UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)  or (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934
                                       OR

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

For the Fiscal Year Ended December 31, 2000.
                                       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:    0-23696


                              RADICA GAMES LIMITED
             (Exact name of registrant as specified in its charter)

                                     BERMUDA
                 (Jurisdiction of incorporation or organization)

                       SUITE R, 6/FL. 2-12 AU PUI WAN ST.
                                FO TAN, HONG KONG
                    (Address of principal executive offices)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to section 12(g) of the Act:

                          Common Stock, Par Value $.01

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act.

                                      None

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

           Title of each class                 Amount Outstanding
           -------------------                 ------------------
      Common Stock, Par Value $.01                 17,564,297

Indicate by check mark 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
             -----       -----

Indicate by check mark which financial statement item the registrant has elected
to follow:

         Item 17         Item 18    X
                 -----            -----


<PAGE>


                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not Applicable

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not Applicable

ITEM 3.  KEY INFORMATION


SELECTED FINANCIAL DATA

      Set forth below is the selected  income  statement  and balance sheet data
for each of the three years in the period ended  October 31, 1998, of two months
in the period  ended  December 31, 1998 and of the two years in the period ended
December 31, 2000.  This summary should be read in conjunction  with  "Operating
and Financial  Review and Prospects" and the combined  financial  statements and
notes thereto included elsewhere in this document.

<TABLE>
<CAPTION>
                                                                                           TWO MONTHS ENDED
                                                                  YEAR ENDED OCTOBER 31,       DECEMBER 31,  YEAR ENDED DECEMBER 31,
                                                               1996        1997        1998        1998         1999         2000
                                                            -----------------------------------------------------------------------
                                                                      (IN  THOUSANDS, EXCEPT PER SHARE DATA AND MARGINS)
<S>                                                         <C>         <C>         <C>          <C>         <C>          <C>
INCOME STATEMENT DATA:
Net sales                                                   $ 47,535    $ 87,760    $ 155,618    $ 21,071    $ 133,522    $ 103,381
Cost of sales                                                 30,696      40,888       70,576      10,717       78,229       80,232
                                                            --------    --------    ---------    --------    ---------    ---------

Gross profit                                                  16,839      46,872       85,042      10,354       55,293       23,149
                                                            --------    --------    ---------    --------    ---------    ---------
Operating expenses:
  Selling, general and administrative                         11,752      14,403       27,788       3,657       28,049       32,273
  Research and development                                     1,699       2,099        3,710         730        6,036        5,210
  Acquired research and development                               --          --        1,500          --           --           --
  Depreciation and amortization                                1,594       2,278        3,423         612        4,956        5,427

  Restructuring charge                                            --          --           --          --           --        1,190
                                                            --------    --------    ---------    --------    ---------    ---------
Total operating expenses                                    $ 15,045    $ 18,780    $  36,421    $  4,999    $  39,041    $  44,100
                                                            --------    --------    ---------    --------    ---------    ---------

Operating (loss) income from continuing operations             1,794      28,092       48,621       5,355       16,252      (20,951)
Other income                                                     748         915          807         471        1,231        1,287
Share of loss of affiliated company                               --        (141)        (334)       (120)      (1,748)          --
Net interest (expenses) income                                  (165)        913        1,896         289        1,469          664
                                                            --------    --------    ---------    --------    ---------    ---------
(Loss) Income from continuing operations before
  income taxes and unusual item                                2,377      29,779       50,990       5,995       17,204      (19,000)
Unusual item                                                     709          --           --          --           --           --
                                                            --------    --------    ---------    --------    ---------    ---------
(Loss) Income from continuing operations
  before income taxes                                          3,086      29,779       50,990       5,995       17,204      (19,000)

Credit (Provision) for income taxes                              120        (193)         226        (176)        (149)         901
                                                            --------    --------    ---------    --------    ---------    ---------

                                                               (continued)
</TABLE>

                                       2

<PAGE>

<TABLE>
<CAPTION>
                                                                                           TWO MONTHS ENDED
                                                                  YEAR ENDED OCTOBER 31,       DECEMBER 31,  YEAR ENDED DECEMBER 31,
                                                               1996        1997        1998        1998         1999         2000
                                                            -----------------------------------------------------------------------
                                                                      (IN  THOUSANDS, EXCEPT PER SHARE DATA AND MARGINS)
<S>                                                           <C>          <C>        <C>         <C>         <C>         <C>
(Loss) Income from continuing operations
  after income taxes                                          $  3,206     $29,586    $ 51,256    $  5,819    $ 17,055    $(18,099)

Discontinued Operations:
  Loss from operation of pub poker business                     (1,712)         --          --          --          --          --
                                                              --------     -------    --------    --------    --------    --------

Net (loss) income                                             $  1,494     $29,586    $ 51,256    $  5,819    $ 17,055    $(18,099)
                                                              ========     =======    ========    ========    ========    ========
Net (loss) earnings per share from continuing operations      $   0.15     $  1.43    $   2.53    $   0.31    $   0.94    $  (1.03)

Effect of discontinued operations                                (0.08)         --          --          --          --          --
                                                              --------     -------    --------    --------    --------    --------
Net (loss) earnings per share - basic                         $   0.07     $  1.43    $   2.53    $   0.31    $   0.94    $  (1.03)
                                                              ========     =======    ========    ========    ========    ========

Weighted average number of shares                               21,439      20,761      20,240      18,883      18,144      17,608
Net (loss) earnings per share - assuming dilution             $   0.07     $  1.37    $   2.39    $   0.29    $   0.90    $  (1.03)
                                                              ========     =======    ========    ========    ========    ========

Weighted average number of shares and dilutive
  potential common stock used in computation                    21,439      21,636      21,488      20,094      18,979      17,608

STATISTICAL DATA:
Gross margin                                                      35.4%       53.4%       54.6%       49.1%       41.4%       22.0%
Operating margin                                                   3.8%       32.0%       31.2%       25.4%       12.2%      (20.3%)
Dividends per share                                                 --          --          --          --          --          --

BALANCE SHEET DATA (AT PERIOD END):
Working capital                                               $ 18,847     $48,860    $ 59,913    $ 65,776    $ 65,123    $ 42,540
Total assets                                                    42,725      79,449     113,521     108,190     122,174      99,394
Long-term debt                                                      --          --          --          --      10,946       5,473
Total debt                                                          99          --          --          --      13,809      12,901
Capital stock                                                      207         209         189         189         176         176
Shareholders' equity                                            31,813      61,593      79,839      85,735      86,062      67,388
</TABLE>

RISK FACTORS

      The shares of Common Stock of the Company involve a significant  degree of
risk.  Prospective  investors  should carefully  consider the following  factors
together  with the other  information  contained  or  incorporated  by reference
herein  prior to making any  investment  decision  regarding  the Company or its
securities.

RISKS OF MANUFACTURING IN CHINA

      The Company's  factory  location is in Southern China and its headquarters
are in Hong Kong, which is a Special Administrative Region of China.

      Risk of China Losing Normal Trade  Relations  ("NTR") Status or of Changes
in Tariff or Trade Policies.  The Company manufactures in China and exports from
Hong Kong and China to the United States and worldwide. Its products sold in the
United States are currently  not subject to US import  duties.  On September 19,
2000,  the US Senate  voted to  permanently  normalize  trade with China,  which
provides a favorable  category of US import duties. As a result of opposition to
certain  policies of the Chinese


                                       3

<PAGE>


government and China's growing trade surpluses with the United States, there has
been,  and in the future may be,  opposition  to the extension of NTR status for
China. The loss of NTR status for China, changes in current tariff structures or
adoption  in the United  States of other trade  policies  adverse to China could
have an adverse effect on the Company's business.

