed mailers. We also provide a subscriber the option to purchase new and/or used video game titles at discounted prices and trade games.

We also sell previously owned DVD's.

Summary of Consolidated Condensed Results of Operations

Any measurement and comparison of revenues and expenses from continuing operations should not be considered necessarily indicative or interpolated as the trend to forecast our future revenues and results of operations. We have excluded from our analyses all references to, and the financial results of, our discontinued operations in order to enhance the comparability and meaningfulness of our continuing operations.

Revenue

A. Subscriptions

On-line video game rental revenue for the quarter ended June 30, 2008 was $105,939 as compared to $147,140 for quarter ended March 31, 2008 and $178,803 for quarter ended December 31, 2007. Our quarterly sales have declined by approximately $72,864 or 40.8% over our first quarter ended December 31, 2007. Our monthly sales have dropped from a high of $66,235 in October 2007 to a low of $31,251 in June 2008. We have had nine consecutive months of decreasing sales and subscriber enrollments. We expect this downward sales and enrollment trend to continue through the fourth quarter of our 2008 fiscal year. Unless we are able to purchase new releases to re-build our library with contemporary titles quickly and market our business effectively, our revenues will continue to suffer.

Our current year-to-date sales total $431,883. For the same period one year ago, we reported $295,867, representing a net increase of $136,016, or 45.9% increase. Although our current nine-month sales results are better than the same period one year ago, the year-to-date revenues are significantly less than what we had forecasted in our business plan. Our current fiscal year monthly sales are decreasing at an average rate of 10.1% per month.

We believe that the following factors have contributed significantly to our poor revenue results: (a.) the current state of the depressed national economy, (b.) our lack of capital to purchase the latest versions and new releases for our library, and (c.) not adequately advertising and marketing our business to attract new subscribers.

B. Wholesale Sales

We reported $465,450 of DVD sales in our second quarter ended June 30, 2008. These sales were to one customer. Our margin was 7%.

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Costs and Expenses

Cost of Revenues

A. Subscriptions

Costs of subscription revenues include all costs in the production of these revenues which includes such key items such as video game depreciation, shipping materials and credit card fees. Total cost of these revenues for the nine months ended June 30, 2008 and June 30, 2007 was $210,806 and $1,453,020, respectively.

There are several reasons for the net decrease in our current nine month period over the same prior year's period. Of significance, is the elimination of our overall costs attributed directly to not engaging and paying a bounty to various marketing affiliates for potential customer acquisitions. This savings amounted to approximately $984,420. The other expenses in this category decreased approximately of $257,794.

Any increase/decrease in these expense items, other than depreciation, is generally a direct function of the number of our active subscribers, and, the number of times each month the subscriber will place an order and return a game.

B. Wholesale Sales

We purchased $435,000 of previously used DVD's from three vendors and sold 100% of this inventory to one customer. At June 30, 2008, we do not have any inventory on hand for sale.

Fulfillment

This category of expense is primarily comprised of those support services for the distribution of video games to subscribers/customers which includes distribution centers' facility costs, independent contractor fees, certain communications' expenses and certain wages and related burden. The total cost of fulfillment for the nine months ended June 30, 2008 and 2007 was approximately $172,516 and $287,567, respectively. Because we have been experiencing a steep decline in our sales and our subscriber base, we closed three distribution centers and an administrative office during this quarter ended June, 30, 2008. We have consolidated all our operations into one distribution center located in Kansas City, MO. We believe this effort will lead to logistical efficiencies and economies of scale.

Technology and Development

This category is primarily comprised of expenses for maintaining our website, website enhancements and backend software maintenance. These costs are reasonable and comparable for each period reported and within our forecast.

Advertising and Marketing

Because of the lack of working capital, we have restricted advertising and marketing to a minimum this fiscal year.

General and Administrative Expenses

General and administrative expenses include Federal and State employer and business taxes, various compliance expenses and licenses, professional fees, certain wages and burden, and other unallocated expenses. Total expense for this category for the nine months ended June 30, 2008 and 2007 was $799,674 and $1,958,557, respectively. Of significance, the principal reason for the decrease reported this nine month period over the same period one year ago is because of $1,440,000 of the amortization of prepaid expenses recognized that did not recur in our current fiscal period.

Other category expenses that impacted this period over the prior year's comparable period were: (a.) amortization of software - increased approximately $52,750, and (b.) professional and legal fees - increased approximately $50,155. The other expense items making up this category were within expectations of management.

