SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON D.C. 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended   June 30, 1998

                                       OR

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     ---                      EXCHANGE ACT OF 1934

                 For the transition period from        to
                                                ------    ------
                          Commission file number 1-9599

                                GALOOB TOYS, INC
             (Exact name of registrant as specified in its charter)


         Delaware                                      94-1716574
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

500 Forbes Boulevard, South San Francisco, California             94080
       (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code  (650) 952-1678



   Indicate by check whether the registrant (1) has filed all reports required
    to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
       during the preceding 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  X  No
                                     ---    ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:








Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                               Yes         No
                                   ---        ---

 APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
        of each of the issuer's classes of common stock, as of the latest
                                practicable date.

       18,124,864 shares of common stock, par value $.01, as of June 30, 1998.

<PAGE>











































                       GALOOB TOYS, INC. AND SUBSIDIARIES
                                      INDEX


PART 1 - FINANCIAL INFORMATION

  Item 1                                                              Page
   - Condensed Consolidated Balance Sheets

   - Condensed Consolidated Statements of Operations

   - Condensed Consolidated Statements of Cash Flows

   - Notes to Condensed Consolidated Financial Statements

  Item 2

   - Management's Discussion and Analysis of Financial Condition
     and Results of Operations


PART 2 - OTHER INFORMATION

  Item 1
   - Legal Proceedings

  Item 6
   - Exhibits and Reports on Form 8-K


SIGNATURE




























Part 1.  Financial Information
Item 1.   Financial Statements
                       GALOOB TOYS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (in thousands, except shares and per share data)
<TABLE>
<CAPTION>
                                                                   June 30,      June 30,      Dec. 31,
                                                                   1998          1997          1997
                                                                   -----------   -----------   -----------
                                                                   (Unaudited)   (Unaudited)
<S>                                                                <C>           <C>           <C>
ASSETS
Current Assets:
      Cash and cash equivalents                                       $30,041       $16,693        $3,359
      Accounts receivable, net                                         34,372        59,216        73,810
      Inventories                                                      20,280        22,477        24,707
      Tooling and related costs                                        11,907        18,708        12,434
      Prepaid expenses and other assets                                14,830        17,448         9,900
      Deferred income taxes                                               --         12,275           --
                                                                   -----------   -----------   -----------
                Total Current Assets                                  111,430       146,817       124,210
Land, building and equipment, net                                      10,419        10,186        10,451
Indebtedness from related party                                           950           950           950
Other assets                                                            9,450         7,824        10,276
License rights                                                         42,880          --          43,250
Deferred income taxes                                                  20,455          --          18,646
                                                                   -----------   -----------   -----------
                Total Assets                                         $195,584      $165,777      $207,783
                                                                   ===========   ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
      Accounts payable                                                $12,071       $12,094       $19,156
      Accrued expenses                                                 18,901        13,170        21,520
      Income taxes payable                                                839           450           734
                                                                   -----------   -----------   -----------
                Total Current Liabilities                              31,811        25,714        41,410
Other liabilities                                                       4,463         4,184         4,343
Deferred income taxes                                                     --          1,071           --
                                                                   -----------   -----------   -----------
                Total Liabilities                                      36,274        30,969        45,753
                                                                   -----------   -----------   -----------
SHAREHOLDERS' EQUITY
       Preferred stock
           Authorized 1,000,000 shares                                    --            --            --
       Common stock, par value $.01 per share
           Authorized 50,000,000 shares
           Issued and outstanding 18,124,864 shares,
           18,019,864 shares and 18,108,864 shares                        181           180           181
       Warrants                                                        40,427           --         40,350
       Additional paid-in capital                                     171,887       170,865       171,745
       Retained earnings (deficit)                                    (52,621)      (35,673)      (49,682)
       Cumulative translation adjustment                                 (564)         (564)         (564)
                                                                   -----------   -----------   -----------
                Total Shareholders' Equity                            159,310       134,808       162,030
                                                                   -----------   -----------   -----------
                Total Liabilities and Shareholders' Equity           $195,584      $165,777      $207,783
                                                                   ===========   ===========   ===========
</TABLE>
        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.
<PAGE>