      Chinese Political,  Economic and Legal Risks. The success of the Company's
current and future  operations in China and Hong Kong is highly dependent on the
Chinese  government's   continued  support  of  economic  reform  programs  that
encourage  private  investment,  and  particularly  foreign private  investment.
Although the Chinese  government  has adopted an "open door" policy with respect
to foreign investment, there can be no assurance that such policy will continue.
A change in  policies  by the  Chinese  government  could  adversely  affect the
Company by, among other  things,  imposing  confiscatory  taxation,  restricting
currency conversion,  imports and sources of supplies,  or expropriating private
enterprises.  Although the Chinese  government has been pursuing economic reform
policies  for the past 15 years,  no  assurance  can be given  that the  Chinese
government  will  continue to pursue such policies or that such policies may not
be significantly  altered,  especially in the event of a change in leadership or
other social or political disruption.

      The  Company's  production  and shipping  capabilities  could be adversely
effected by ongoing tensions between the Chinese and Taiwanese  governments.  In
the event that Taiwan does not adopt a plan for unifying with China, the Chinese
government has threatened  military action against Taiwan. As of yet, Taiwan has
not indicated that they intend to propose and adopt a reunification  plan. If an
invasion were to occur,  Radica's supply of components from Taiwanese suppliers,
including  computer  processing  units  (CPUs),  could be cut  off,  potentially
limiting the  Company's  production  capabilities.  Invasion  could also lead to
sanctions or military  action by the US and/or European  countries,  which could
materially effect sales to those countries.

      China  does not  have a  comprehensive  system  of  laws.  Enforcement  of
existing  laws may be sporadic and  implementation  and  interpretation  thereof
inconsistent. The Chinese judiciary is relatively inexperienced in enforcing the
laws that exist,  leading to a higher than usual degree of uncertainty as to the
outcome of any  litigation.  Even where adequate law exists in China,  it may be
impossible to obtain swift and equitable  enforcement  of such law, or to obtain
enforcement of a judgment by a court of another jurisdiction.

      Dependence on Local Government.  The Company operates its factory in China
under agreements with the local government.  Many aspects of such agreements and
operation of the Factory are  dependent on the Company's  relationship  with the
local government and existing trade  practices.  The relationship of the Company
with the local  government  could be subject to  adverse  change in the  future,
especially  in the event of a change in  leadership or other social or political
disruption.

      Chinese Taxation.

      The Company paid  $20,300 in profits tax on the Joint  Venture in China in
2000, the second year it has paid tax in China. The Company has been granted 50%
relief from income tax through December 31, 2001 under the Income Tax Law of the
PRC, and will  therefore be taxed at 12% during this period.  After this it will
be taxed at the full rate of income  tax,  however,  the  Company  can apply for
extension  of the  reduced  rate and  intends to do so. In  addition,  under the
existing  processing   arrangement  and  in  accordance  with  the  current  tax
regulations in the PRC, manufacturing income generated in the PRC is not subject
to PRC income taxes.

                                       4

<PAGE>


      The PRC assess  tax on the  Company  based on two  separate  contracts:  a
Processing Agreement (PA) and a Joint Venture (JV) contract.  The JV contract is
a joint venture with the local  township that lasts through  August 12, 2024 and
tax is  payable  quarterly  based on tax  rates  determined  upon  entering  the
agreement. The tax on a PA is assessed on labor and raw material costs submitted
periodically to the PRC customs offices throughout the year.

      The Chinese  tax system is subject to  substantial  uncertainties  and has
been subject to recently enacted changes,  the interpretation and enforcement of
which are also uncertain.  There can be no assurance that changes in Chinese tax
laws or their  interpretation  or their application will not subject the Company
to substantial Chinese taxes in the future.

      Limited Infrastructure.  Electricity,  water, sewage,  telephone and other
infrastructure  are limited in the  locality of the  Factory.  In the past,  the
Company has experienced temporary shortages of electricity and water supply. The
Company has installed seven back-up  electrical  generators in the Factory which
can support it in the event of a power shortage.  There can be no assurance that
the infrastructure on which the Factory is dependent will be adequate to operate
the Factory successfully.

DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS

      The  Company's  operating  results  depend  largely upon the appeal of its
products to consumers. Consumer preferences are highly subjective, and there can
be no assurance that consumers will continue to find existing products appealing
or will find new  products  appealing.  Also,  the Company  continues to offer a
relatively  limited range of products that are all in the categories of games or
peripherals.  This  exposes  the  Company to the risks of any  narrowly  focused
business.  Changes  in  consumer  preferences  away from the  kinds of  products
offered by the Company could have an adverse effect on the Company.

      Some of the  Company's  products have been only  recently  introduced  and
although they may  experience  good initial sales growth,  there is no assurance
that such initial  success is  indicative  of  significant  future  sales.  As a
general  matter,  the  Company  expects  that the sales of these  products  will
eventually  decline.  The Company cannot predict how long the product cycle will
last for any  product.  In order to control  costs,  and take  advantage  of the
finite  shelf  space  available  to the  Company,  it will  also  need to delete
products from its line periodically.  The Company's  long-term operating results
will therefore  depend largely upon its continued  ability to conceive,  develop
and introduce new appealing products at competitive prices.

      Once a new product is conceived,  the principal steps to the  introduction
of  the  product  include  design,   sourcing  and  testing  of  the  electronic
components,  tooling, and purchase and design of graphics and packaging.  At any
stage in the process,  there may be  difficulties  or delays in  completing  the
necessary steps to meet the contemplated product introduction  schedule.  It is,
for  example,  common in new  product  introductions  or  product  revisions  to
encounter technical and other difficulties  affecting  manufacturing  efficiency
and,  at times,  the  ability to  manufacture  at all,  that will  typically  be
corrected  or  improved  over a  period  of time  with  continued  manufacturing
experience  and  engineering  efforts.  If one or  more  aspects  necessary  for
introduction  of  products  are not met in a  timely  fashion,  or if  technical
difficulties take longer than anticipated to overcome,  the anticipated  product
introductions will be delayed, or in some cases may be terminated.  Therefore no
assurances can be given that products will be introduced in a timely fashion.

      For most of the Company's  history,  electronic  handheld  games made up a
significant portion of the Company's overall sales. In 1998 and 1999, electronic
handheld games made up 77.1% and 65.7%,


                                       5

<PAGE>


respectively.  In  response  to the heavy  concentration  of sales  within  this
category,  Radica has worked to diversify its product lines. Electronic handheld
games accounted for 47.7% of sales in 2000.

      Much of the  Company's  expected  2001  peripherals  revenues are based on
steering wheels,  controllers and accessories developed for Microsoft's Xbox(TM)
and  Nintendo's  platforms,  expected  to  be  released  in  October  and  July,
respectively.  Delays  in the  introduction  of  these  platforms  could  have a
significant impact on the Company's  peripherals  revenue in 2001. There is also
no guarantee  that the Company will be able to create  peripheral  products that
work with the new platforms in time to meet the market.

      The Company  expects  2001 to be the first year of  significant  US market
penetration  for its  peripheral  products.  Potential  factors  such as intense
market  competition  and lack of response from the retailers and consumers could
have a negative impact on the product introduction in the US.

      Future products may utilize  different  technologies and require knowledge
of markets in which the  Company  does not  presently  participate.  Significant
delays in the  introduction  of, or the failure to  introduce,  new  products or
improved  products  would  have an  adverse  effect on the  Company's  operating
results.

NO ASSURANCE OF CONTINUED GROWTH

      There can be no assurance  that the Company will achieve  future growth in
net sales and net income or that it will be able to maintain its present  levels
of  net  sales  or  profitability.   The  Company's  current  business  strategy
emphasizes  the sale of a controlled  number of products,  while  representing a
more diverse range of products,  e.g.,  Sports games,  Heritage card games,  the
Girl Tech(R) line, Play TV(TM), game peripherals,  internet  accessories and ODM
products.