Financial Condition, Liquidity and Capital Resources

Our consolidated condensed financial statements as of and for the nine months ended June 30, 2008 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. For the nine months ended June 30, 2008, we had a net loss of $1,390,145 and negative cash flows from operations of $997,674. At June 30, 2008, we had a working capital deficit of $3,453,025, and a stockholders' deficit of $2,902,190. Because of our significant working capital deficit at June 30, 2008 and the other unfavorable factors discussed herein, we may not be able to meet certain current financial objectives as presently structured.

We had a cash balance of $26,889 at June 30, 2008. We finance our operations and capital requirements primarily through private debt and equity offerings. Between Jan and March 2008, we raised $1,110,000 from twelve accredited investors in the form of 120 day, 14%, unsecured notes payable. These funds were used to pay off certain debts and fund our day-to-day operations. Our recent operating results give rise to concerns about our ability to generate cash flow from operations sufficient to sustain ongoing viability. During the latter half of 2007, we initiated and implemented severe cost controls and focused on: (a.) reducing and/or eliminating certain general and administrative expenses, (b.) eliminating certain distribution centers and staff, (c.) and, curtailing certain marketing and advertising campaigns. We have benefited from these adjustments. However, a direct result of these changes has been the continual decline of the subscriber base. Therefore, in order to sustain our business operations, we will have to continue raise more money from in the form of debt and/or of equity instruments, and increase our subscriber base and sales quickly.

At June 30, 2008: (a.) the book value of our outstanding common stock was a negative $0.09 per share, (b.) our current ratio was .10, and (c.) our cash to debt ratio was .01. As of July 3, 2008, we are in default on a total of $1,393,000 notes payable, plus the related accrued interest of $202,400. As of June 30, 2008, approximately 88% of our accounts payable are past due. We also anticipate continued substantial negative cash flows from operations. The results of these fundamental financial ratios, plus our excessive debt, our inability to service our obligations timely and our negative cash flows from operations are not acceptable and are strongly indicative we will have to improve our performance very quickly if we expect to stay in business.

Our continuation as a going concern is dependent on our ability to resolve the default discussed above, to grow revenues, obtain additional equity and/or financing, and, generate sufficient cash flow from operations to meet our obligations on a timely basis. The aforementioned consolidated condensed financial statements, as of and for the periods ended June 30, 2008, do not include any adjustments that might result from the outcome of these uncertainties.

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On April 9, 2008 we were notified by the holders of eight secured convertible promissory notes, totaling $1,157,873, that we were in default. These notes and related accrued interest were due on March 31, 2008. In May 2008, we negotiated an extension to pay off these notes. These notes are due on August 15, 2008. Conditions precedent to the extension are:

a. All accrued interest will be payable in our $0.001 par value common stock and valued at $.03 per share.

b. An extension or "stand-still" fee of $50,000 will be payable in shares of our $0.001 par value common stock and valued at $0.03 per share. Shares to be issued are 1,666,667.

c. We will pay management fees of $7,500 per month for four months, or $28,000, and the fees will be paid in shares of our $0.001 par value common stock and valued at $0.03 per share. Total shares to be issued are 933,333.

d. We are required to reset the existing convertible notes payable conversion price from $1.25 to $0.50 per share and we have to reset the exercise prices of the two and three year warrants granted to the respective note holders from $1.25 to $0.60 per share and from $2.50 to $0.75 per share, respectively.

As of the date of this report, we have not: (a.) issued the stock, (b.) reset the conversion price of the convertible notes, and (c.) reset the exercise prices of the warrants. We expect to complete these requirements within the next 60 days.

In May and June 2008, we negotiated settlements with each of the Company's prior officers and their related companies (the "Party or Parties"). The three prior officers are: (a.) John P. Gorst ("Gorst"), prior CEO (b.) M. Carroll Benton ("Benton"), prior CFO, and (c.) Asra Rasheed ("Rasheed"), prior Interim CEO and President. The two related companies of the officers are: (a.) Insynq, Inc. (Gorst and Benton) and (b.) Nextrental, Inc. (Rasheed). Significant terms of these settlements are:

a. Gorst, Benton and Rasheed will return a total of 2,560,000 shares of their respective outstanding shares of $0.001 par value common stock to the Company as treasury shares.

b. Gorst will resign his position as a board member.

c. All amounts due to the prior officers and their related companies as of the June 30, 2008 and through the date of this report will be settled in common . . .