                       GALOOB TOYS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                              Three Months Ended   Six Months Ended
                                                    June 30,            June 30,
                                             ------------------- -------------------
                                             1998      1997      1998      1997
                                             --------- --------- --------- ---------
<S>                                          <C>       <C>       <C>       <C>
Net revenues                                  $40,018   $52,356   $70,280   $92,954
Costs of products sold                         24,716    28,872    41,394    51,726
                                             --------- --------- --------- ---------
Gross margin                                   15,302    23,484    28,886    41,228
Operating expenses:
      Advertising and promotion                 4,153     7,496     8,599    14,882
      Other selling and administrative          6,088     6,932    13,207    14,939
      Royalties, research and development       6,439     7,912    12,216    14,476
                                             --------- --------- --------- ---------
      Total operating expenses                 16,680    22,340    34,022    44,297
                                             --------- --------- --------- ---------
Earnings (loss) from operations                (1,378)    1,144    (5,136)   (3,069)

Micro Machines license rights and
     litigation settlement                         --   (22,949)       --   (22,949)
Interest expense                                 (170)      (49)     (361)     (118)
Other income (expense), net                       433       355       749       824
                                             --------- --------- --------- ---------
Earnings (loss) before income taxes            (1,115)  (21,499)   (4,748)  (25,312)
Income tax benefit                               (424)   (8,384)   (1,809)   (9,871)
                                             --------- --------- --------- ---------
Net earnings (loss)                             ($691) ($13,115)  ($2,939) ($15,441)
                                             ========= ========= ========= =========

Average common shares outstanding              18,110    18,020    18,116    17,992

Net earnings (loss) per common share           ($0.04)   ($0.73)   ($0.16)   ($0.86)


</TABLE>

        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.
<PAGE>








                       GALOOB TOYS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (in thousands, except shares)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                             SIX MONTHS ENDED
                                                                 JUNE 30,
                                                          -------------------
                                                          1998      1997
                                                          --------- ---------
<S>                                                       <C>       <C>
CASH FLOW FROM OPERATING ACTIVITIES:
   Net earnings (loss)                                     ($2,939) ($15,441)
   Adjustments to reconcile net earnings
   (loss) to net cash provided by (used in)
   operating activities:
      Depreciation and amortization                            828       484
      Changes in assets and liabilities:
        Accounts receivable                                 39,438    43,106
        Inventories                                          4,427    (2,503)
        Tooling and related costs                              527    (3,272)
        Prepaid expenses and other current assets           (4,930)   (5,087)
        Other assets                                         1,006    (2,363)
        Deferred taxes                                      (1,809)   (9,871)
        Accounts payable                                    (7,085)   (7,561)
        Accrued expenses and other liabilities              (2,499)   (7,346)
        Income taxes payable                                   105    (1,221)
                                                          --------- ---------
      Net cash (used in) provided by operating
        activities                                          27,069   (11,075)
                                                          --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
   Investment in land, building and
        equipment, net                                        (529)     (593)
                                                          --------- ---------
      Net cash (used in) provided by investing
        activities                                            (529)     (593)
                                                          --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
   Repayments under long-term debt agreements                    --      (17)
   Proceeds from issuance of common stock                      142       575
   Other, net                                                    --     (117)
                                                          --------- ---------
   Net cash (used in) provided by financing activities         142       441
                                                          --------- ---------
INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                          26,682   (11,227)
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                        3,359    27,920
                                                          --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $30,041   $16,693
                                                          ========= =========

</TABLE>



        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.



<PAGE>
                       GALOOB TOYS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    THREE AND SIX MONTHS ENDED JUNE 30, 1998
                                   (Unaudited)

NOTE A -  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated balance sheets as of June 30, 1998 and 1997
and the condensed consolidated statements of operations for the three and six
month periods ended June 30, 1998 and 1997 and the condensed consolidated
statements of cash flows for the six month periods ended June 30, 1998
and 1997 have been prepared by the Company without audit.  In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at June 30, 1998 and 1997 have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1997.  Certain amounts in the financial statements of prior years have been
reclassified to conform with the current year's presentation.