DEPENDENCE ON MAJOR CUSTOMERS

      Historically,  a  significant  portion  of the  Company's  sales  has been
concentrated  in a few  large  retail  customers.  See  Note 18 of  Notes to the
Consolidated  Financial Statements included herein. Most of the Company's retail
customers  operate  on a  purchase  order  basis and the  Company  does not have
long-term  contracts with its retail customers.  While management  considers the
Company's  relationships with its major retail customers to be good, the loss of
one or more of its major retail  customers  would have an adverse  effect on the
Company's results of operations.

DEPENDENCE ON SUPPLIERS AND SUBCONTRACTORS

      The Company is dependent on suppliers for the components and parts that it
assembles to produce its products.  The Company generally purchases the specific
LCDs or  semiconductor  chips for any  particular  product  model  from a single
supplier.  While the Company believes that there are alternative sources for all
of its supplies,  an interruption of the supply of LCDs,  semiconductor chips or
other supplies from a supplier could result in significant production delays.

      The Company also relies on outside manufacturers for production of some of
its  peripherals.  While the Company has moved the  majority of this  production
into its own Factory, manufacturer delays or shut downs could have a significant
impact on sales of peripherals in 2001.


                                      6

<PAGE>


CONCENTRATED MANUFACTURING FACILITIES

      A disruption  of  operations  at the Factory due to fire,  labor  dispute,
dispute with the local government or otherwise,  would have an adverse effect on
the Company's results of operations. In such event, the Company believes that it
could  partially  mitigate the effect of a disruption by  increasing  the use of
subcontractors  to assemble its products,  but there can be no assurance that it
would be able to do so. In addition, the Company's manufacturing  facilities are
dependent on the Company's relationship with the local government.

NO ASSURANCE OF SUCCESS IN NEW BUSINESS

      In  order to  sustain  growth,  Radica  intends  to  expand  into  related
businesses,  including  Original  Design  Manufacturing  ("ODM") of products for
third parties.  Until 1999, Radica had only been successful in developing an ODM
relationship  with  Hasbro.  During  the past  year,  Radica  has  been  able to
successfully  enter into an ODM agreement  with Konami and  Shinsedai  Co., Ltd.
("SSD"),  and is also currently  manufacturing  Othello product for Mattel.  The
Company intends to maintain  relationships  with its existing ODM partners while
continuing to pursue new partners.

NO ASSURANCE OF CONTINUED ODM BUSINESS

      The  Company's  contract  with the Hasbro  Games Group can be ended on 180
days  notice;  the  Company's  contracts  with  Konami  and  SSD,  have  similar
termination  clauses.  There  can be no  guarantee  then  such  business  can be
retained  indefinitely.  Loss of  such  business  would  materially  effect  the
Company's revenues.

DEPENDENCE ON KEY PERSONNEL

      The success of the Company is  substantially  dependent upon the expertise
and  services of its senior  management  personnel.  The loss of the services of
senior executives would have an adverse effect on the Company's business.

SEASONALITY

      The Company  experiences a significant  seasonal  pattern in its operating
results and working capital  requirements.  The Company typically generates most
of its sales in the third and fourth  quarters of its fiscal year,  prior to the
traditional  gift season.  The Company expects this seasonal pattern to continue
for  the  foreseeable   future  but  to  become  less  pronounced  as  retailers
increasingly sell its products year round and ODM orders increase. The Company's
operating  results may also fluctuate  during the year due to other factors such
as the timing of the  introduction  of new  products.  The  market  price of the
Common  Stock  may  be  subject  to  significant  fluctuations  in  response  to
variations in quarterly  operating  results and other factors.  See Exhibit 12.1
Statement re Selected Quarterly Financial Data included herein.

COMPETITION

      Both the games and  peripherals  businesses  are highly  competitive.  The
Company  currently faces direct  competition from a number of other producers of
handheld  electronic  games and  peripherals,  the barriers for new producers to
enter into the Company's markets are relatively low and the Company expects that
it will  face  increased  competition  in the  future.  Some  competitors  offer
products at lower prices,  are better  established in the toy and games industry
and are larger than the Company. In addition, with respect to ODM manufacturing,
the Company competes with a number of substantially  larger and


                                       7

<PAGE>


more  experienced  manufacturers.  As  the  Company  enters  other  markets  and
businesses, it expects to face new competition.

INTELLECTUAL PROPERTY RISKS

      From time to time,  other companies and  individuals may assert  exclusive
patent,   copyright,   trademark  and  other  intellectual  property  rights  to
technologies  or  marks  that  are  important  to the  electronic  handheld  and
mechanical games industry generally or to the Company's  business  specifically.
The  Company  will  evaluate  each  claim  relating  to  its  products  and,  if
appropriate,  will seek a license to use the protected technology.  There can be
no assurance  that the Company will be able to obtain  licenses to  intellectual
property  of third  parties on  commercially  reasonable  terms,  if at all.  In
addition,  the Company  could be at a  disadvantage  if its  competitors  obtain
licenses  for  protected  technologies  on more  favorable  terms  than does the
Company.  If the  Company  or its  suppliers  are  unable to  license  protected
technology used in the Company's products,  the Company could be prohibited from
marketing  those  products  or may have to  market  products  without  desirable
features.  The  Company  could  also incur  substantial  costs to  redesign  its
products  or to defend  any legal  action  taken  against  the  Company.  If the
Company's products should be found to infringe protected technology, the Company
could be enjoined from further  infringement  and required to pay damages to the
infringed  party.  Any of the  foregoing  could  have an  adverse  effect on the
results of operations and financial position of the Company.

PRODUCT LIABILITY

      Historically,  the Company has had only a minor  experience  of complaints
relating to injuries or other damages caused by its products. However, in recent
years the  Company  has  introduced  products  that  involved  more  active play
including its baseball and golf games.  In fiscal 2000,  the Company  received a
number of  consumer  complaints  that bats used in the  baseball  game  could be
broken resulting in a projectile striking a game participant.  The Company is in
the process of recalling the bats for replacement  with a reengineered  bat. The
Company could be exposed to claims for damages in these or other  circumstances,
some or all of which may not be covered by insurance.

TAXATION

      The  Company  cannot  predict  whether its tax rates will remain as low as
they  have  been  in  the  past  as  tax  regulations  and  the  application  or
interpretation  thereof in the various  jurisdictions  within  which the Company
operates are always subject to change.  See "Item 4.  Description of Business --
Taxation of the Company and its Subsidiaries".

COPY PRODUCT

      On occasion in the electronic games and peripherals industries, successful
products are  "knocked-off" or copied.  While the Company strives to protect its
intellectual  property there can be no guarantee that knock-offs will not have a
significant effect on business.

BAD DEBTS AND RETURNS

      While the  Company  does full  credit  checks on all of its  customers  it
cannot guarantee that any customer will not default on a payment of debt. Such a
default could have a significant effect on the Company's results. It is industry
practice for  retailers to hold back payments on slow moving stock or to request
markdowns or returns on such stock. It is the Company's policy to only take back
defective product and while the Company believes it will be able to enforce this
policy under normal industry


                                       8

<PAGE>


conditions,  it may not be  possible to enforce  this  policy in all cases.  The
peripherals  markets  generally  experiences  a  higher  rate of  defective  and
overstock returns than the electronic and mechanical game market does. Currently
all defective peripherals are returned to the manufacturer for credit.

CONTROL BY EXISTING SHAREHOLDERS

      The Company's largest  shareholders  (see "Item 7. Major  Shareholders and
Related Party  Transactions -- Control of  Registrant")  including Mr. Robert E.
Davids,  Vice Chairman of the Company,  and a group that consists of Dito Devcar
Corporation and certain related  persons,  a group that consists of RAD Partners
1999 LLC and certain related persons,  and the Hansen Trust, own beneficially in
the aggregate a majority of the  outstanding  Common  Stock.  Assuming that they
were in  agreement,  such  persons  would have the power to elect the  Company's
directors and to approve or disapprove all other matters requiring shareholders'
approval regardless of the vote of any other shareholders.

ENFORCEABILITY OF CIVIL LIABILITIES

      The Company is a Bermuda holding company, and a substantial portion of its
assets are  located  outside  the United  States.  In  addition,  certain of the
Company's  directors  and officers  and certain of the experts  named herein are
resident outside the United States (principally in Hong Kong, the United Kingdom
and the People's  Republic of China),  and all or a  substantial  portion of the
assets of such  persons are or may be located  outside the United  States.  As a
result, it may not be possible for investors to effect service of process within
the United States upon such persons,  or to enforce  against them or the Company
judgments  obtained  in the  United  States  courts  predicated  upon the  civil
liability  provisions of the United States  securities laws. Among other things,
the Company  understands that there is doubt as to the enforceability in Bermuda
and Hong Kong,  respectively,  in original actions or in actions for enforcement
of judgments of United States courts,  of civil  liabilities  predicated  solely
upon the United States securities laws.

SHARES ELIGIBLE FOR FUTURE SALE

      At December 31, 2000,  the Company had  17,564,297  shares of Common Stock
outstanding.  The  Company  estimates  that most of such  shares  were sold in a
registered  offering or in a  transaction  under Rule 144,  and  therefore  such
shares  (other than any shares  purchased  by  "affiliates"  of the Company) are
tradable   without   restriction.   The  remaining   shares  owned  by  existing
shareholders  are  restricted  securities  under the  Securities Act of 1933, as
amended (the  "Securities  Act") and may be sold only pursuant to a registration
statement  under  the  Securities  Act  or  an  applicable  exemption  from  the
registration  requirements of the Securities Act, including Rule 144 thereunder.
Most of these restricted shares are currently eligible for sale pursuant to Rule
144,  subject to the  limitations  of such rule.  In  addition,  the Company has
granted to Mr.  Davids and the Hansen  Trust  certain  registration  rights with
respect to their  shares.  (See "Item 7. Major  Shareholders  and Related  Party
Transactions -- Interest of Management in Certain  Transactions") Mr. Davids has
exercised his registration rights for all his outstanding shares. No predictions
can be made as to the effect,  if any,  that market  sales of shares by existing
shareholders or the availability of such shares for future sale will have on the
market price of Common Stock prevailing from time to time. The prevailing market
price of Common  Stock could be  adversely  effected  by future  sales of Common
Stock by existing shareholders.


                                       9

<PAGE>


ITEM 4.  INFORMATION ON THE COMPANY

DESCRIPTION OF BUSINESS

      Radica Games Limited ("the  Company")  manufactures  and markets a diverse
line of electronic entertainment products including handheld and tabletop games,
high-tech  toys,  video  game  controllers  and  peripherals.   The  Company  is
headquartered  in Hong Kong at the address set forth on the cover of this report
and  manufactures  its  products in its factory in southern  China.  The Company
markets its  products  through  subsidiaries  in the United  States,  the United
Kingdom,  Canada and Hong Kong. Its largest market is in the United States where
in  2000 it had  the  third  largest  market  share  in  handheld  and  tabletop
electronic  games according to the NPD Group,  Inc., the primary source for such
industry data. In the United Kingdom,  the Company's  subsidiary has the largest
market share of the video game controller market among third-party manufacturers
according to industry data source, Chart Track.

      The Company has operated as a manufacturer of games since 1983, starting a
small  operation in Hong Kong providing  souvenir casino games for the Las Vegas
market  including  mechanical  bank  slot  machines.  Radica  expanded  into the
electronic  game  business  setting  up  a  factory  in  China  in  1991  and  a
distribution  operation  in  the  United  States  in  1992.  The  business  grew
substantially  from that point and the Company  became the  leading  supplier of
casino  type  electronic  handheld  games in the U.S.  market with games such as
Video Poker and Video Blackjack.  In 1994 the Company went public and its shares
began trading on the NASDAQ exchange under the RADA symbol.

      In 1995 Radica began to diversify  its product line into other  electronic
handheld and tabletop game areas. The Company began to offer heritage games such
as  Solitaire,  Hearts and Gin Rummy,  and sports  games such as its World Class
Golf(TM) and Football.  In addition to the casino and heritage games that helped
build the company,  Radica  offers a broad line of  electronic  games  including
virtual fishing games such as Sport Bass Fishin'(TM), virtual hunting games such
as  Buckmasters(R)  Deer  Huntin'  II(TM),  a line of games  based on popular EA
SPORTS(TM) products,  NASCAR(R) and Harley-Davidson(R) licensed games, and other
sports games such as the Radica Rock(TM) virtual rock climbing game.

      Radica's  line of fishing  games feature  motion-sensing  technology  that
allows the player to use the games as a rod and reel.  The player  casts,  feels
the fish  bite,  sets the hook  with a jerk,  and  reels in the fish with a real
handle. This product started an industry trend in creating virtual reality games
where the product  provides  the feel of the real sport.  This is  delivered  by
uniquely realistic game shapes, motion sensors and tactile feed back. An example
of this is the Company's new virtual puzzle game,  eLabyrinth.  Like the classic
wooden  labyrinths,  you have to  navigate a ball  through a maze  riddled  with
holes. Motion sensors in the game mean you just tilt the game left and right and
up and down to keep your virtual ball out of the traps. And our virtual maze has
20  different  levels,  trap doors and  moving  staircases,  quicksand  and evil
spiders and ants for an added challenge.

      In 2000, Radica introduced NASCAR(R) I-Racer(TM).  A full headset complete
with headphones produced 3D graphics and digital dimensional sound for a virtual
reality experience.  The steering wheel provides vibration feedback.  Radica has
announced  the  introduction  of Air Force  iCombat  in 2001.  The same heads up
display and full headphones  create the sights and sounds of air-to-air  combat.
The game features motion sensors and vibration feedback in the joystick.

      The Company  continues to pursue licensed  properties and added the Tetris
license to the Radica line for 2001.  With over 50 million  fans,  Tetris is the
world's  most  popular  and best  selling  video  game of all  time.  Radica  is
introducing two versions of Tetris,  one in the mass market and a second game in


                                       10

<PAGE>


our  specialty  channel.  Both  games  feature  classic  Tetris  play with added
features such as backlighting and head to head play through an IR link.

      Radica  has  introduced  Radica   PlayTV(TM)  games  featuring   XaviX(TM)
technology.  The technology  provides  consumers with easy-to-use  PlayTV games,
which are freestanding devices that plug directly into the TV and use the screen
as the display. This single-chip, multi-processor integrated circuit is designed
to  generate  high-quality  graphics  and  sound  on a  television  set.  PlayTV
Baseball,  Ping Pong, and Buckmasters(R)  Huntin' shipped the last half of 2000.
Radica is  expanding  this line of product  in 2001 with  PlayTV  Bass  Fishin',
PlayTV Snowboardin' and PlayTV Card Night.

      In 2001 Radica will  introduce  Skannerz.  Targeting  boys 7-12,  Skannerz
utilizes  UPC  scanner  technology  to  create a fun,  collectible-driven  game.
Players use  Skannerz to scan the UPC code of any  consumer  product to download
monsters,  magic potions and weapons to use in battle. Each game unit includes a
comic book and collectible poster.

      Girl  Tech(R),  was  created to design,  manufacture  and market  personal
electronics  for  girls  ages  8-12.  Girl  Tech(R)  is  dedicated  to  creating
technology  enhanced toys designed with girls' play patterns and  preferences in
mind and that  address  issues  that are  important  to them such as privacy and
communication. Girl Tech's products and services are tied by the common theme of
encouraging  girls'  to have  fun  with  the  use of  technology.  The web  site
(www.girltech.com)  currently  receives  almost 75,000 hits per month from girls
from over 85 countries.