The results of operations for the three and six month periods ended
June 30, 1998 and 1997 are not necessarily indicative of the operating
results for the full year.


NOTE B - LOAN AGREEMENT

On April 1, 1993, the Company entered into a Loan and Security agreement with
Congress Financial Corporation.  On March 31, 1995, this original agreement
was amended and restated in full, including increasing the credit limit to
$40 million, with a provision to increase the limit to $60 million at the
option of the Company.  On December 19, 1997, the loan agreement was amended,
increasing the credit limit to $75 million and extending the term of the loan
agreement until December 2000 . Borrowing availability is determined by a
formula based on both accounts receivable and inventories. The current interest
rate is equal to prime with a LIBOR option. The Company also agreed to pay an   
unused line fee of 0.25% and certain management fees.  In consideration of this 
amendment, the Company paid loan fees of $750,000.  The loan fee is included
in other assets and is being amortized straight-line over the term of the loan.














<PAGE>
NOTE C - INVENTORIES
(in thousands)                                                               

<TABLE>
<CAPTION>



                                 June 30,             December 31,
                         ----------------------       ------------
                            1998        1997              1997
                         ----------  ----------       ------------
<S>                      <C>         <C>              <C>
Finished goods             $19,810     $21,983            $24,291
Raw materials and parts        470         494                416
                         ----------  ----------       ------------
                           $20,280     $22,477            $24,707
                         ==========  ==========       ============

</TABLE>


NOTE D - RESEARCH AND DEVELOPMENT

Research and development expenses amounted to $1.6 million and $3.0 million for
the three months ended June 30, 1998 and 1997, respectively, and $2.8 million
and $5.8 million for the six months ended June 30, 1998 and 1997, respectively.































<PAGE>
Part 1.  Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

The following table sets forth for the periods indicated the percentage
relationships between revenues and certain expense and earnings items:

<TABLE>
<CAPTION>

                                              Three Months Ended   Six Months Ended
                                                    June 30,            June 30,
                                             ------------------- -------------------
                                             1998      1997      1998      1997
                                             --------- --------- --------- ---------
<S>                                          <C>       <C>       <C>       <C>
Net revenues                                    100.0%    100.0%    100.0%    100.0%
Costs of products sold                           61.8%     55.2%     58.9%     55.6%
                                             --------- --------- --------- ---------
Gross margin                                     38.2%     44.8%     41.1%     44.4%
      Advertising and promotion                  10.4%     14.3%     12.2%     16.0%
      Other selling and administrative           15.2%     13.2%     18.8%     16.1%
      Royalties, research and development        16.1%     15.1%     17.4%     15.6%
                                             --------- --------- --------- ---------
Earnings (loss) from operations                  -3.5%      2.2%     -7.3%     -3.3%
Micro Machines license rights and
      litigation settlement                        --     -43.8%       --     -24.7%
Interest expense                                 -0.4%     -0.1%     -0.5%     -0.1%
Other income (expense), net                       1.1%      0.7%      1.1%      0.9%
Income tax benefit                                1.1%     16.0%      2.5%     10.6%
                                             --------- --------- --------- ---------
Net earnings (loss)                              -1.7%    -25.0%     -4.2%    -16.6%
                                             ========= ========= ========= =========

</TABLE>


Net revenues decreased 24% to $40.0 million in the second quarter of 
1998 as compared to $52.4 million in the second quarter of 1997.  
Domestic sales decreased 29% to $25.4 million while international sales 
decreased 13% to $14.6 million.

The Company's worldwide sales of boys' toys decreased 62% in the second 
quarter of 1998 as compared to the second quarter of 1997.  Sales for 
the second quarter of 1997 were driven by the demand for Star Wars (TM)
toys created by the theatrical re-release of the Star Wars Trilogy.  The 
absence of a similar film event in the first half of 1998 led to 
comparatively lower worldwide sales of boys' toys.

The Company's worldwide sales of girls' toys increased 322% in the 
second quarter of 1998 as compared to the second quarter of 1997.  This 
increase was attributable to sales of the Company's Spice Girls (TM), 
Anastasia (TM) and Pound Puppies (R) product lines.