      In June of 1999,  Radica  announced the acquisition of Leda Media Products
Limited, now called Radica UK Limited ("Radica UK"), a UK company that, with its
Gamester  brand,  is a leader in video game  controllers  in  Europe.  Radica UK
brings  Radica into a new market that is closely  aligned with  handheld  games.
Controllers are handheld devices that plug into video games such as Nintendo and
Sony manufacture.  They provide the control of the game as a peripheral  device.
Included in this range are game pads,  steering  wheels,  memory cards and other
accessories used to enhance game play and performance.  Radica UK is the current
leader among third-party companies in the UK and has a strong position in Europe
as well.  Radica will begin  shipping and selling the product line to the United
States  and  Canada  during  the  second  half of 2001 and has moved most of the
manufacturing  of  controllers  into  its  factory  in  China.  Radica  recently
introduced  its two new  peripherals,  Dual  Force(TM)  2 Racing  Wheel and Dual
Force(TM) 2 Controller to coincide with the launch of Sony's PlayStation(TM)2.

      The Company also undertakes Original Design Manufacturing  ("ODM") for the
Hasbro Games Group,  producing  well-known  electronic versions of games such as
Yahtzee(TM), Trivial Pursuit(TM) and Monopoly(TM).  During 2000 the Company also
undertook ODM products for Konami Japan,  producing the "Beat Mania" controller,
Mattel,  producing Othello handheld games in the US market,  Tsukuda,  producing
Othello  handheld games for the Japanese market and Epoch,  producing  XaviX(TM)
Ping Pong and Baseball games.

      THE   INFORMATION   IN  THIS   ANNUAL   REPORT  ON  FORM   20-F   CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL  RESULTS  TO DIFFER  MATERIALLY  FROM  PROJECTED  RESULTS  AS A RESULT OF
VARIOUS FACTORS. FORWARD-LOOKING STATEMENTS INCLUDE ESTIMATES OF NEW PRODUCTS TO
BE  INTRODUCED  BY THE COMPANY IN THE  FUTURE,  STATEMENTS  ABOUT THE  COMPANY'S
BUSINESS  STRATEGY AND PLANS,  STATEMENTS  ABOUT THE  ADEQUACY OF THE  COMPANY'S
WORKING CAPITAL AND OTHER CAPITAL  RESOURCES,  AND IN GENERAL  STATEMENTS HEREIN
THAT ARE NOT OF A HISTORICAL NATURE. THE FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER  MATERIALLY FROM PROJECTED  RESULTS INCLUDE THE RISKS OF MANUFACTURING
IN CHINA, DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS,


                                       11

<PAGE>


DEPENDENCE ON MAJOR CUSTOMERS,  COMPETITION AND THE OTHER RISK FACTORS WHICH ARE
DESCRIBED HEREIN UNDER "ITEM 3. KEY INFORMATION -- RISK FACTORS".

BACKGROUND

      The Company  completed an Initial Public Offering (IPO) in May 1994. Prior
to the IPO, the principal  shareholders  of the Company  conducted the Company's
business through two separate,  jointly owned companies  (Radica Limited,  which
manufactured  the Company's  products,  and Radica USA,  which  distributed  and
currently  distributes  products  in the  United  States)  and  through  a third
company,  Disc Inc., that was solely owned by Robert E. Davids, Vice Chairman of
the Company,  which provided  certain design and engineering  services to Radica
Limited ("Radica HK"), and now provides similar services to Radica China Limited
("Radica China") and Radica Games Limited ("Radica Games").

      Radica  HK was  established  in Hong  Kong in  September  1983 by James J.
Sutter  and John N.  Hansen and  originally  sold two  models of  souvenir  slot
machine banks.  In 1988,  Robert E. Davids joined the Company as General Manager
and  led the  Company's  development  of one of the  first  souvenir  electronic
tabletop  poker games.  In 1989,  Mr. Davids became an equal  shareholder in the
Company with Mr. Sutter and Mr. Hansen.  In 1991, the Company  introduced one of
the first handheld electronic poker games.

      Radica initially had its products assembled in Hong Kong by subcontractors
and sold through  distributors in the United States.  Between 1988 and 1990, the
Company brought certain of its production  activities in house. At the beginning
of 1992, the Company opened a factory in Tai Ping, China,  moving its production
activities  from Hong Kong to southern  China.  In April 1992, Mr.  Sutter,  Mr.
Hansen and Mr.  Davids  established  Radica USA to take  greater  control of the
distribution  of the Company's  products in the United States.  The Company made
over 70% of its sales through Radica USA in fiscal 2000 (excluding ODM sales).

      In  December  1993,  Radica  Games was  incorporated  in  Bermuda  and was
established as a holding  company of Radica HK. Prior to the closing of the IPO,
Radica Games acquired all of the outstanding common stock of Radica USA from Mr.
Davids,  Mr.  Sutter and Mr.  Hansen in exchange  for  additional  shares of the
Company's common stock and acquired all of the outstanding  common stock of Disc
from Mr. Davids. In May 1995 the Company opened its purpose built factory in Tai
Ping,  China on a 3.7 acre site under the terms of a  cooperative  joint venture
agreement with the local government.

      In April 1998 the Company acquired the assets and business of Girl Tech(R)
from KidActive, LLC.

      In June 1999, the Company acquired Radica UK, formerly Leda Media Products
Limited, a leading supplier of video game controllers in the United Kingdom.

      During the fourth quarter of 1999, the Company commenced construction of a
$3 million  extension  to its  factory  which will add  202,000  square  feet of
factory space and 178,000  square feet of dormitory  space allowing for up to an
additional  3,000 employees to be housed.  As a result of the drop in demand for
Radica product in the US during 2000,  work towards  completion of this addition
has been  postponed and will  continue  when market  demand  warrants use of the
additional space.

BUSINESS STRATEGY

      The Company  intends to provide a broad line of electronic  and mechanical
games, video game controllers and peripherals.  In order to provide  innovative,
high quality games at low prices, Radica


                                       12

<PAGE>


employs a strategy of product  design in the United  States and United  Kingdom,
where a substantial  majority of the Company's products are sold,  combined with
engineering   and  low  cost   materials   procurement  in  Asia  and  low  cost
manufacturing in China, where the Company operates its Factory. The Company also
consults a select group of outside inventors for product concepts. The Company's
current  products and planned products are intended to reach retail price points
covering  the range of large  volume gift  products.  The  Company  historically
focused  primarily  on products  that  combine  knowledge  of the casino  gaming
industry with experience in new product introduction, electronic game design and
low cost  manufacturing.  Since 1996 the  Company  has placed  more  emphasis on
non-casino  games and with the  acquisition  of Radica UK in 1999,  has expanded
beyond  electronic  games,  to  include a line of video game  joypads,  steering
wheels,  memory cards and other assorted  accessories.  The Company also designs
and  manufactures  electronic  games and  peripherals on behalf of third parties
under ODM  agreements.  The games and  peripherals  are generally based on third
party games.

      To provide differentiation between high-end and low-end markets,  products
are packaged under the name  'RADICA:(R)' for the low-end mass markets and under
the name 'Radica Gold' for the more  exclusive  high-end  markets.  Girl Tech(R)
products are packaged under the name of "Girl Tech(R)".  Video game  peripherals
are packaged  under the  Gamester(R)  name.  Radica's line of products using the
XaviX(TM) technology are packaged under the name of Connect TV(TM) in Europe and
Play TV(TM) in the US and other world markets.

      Radica believes its ability to develop and introduce  innovative  products
is enhanced by its established  innovative product design and engineering in the
United  States and the United  Kingdom,  and its multiple  channel  distribution
capabilities,  which  allow  for close  customer  contact.  Large  manufacturing
volumes and low cost production  activities in China have allowed the Company to
keep its prices competitive. In addition, electronic parts and subassemblies can
be purchased efficiently and at low cost in Asia.