Net revenues decreased 24% to $70.3 million in the six months ended June 
30 ,1998 as compared to $ 93.0 million in the six months ended June 30, 
1997.  Domestic sales for the same period decreased 31% to $45.9 million 
while international sales decreased 7% to $24.4 million.

The Company's worldwide sales of boys' toys decreased 63% in the six 
months ended June 30 ,1998 as compared to the six months ended June 30, 
1997.  The Company's worldwide sales of girls' toys increased 186% in 
the six months ended June 30 ,1998 as compared to the six months ended 
June 30, 1997.  The change in sales of boys' and girls toys was 
attributable to the same factors noted for the changes in the second 
quarter.

Gross margin decreased $8.2 million to $15.3 million in the second 
quarter of 1998 from $23.5 million in the second quarter of 1997.  The 
lower sales volume decreased gross margin by $ 5.5 million, and a 
decrease in the gross margin rate accounted for $ 2.7 million of the 
decrease.  The gross margin rate decreased to 38.2% in the second 
quarter of 1998 as compared to 44.8 % in the second quarter of 1997.  
The decrease in the gross margin rate was primarily attributable to a 
shift from full gross margin, promoted products to lower gross margin, 
non-promoted products.

Gross margin decreased $12.3 million to $28.9 million in the six months 
ended June 30, 1998 from $41.2 million in the six months ended June 
30,1997.  The lower sales volume decreased gross margin by $ 10.0 
million, and a decrease in the gross margin rate accounted for $ 2.3 
million  The gross margin rate decreased to 41.1% in the six months 
ended June 30, 1998, as compared to 44.4 % in the six months ended June 
30, 1997.  The change in the gross margin rate was primarily 
attributable to the same factor noted for the change in the second 
quarter.

Advertising and promotion expenses were $4.2 million, or 10.4% of net 
revenues in the second quarter of 1998, as compared to $7.5 million, or 
14.3% of net revenues in the second quarter of 1997.  For the six months 
ended June 30, 1998, these expenses were $8.6 million, or 12.2%, of net 
revenues as compared to $14.9 million, or 16.0%, in the six months ended 
June 30 ,1997.  The decrease in the advertising and promotion expenses 
was attributable to a reduction in  television advertising, trade show 
and product promotion expenses which was primarily due to the Company's 
shift in sales from promoted products to non-promoted products.

Other selling and administrative expenses were $6.1 million in the 
second quarter of 1998, as compared to $6.9 million in the second 
quarter of 1997.   For the six months ended June 30,1998, these expenses 
were $13.2 million, as compared to $14.9 million in the six months ended 
June 30, 1997.   The decrease in other selling and administrative 
expenses in the second quarter and the six months ended June 30, 1998 
was primarily related to lower personnel and legal costs.

Royalties, research and development expenses were $6.4 million, or 
16.1%, of net revenues in the second quarter of 1998 as compared to $7.9 
million, or 15.1%, of net revenues in the second quarter of 1997.  For 
the six months ended June 30, 1998, these expenses were $12.2 million, 
or 17.4%, of net revenues as compared to $14.5 million, or 15.6%, of net 
revenues in the six months ended June 30, 1997.  The increase in 
royalties, research and development expenses as a percentage of net 
revenues in the second quarter and the six months ended June 30, 1998 
was primarily attributable to higher royalty expenses, partially offset 
by reductions in research and development spending.  The reductions in 
research and development spending are primarily related to efficiencies 
associated with the Company's restructured product portfolio. In the 
third quarter of 1997, the Company discontinued all of the male action 
lines it introduced in 1996 and 1997, and all future male action 
properties under development in order to maximize the future value of 
the rights the Company was awarded to market small-scale toys for the 
next three Star Wars films and the classic Star Wars Trilogy.