      The Company has  expanded  and  continues  to expand  distribution  of its
existing  products,  both inside and outside the United States.  As part of this
goal,  Radica Canada and a predecessor of Radica UK were  established in 1995 to
distribute  products in these markets.  UK distribution was assumed by Radica UK
upon its  acquisition  by the  Company in 1999.  The  Company  intends to pursue
related  business   opportunities   that  leverage  off  the  Company's  product
development  expertise to access new  markets.  Related  business  opportunities
include ODM for other companies, of which the manufacturing for the Hasbro Games
Group is an example.


                                       13

<PAGE>

PRODUCTS

         At the end of fiscal year 2000, Radica's principal products by product
line were as follows:

<TABLE>
<CAPTION>
FISHING                                     HUNTING                                   SPORTS
-------                                     -------                                   ------
<S>                                         <C>                                       <C>
Ultimate Bass Fishin'(TM)                   Buckmaster(R)Deer Huntin'(TM)             Nascar(R)Speedzone(TM)
Sport Bass Fishin'(TM)                      Buckmaster(R)Bow Huntin'(TM)              Tiger Woods Ultimate Golf(TM)
Pro Guide Bass Fishin'(TM)                  Buckmaster(R)Deer Huntin'(TM)II           Tiger Woods Tournament Golf(TM)
                                                                                      EA Madden Football(TM)
                                                                                      EA No Hitter(TM)Baseball
                                                                                      Nascar(R)I-Racer(TM)
                                                                                      Radica  Rider(TM)
                                                                                      Tiger Woods Jr. Golf(TM)
                                                                                      Sports Nut(TM)

HERITAGE                                    CASINO                                    GIRL TECH(R)
--------                                    ------                                    ------------
Solitaire                                   Pocket Poker(R)                           Password Journal(R)
Pocket Solitaire(TM)                        Pocket Blackjack 21(R)                    Keep Safe Box(TM)
Pocket Othello(TM)                          Pocket Slot(TM)                           Laser Chat(TM)
Pocket Checkers(TM)                         Jackpot Slot(TM)                          Palm Reader(TM)
Pocket Tic-Tac-Toe(TM)                      Color Poker(TM)                           Password Phone(TM)
                                            Draw Poker(TM)

<CAPTION>
PLAY TV                                             ODM                               PERIPHERALS (PLAYSTATION)
-------                                             ---                               -------------------------
<S>                                                 <C>                               <C>

Radica Play TV Baseball(TM)                         Connect Four(TM)                  Dual Force Joypad
Radica Play TV Ping Pong(TM)                        Battleship(TM)                    PS2 Dual Force Joypad
Radica Play TV Opus(TM)                             Yahtzee(TM)                       PS2 Dual Force Steering Wheel
Radica Play TV Buckmaster(R)Huntin'(TM)             Hangman(TM)                       PS2 Pro Racer
                                                    Sorry(TM)                         PS2 Light Gun
                                                    Perfection(TM)                    PS2 Speaker System
                                                    Trivial Pursuit(TM)               iRacer Racing Controller
                                                    Monopoly(TM)                      Playstation Controller
                                                    Beat Mania(TM)                    Dual Force Controller
                                                    Epoch Ping Pong                   Dual Force Steering Wheel
                                                    Othello(TM)                       Assorted Color Memory Cards

PERIPHERALS (NINTENDO 64)                           PERIPHERALS (PC)                  PERIPHERALS (HANDHELD)
-------------------------                           ----------------                  ----------------------
N64 Steering Wheel with Rumble                      Dual Force Steering Wheel         Gameboy Powerpack
N64 Tremor Pak + 1MB Memory                         Dual Force Controller             Gameboy Spotlights
                                                    USB 99 Wheel                      Gameboy Link Lead
                                                    USB Pro Racer                     Gameboy Memory Card
                                                                                      Gameboy Tremor Pak
                                                                                      Gameboy Essentials
</TABLE>

      In addition the Company has a number of discontinued  lines, which, unless
the market warrants reintroduction, the Company only intends to continue selling
so long as inventories exist. The Company


                                       14
<PAGE>


intends  to  introduce  approximately  88  new  models  in  2001  (including  46
peripherals products).  In fiscal 2000, the Company's products had retail prices
ranging from $5 to $500.

      The following table sets forth a breakdown of the Company's sales by major
product category for the last four fiscal years.

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                            1997                                                1998
                       % OF NET         NET         UNITS     NO. OF      % OF NET         NET         UNITS     NO. OF
PRODUCT LINES         SALES VALUE   SALES VALUE      SOLD     MODELS     SALES VALUE   SALES VALUE      SOLD     MODELS
---------------       -----------   -----------    ------     ------     -----------   -----------     -----     ------
                                          (in thousands)                                   (in thousands)
<S>                      <C>          <C>          <C>           <C>        <C>           <C>          <C>          <C>

Handheld                  81.8%       78,796        9,196        132         77.1%        122,902      11,903       110
Girl Tech                 --              --           --         --          0.1%            145          11         2
ODM                       18.2%       17,487        3,643         12         22.8%         36,322       6,144        20
Total                    100.0%       96,283       12,840        144        100.0%        159,369      18,058       132
</TABLE>

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                            1999                                                2000
                       % OF NET         NET         UNITS     NO. OF      % OF NET         NET         UNITS     NO. OF
PRODUCT LINES         SALES VALUE   SALES VALUE      SOLD     MODELS     SALES VALUE   SALES VALUE      SOLD     MODELS
---------------       -----------   -----------    ------     ------     -----------   -----------     -----     ------
                                          (in thousands)                                   (in thousands)
<S>                       <C>          <C>          <C>           <C>        <C>         <C>           <C>         <C>
Handheld                  65.7%        87,775       8,667        100          47.7%      49,307        6,644       110
Play TV                   --               --          --         --           8.3%       8,561          289         4
Girl Tech                  5.6%         7,444         594          6          13.4%      13,897        1,211        12
ODM                       20.9%        27,897       6,109         22          18.6%      19,271        4,686        22
Peripherals                7.8%        10,406       1,871        139          11.9%      12,345        1,752       108
Total                    100.0%       133,522      17,241        267         100.0%     103,381       14,582       256
</TABLE>


      Radica  sells a broad range of  electronic  and  mechanical  handheld  and
tabletop  games  under the Radica  and Radica  Gold  brand  names.  These  games
simulate sports and recreational  activities,  such as fishing,  hunting,  golf,
baseball and snowboarding; casino games, such as blackjack, poker and slots; and
popular heritage games such as solitaire, checkers and crossword puzzles.

      During  1999,  Radica  introduced  its  Girl  Tech(R)  line of  electronic
products. The Girl Tech(R) line provides unique and innovative gadgets for girls
that utilize  technologies  such as the  electronic  voice  recognition  used in
Password  Journal(R)  and  Password  Door  Pass(TM).   Girl  Tech(R)'s  Password
Journal(R) was the highest selling youth electronic product in the United States
in 2000, according to the NPD Group.

      In June of 1999,  the  Company  acquired  Radica UK,  which  expanded  its
product portfolio to include game peripherals such as steering wheels,  joypads,
memory cards and video game accessories for Playstation, PlayStation 2, Nintendo
64, Nintendo Gameboy and PC Platforms.

      During 2000,  Radica  introduced  its Play TV(TM) line,  featuring the new
XaviX(TM)  technology  which  allows  users to plug  games  directly  into their
television set for display of the game contact on the screen  without  requiring
connection through a video game system.


                                       15

<PAGE>


NEW PRODUCT INTRODUCTION

      In fiscal 2001,  Radica intends to update its line of games by introducing
approximately 88 new games/accessories in the following  categories:  Handhelds,
with Radica  Fishing (2 games),  Radica  Sports (10 games),  Radica  Heritage (5
games),  Radica Action (6 game),  Radica  Hunting (2 games) and Radica Casino (3
games);  Girl  Tech(R) (7 games),  Play  TV(TM) (3 games)  and  Peripherals  (46
products).  The Company  believes  that its  strategy of offering  various  game
models  with  differing  features  enables  it to market its games to a wide age
range of consumers with different  tastes and financial  means. The Company will
also continue to provide its Radica Gold brand products to higher end retailers.

      In addition,  Radica  intends to introduce a Preschool line of products (4
games) during 2001.

      2000 vs. 2001 Line List (by category)

                                          2000               2001
                                          ----               ----
           Handheld                         62                 45
           Play TV                           4                  5
           Girl Tech                        10                  9
           Preschool                         0                  4
           Peripherals                      78                 46
                                           ---                ---
           TOTAL                           154                109

      The Company anticipates that new product introductions in fiscal 2001 will
be  concentrated  in the second and third  quarters of that year.  By the end of
fiscal 2001, the Company expects its product line to include  approximately  109
models,  of which 46 will be in  peripherals.  However,  it is possible that the
Company will determine not to proceed with any given product or that one or more
aspects  necessary  for  introduction  of the  products  in fiscal  2001 will be
delayed, which could delay or prevent certain anticipated product introductions.

LICENSING

      During  fiscal 2000,  Radica  engaged in several  licensing  agreements in
which Radica was given  permission to use the name,  logo,  game concept  and/or
license of a person, company or brand in exchange for a royalty fee.

      Among the  licensors  were  NASCAR  (NASCAR(R)  Racer(TM)  and  NASCAR (R)
Speedzone(TM)),  Tiger Woods (Tiger  Woods  Ultimate  Golf(TM),  Tiger Woods Tee
Time(TM) and Tiger Woods Tournament Golf(TM)), Electronic Arts (EA No Hitter(TM)
and EA Madden Football(TM)), Sloane Vision Unlimited, developers of Chicken Soup
for the  Soul  (Chicken  Soup for the  Soul(R),  Chicken  Soup  for the  Teenage
Soul(TM)),  Anjar Co,  developers  of Othello,  Buckmaster  (Buckmaster(R)  Deer
Huntin'(TM)   II  and   Buckmaster(R)   Elk   Huntin'(TM),   Buckmaster(R)   Bow
Huntin'(TM)), Hank Parker (Ultimate Bass Fishin'(TM), Pro Guide Bass Fishin'(TM)
and Sport Bass  Fishin'(TM)),  Elvis  Presley  Enterprises  (Elvis Slot) and the
Tetris Company (Tetris Lite).

      The Company  intends to  incorporate  some of these licenses into its 2001
product line and will pursue new licenses in instances where management feels it
will enhance the value and marketability of a particular product.


                                       16

<PAGE>


MANUFACTURING

      Radica's  manufacturing is generally  limited to IC chip bonding,  plastic
injection,  clamshell  production,  mold  manufacture,  surface mount technology
("SMT") and assembly  operations.  The Company orders customized  components and
parts from suppliers and uses  subcontractors  for more  complicated  operations
such as masking of the Company's  proprietary  software  onto the  semiconductor
chips used in its games,  LCD tooling and a  proportion  of tooling of molds for
its plastic parts, with majority of tools built in house.

      In 2000 the Company  assembled all of the Radica and Girl Tech(R) lines of
products  in order to  control  its  costs,  quality,  production  and  delivery
schedules.  Peripherals for Radica UK's markets were assembled both in-house and
by third party manufacturers during 2000. The Company intends to manufacture the
majority of the peripherals product in-house during 2001.

      The  Company's  products are not required to obtain any quality  approvals
prior to sales in the United States. The Company,  however,  is required to have
and has obtained CE approval,  Europe's  toy safety  standard,  for its products
sold in Europe.  The Company has been granted a Chinese toy quality license from
the Chinese Import and Export Commodity  Inspection Bureau, which is required of
toy and game  manufacturers  in China to export toys or games. In addition,  the
Company voluntarily complies with ASTM 963, a US toy safety standard.

      The Company  received renewal of its ISO 9001 quality  certification  from
Underwriters  Laboratory  on January  24,  2001.  The scope of the  registration
covers the design,  sales and distribution of electronic and  electro-mechanical
games and related gift products.

MANUFACTURING FACILITIES

      Radica  currently  manufactures  its products at its Tai Ping factory (the
"Factory") in Dongguan,  Southern China approximately 40 miles northwest of Hong
Kong. The Factory was constructed  with the cooperation of the local  government
according  to  the  Company's  design  specifications  on a 3.7  acre  site.  An
extension of the Factory  commenced in December 1999 to add 202,000  square feet
of factory space and 178,000  square feet of dormitory  space allowing for up to
an additional  3,000  employees to be housed.  The cost of  construction  of the
extension is approximately $3.0 million,  exclusive of manufacturing  equipment.
As a result of the drop in demand for Radica product in the US during 2000, work
towards  completion of this  addition has been  postponed and will continue when
market demand  warrants use of the  additional  space.  The unit capacity of the
Factory  depends on the  product  mix  produced.  In any event,  there can be no
assurance  that the  Company  will be able to operate at full  capacity  or have
sufficient sales to warrant doing so.

      In June, 1994 the Company entered into a joint venture  agreement  ("Joint
Venture  Agreement")  with the local  government  to operate  the  Factory.  The
Company funded the construction costs. Such amounts will be applied as a 30 year
prepaid  leasehold on the Factory.  Upon  commencement of production,  the local
government received a fixed annual fee as the joint venture partner.  The annual
fee is subject to increases every three years.

      The Company also manufactures  under a processing  agreement  ("Processing
Agreement") with the local government.  The Processing Agreement provides by its
terms that the local government will provide manufacturing facilities and supply
workers  to the  Company  and that the  Company  will pay a  management  fee and
processing  fee and certain other  charges.  The  management  fee is paid to the
local government and is based on a negotiated sum per worker at the Factory. The
processing  fee is based on


                                       17

<PAGE>


the value of raw  materials  shipped  into the Factory and the value of products
shipped from the Factory and is established in production agreements agreed upon
with local  government  officials.  The Company pays the processing fees through
the Bank of China in Hong  Kong and the funds  are then  placed in an  operating
account including other Company funds in China, all of which are used to pay the
costs of the  Factory.  In  practice,  the Company  operates  all aspects of the
Factory, including hiring, paying and terminating workers. Most of the Company's
factory workers are hourly employees and are provided room and board in addition
to their wages. In addition,  the Company bears all other costs of operating the
Factory,  including  utilities  and  certain  employee  social  welfare  charges
established by the local  government.  Many aspects of the Processing  Agreement
and operation of the Factory are dependent on the  Company's  relationship  with
the local  government and existing  trade  practices in addition to the terms of
the Processing  Agreement.  The Company believes that its relationship  with the
local government is good.

MATERIALS

      Major  components  used  in the  Company's  products  are  liquid  crystal
displays  ("LCDs"),  semiconductor  chips,  printed  circuit boards ("PCBs") and
molded plastic parts. The Company purchases LCDs, PCBs, and semiconductor  chips
from several suppliers,  although specific LCDs, PCBs or semiconductor chips for
any particular model are generally purchased from a single supplier. The Company
generally  provides six to nine months order  indications  to its  semiconductor
chip suppliers and must place firm orders a minimum of eight weeks in advance of
delivery.  This lead time in some cases  extends to twenty weeks when the market
is in short  supply.  The Company  generally  tries to maintain  only two months
supply of semiconductor  chips, which may constrain increased  production of its
products on short  notice.  The  Company  pays for most of its  materials  in US
dollars.