During the second quarter of 1997, the Company acquired all outstanding 
rights to its line of miniature vehicles, playsets and accessories 
marketed under the Micro Machines (R) brand and settled related 
litigation.  In 1986, the Licensor of such rights ("the Licensor") 
licensed a concept to the Company that contributed to the origination of 
Micro Machines.  The Company had paid royalties to the Licensor on the 
majority of Micro Machine sales.  The settlement agreement eliminated 
all future royalty payments to the Licensor, effective after March 31, 
1997.  The agreement also ended litigation between the Company and the 
Licensor over past royalties claimed by the Licensor and the extent of 
the Licensor's rights in the Micro Machines brand.  The Company recorded 
a pre-tax charge to earnings of $22.9 million in the second quarter of 
1997 relating to this transaction.  Additionally, the Company 
capitalized $4.5 million, which is being amortized.

Interest expense and other income in the second quarter and the six 
months ended June 30, 1998 were relatively unchanged from the second 
quarter and the six months ended June 30, 1997, respectively.

The income tax benefit in the second quarter and the six months ended 
June 30, 1998 and 1997 reflects the quarterly application of the 
estimated annual rate based upon projected full year earnings. 

Many currently installed computer systems and software products, 
including several used by the Company, are coded to accept only two-
digit entries in the date code field.  Beginning in the year 2000 these 
date code fields will need to accept four-digit entries to distinguish 
21st - Century dates from 20th- Century dates.  As a result, computer 
systems and/or software used by many companies will need to be upgraded 
or replaced to comply with such "Year 2000" requirements.  

The Company's current information technology systems are not Year 2000 
compliant.  As a result, the Company has purchased new enterprise 
software, which accommodates forward century dating through the use of 
the Julian dating format.  The Company began a comprehensive phased 
implementation of the new software in late 1997.  The application 
development phase is in process and the data conversion phase also has 
begun.  The testing phase for the new software will begin in the fourth 
quarter of 1998.  The Company expects its new software to be operational 
and Year 2000 compliant in mid-1999.  As of June 30, 1998, the Company 
had incurred expenditures of $2.2 million in connection with this 
software implementation and expects to incur total expenditures of 
approximately $5.0 million to $6.0 million.  Although no assurances can 
be given, the Company believes that its new enterprise software will be 
operational prior to the year 2000.

The Company has performed a preliminary assessment of its material non-
information technology systems and, based upon this preliminary 
assessment, believes that these systems are Year 2000 compliant.

The Company has yet to determine if the information technology systems 
of the Company's customers, vendors and other third parties with whom 
the Company has material relationships, are Year 2000 compliant. The 
Company intends to contact these third parties during the third quarter 
of 1998 in order to assess their Year 2000 readiness. 

If the Company's information technology systems, its non-information 
technology systems, or the information technology systems of its 
material third-party business partners, are not Year 2000 compliant, it 
could have a negative impact on the Company's business, financial 
condition, and results of operations.  No contingency plans yet have 
been developed for these possibilities. 


Disclosure Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this
Form 10-Q Report, including, without limitation the statements under 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" are, or may be deemed to be, forward-looking statements within the 
meaning of the Private Securities Litigation Reform Act of 1995.  Such forward
looking statements involve known and unknown risks, uncertainties and other
important factors that could cause actual results, performance or achievements 
of results to differ materially from any future results, performance or 
achievements expressed or implied by such forward-looking statements.  Such 
risks, uncertainties and other important factors include among others: the
Company's dependence on timely development, introduction and customer acceptance
of continuing and new products (including those products to be developed under
the new Star Wars license); the continuing trend of increased concentration of
the Company's revenues in the second half of the fiscal year, together with the
increased reliance by retailers on quick response inventory management, which
increases the risk of the Company's underproduction of popular items, 
overproduction of less popular items and failure to achieve tight and compressed
shipping schedules; possible weakness of the Company's markets; the impact
of competition on revenues, margin and pricing; the effect of currency
fluctuations; other risks and uncertainties as may be disclosed from time to
time in the Company's public announcements; the gross national product in the
United States and other countries, which also influences demand for the
Company's products; customer inventory levels; and the cost and availability of
raw materials and changes in trade conditions regarding China.  All subsequent
written and oral forward looking statements attributable to the Company or
persons acting on behalf of one or both of them are expressly qualified in
their entirety by such Cautionary Statements.

Liquidity, Financial Resources and Capital Expenditures

Demand for the Company's products is greatest in the third and fourth quarters
of the year.  As a result, collections of accounts typically peak in the fourth
quarter and early first quarter of the following year. Due to the seasonality
of its revenues and collections, the Company's working capital requirements
and availability of working capital fluctuate significantly during the year.
The Company's seasonal financing requirements are usually highest during
the fourth quarter of each calendar year.

On April 1, 1993, the Company entered into a Loan and Security agreement with
Congress Financial Corporation.  On March 31, 1995, this original agreement
was amended and restated in full, including increasing the credit limit to
$40 million, with a provision to increase the limit to $60 million at the
option of the Company.  On December 19, 1997, the loan agreement was amended,
increasing the credit limit to $75 million and extending the term of the loan
agreement until December 2000 . Borrowing availability is determined by a
formula based on both accounts receivable and inventories. The current interest
rate is equal to prime with a LIBOR option. The Company also agreed to pay an   
unused line fee of 0.25% and certain management fees.  In consideration of this 
amendment, the Company paid loan fees of $750,000.  

During the six months ended June 30, 1998, the Company generated $27.1 million 
of cash from its operating activities primarily from the collections of  
accounts receivable.  As of June 30, 1998, the Company had cash and cash  
equivalents of $30.0 million.

Working capital was $79.6 million at June 30, 1998, as compared to $82.8
million at December 31, 1997 and $121.1 million  at June 30, 1997.  The 
ratio of current assets to current liabilities was 3.5 to 1.0 at June 30, 1998
as compared to 3.0 to 1.0 at December 31, 1997 and 5.7 to 1.0 at June 30, 1997.

On October 14, 1997, the Company entered into an exclusive, worldwide license
with Lucas Licensing Ltd. to make small-scale figures, vehicles, playsets and 
accessories for the next three Star Wars movies, and the Company's current
rights to market such small-scale toys based on the original Star Wars trilogy
were also included.  The licensing agreement calls for minimum commitments, 
primarily in the form of advance payments against future royalties, of $148.1 
million payable throughout the release schedule of the three new films.  The 
first payment is due upon the theatrical release of the first film, which is
anticipated to be in May, 1999.

The Company expects that its cash flow from operations, cash on hand and
borrowings under the extended credit arrangement will be sufficient to meet its
working capital and capital expenditure requirements and provide the Company
with adequate liquidity to meet its anticipated operating needs for the
foreseeable future.




Part 1.  Financial Information
Item 3. Quantitative and Qualitative Disclosures About Market Risk

        Not required.

















<PAGE>
Part II - OTHER INFORMATION

Item 1.  Legal Proceedings

Manufacturer Litigation

In January 1991, the Company, through its wholly owned subsidiary, Galco, 
filed a lawsuit in Hong Kong against Kader Industrial Co., Ltd. ("Kader"), 
alleging damages suffered by both Galco and the Company as a result of Kader's 
defective manufacturing of two lead doll items for the Company's Bouncin'
Babies toy line in 1990.  Kader filed counterclaims alleging breach of 17
individual contracts.  In August 1996, the trial court rendered a decision in
favor of Kader on the general issue of liability in this matter, including an
award of damages based on Kader's counterclaims which was approximately
$250,000, plus prejudgment interest.  In addition, the court awarded certain
litigation costs to Kader.  In March 1998, the Company settled all of the open
matters in this litigation.  The settlement will not result in any additional
material liabilities to the Company.

The Company is involved in various litigation and other legal matters which are
defended and handled in the ordinary course of business.  None of these matters 
is expected to result in outcomes having a material adverse effect on the 
Company's consolidated financial position or results of operation.


Item 6.  Exhibits and Reports on Form 8-K

            (a) Exhibits -  Exhibit 27 - Financial Data Schedule  

            (b) Reports on Form 8-K - None




























<PAGE>

Pursuant to the requirements 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.



                                                 GALOOB TOYS, INC.
                                                   (Registrant)



Date:     August 14, 1998                    By: /s/ Kathleen R. McElwee
                                             --------------------------
                                             Kathleen R. McElwee
                                             Senior Vice President
                                             and Chief Financial Officer