      The Company's  major  suppliers of electronic and mechanical  handheld and
tabletop  game  materials  in fiscal  2000  included  Epson  Hong  Kong  Limited
(semi-conductor  chips), GPI International  Limited (batteries),  Leader Printed
Circuit Boards Limited (PCBs), Li Seng Technology,  Ltd (semi-conductor  chips),
Lik Sun Printing Co. Limited  (printing),  Meise Label Printing Fty  (printing),
Onpress Printed Circuit Boards Limited (PCBs), Senmax Limited (keypads), Sunplus
Technology Co., Limited  (semiconductor chips), SSD Company, Ltd (semi-conductor
chips),  United Radiant  Technology  (HK) Limited (LCDs) and Wintek  Corporation
(LCDs).

      The  Company's  major  suppliers of  peripherals  in fiscal 2000  included
Berway  (steering  wheels  and  controllers),  PRT  (memory  cards)  and San Tai
Industrial Enterprises (game accessories).

SALES AND DISTRIBUTION

      Radica's  products  are  sold in 38  countries,  with  the  United  States
accounting  for over 70% of net sales in fiscal 2000  (excluding  ODM business).
The Company  sells its  products  directly to over 350 active  retailers  in the
United  States and to  approximately  29  distributors  worldwide.  The  Company
participates in the electronic data interchange ("EDI") program maintained by 15
customers including J.C. Penney's,  Sears, Target, Wal-Mart,  Kohl's and K-Mart.
In fiscal 2000, the largest customer of the Company, Wal-Mart, accounted for 17%
of net sales;  in addition  ODM work for the Hasbro  Games Group  accounted  for
17.2% of net sales.  The top five  customers  (excluding  ODM business)  were as
follows:


                                       18

<PAGE>


                                                % OF SALES
        CUSTOMER NAME                       FOR THE FISCAL YEAR
                                            1999           2000
                                            ----           ----
        1.  Wal-Mart (USA)                  18.2%          17.0%
        2.  Target (USA)                     7.7%           9.3%
        3.  K-Mart (USA)                     5.4%           5.0%
        4.  Kohl's (USA)                     4.2%           4.7%
        5.  Toys 'R' Us (worldwide)          4.5%           4.6%

      The following table sets forth certain of the Company's major customers in
2000, including distributors (alphabetical order).

<TABLE>
<CAPTION>
DEPARTMENT STORES        DRUG STORES                 MASS MERCHANDISERS        CATALOG SHOWROOMS
-----------------        -----------                 ------------------        -----------------
<S>                      <C>                         <C>                       <C>
Dayton Hudson            Arbor Drugs Inc.            Ames                      Argos
Dillards                 Eckerd Corporation          Army Airforce Exch.       Brookstone
Foley's                  Genovese Drugs              Bradlees                  Index
J.C. Penney's            London Drugs                Fred Meyer                Intermediates
John Lewis               Long's Drugs                K-Mart                    Littlewoods/Index
Kohl's                   Osco Drug                   Mervyns                   Sharper Image
Macy's                   Thrifty Payless Drug        QVC
Marshall Fields          Walgreens                   Shopko
Neimann Marcus                                       Target
Robinson's-May                                       Bust
Woolworth's                                          Wal-Mart
                                                     Woolworths
                                                     Zellers

<CAPTION>
                         SPECIALTY GIFT SHOP         CONSUMER                  GROCERY &
MAIL ORDER RETAILERS     OPERATORS                   ELECTRONICS STORES        CONVENIENCE STORES
--------------------     -------------------------   ------------------        ------------------
<S>                      <C>                         <C>                       <C>

Fingerhut                Bass Pro                    Best Buy                  Albertsons
Home Shopping Network    Caesar's World              Comat                     Emro Marketing
H. Schneider             Circus Circus               Dixon's                   Kroger
Wish Book                Dufferen Game Room Stores   Electronics Boutique      L&L Jiroch
Innovations              Spencer Gifts               Fry's                     M.W. Kasch
                         Zany Braining               KF Group (Tempo)          W.H. Smith
                                                     Radio Shack               Westfair Super Stores
</TABLE>

                                       19

<PAGE>

<TABLE>
<CAPTION>
TOY RETAILERS        SPORTING GOODS STORES          INTERNET RETAILERS      DISTRIBUTORS (RADICA)
-------------        ---------------------          ------------------      ---------------------
<S>                  <C>                            <C>                     <C>
xxx
Hamleys              Sports Authority               e-Toys.com              Agerex (Finland)
Kay Bee              Bass Pro Shops                 Amazon.com              Al Kawther (Egypt)
Toys'R'Us                                                                   Black Jack Int., S.A. (Panama)
                                                                            Concentra (Portugal)
                                                                            Creative Computers (Israel)
                                                                            CRG Toys (Costa Rica)
                                                                            Distribution Y Servicio D & S S.A. (Chile)
                                                                            Distribuidora Distoys C.A. (Venezuela)
                                                                            Distribuidora Liverpool S.A. (Mexico)
                                                                            Importadora Maduro S.A. (Panama)
                                                                            Irwin Pacific Pty, Ltd. (Australia)
                                                                            Lansay (France)
                                                                            Playthings Private Ltd. (Singapore)
                                                                            Popular de Juguetes (Spain)
                                                                            Prima Toys (South Africa)
                                                                            Semo Brasil Imp. Exp. E. Com. Ltda. (Brazil)
                                                                            The Oriental Trading Co. (Hong Kong)
                                                                            Universal Electronics (Lebanon)
</TABLE>

DISTRIBUTORS (PERIPHERALS)
Darmon Diffusion (France)            Infogrames Portugal (Portugal)
Infogrames Benelux (Netherlands)     Livewire Distribution Pty Ltd. (Australia)
Infogrames France (France)           Manta Co. (Poland)
Infogrames Israel (Israel)           Toptronics Oy (Finland)

      The Company has improved the quality of its distribution network by adding
new distributors in fiscal 1999, in Japan and France.  The acquisition of Radica
UK gave the Company the resources to move UK sales of Radica  product  in-house.
Subsequently,   Radica  terminated  its  distribution   agreement  with  its  UK
distributor in 1999.

      Radica's  distribution  operations use regional sales managers working for
the Company to manage  manufacturers  representatives  and brokers that sell its
products.  These manufacturers  representatives are not employees of the Company
and work on a commission basis.

      The Company's  customers normally provide  indications of interest,  which
may be  canceled  at any  time,  from  three to six  months  prior to  scheduled
delivery,   but  only  confirm  orders  eight  weeks  in  advance  of  delivery.
Accordingly  the Company  generally  operates  without a significant  backlog of
regular  orders,  however,  ODM  orders  tend to be  placed 3 months  or more in
advance.

      The Company does not sell any of its products on consignment  (except to a
limited extent in Hong Kong and China).  In certain  instances,  where retailers
are unable to sell the  quantity of products  which have been  ordered  from the
Company, the Company may, in accordance with industry practice, assist retailers
to enable them to sell such excess  inventory by offering  discounts,  accepting
returns and other concessions.  A portion of firm orders, by their terms, may be
canceled if shipment is not made by a certain date.

      The Company's  Radica,  Radica Gold and Girl Tech(R)  products  carry a 90
days consumer  warranty from the date of sale, and the Company  generally honors
warranty claims even after that period. The

                                       20

<PAGE>


Company's  peripheral  products carry a one year warranty from the date of sale.
In each of the last two years, warranty costs incurred have been less than 2% of
net sales.

PRODUCT DEVELOPMENT

      Radica's  engineering and  development  department has  approximately  120
staff worldwide.  The Company's product development starts with teams in Dallas,
Texas; San Rafael, California; and Hertfordshire,  England and continues through
to the engineering teams in Hong Kong and in the Dongguan  Factory.  The Company
has a formalized product development process that includes quarterly meetings of
its worldwide product  development and sales  departments.  In fiscal 1998, 1999
and 2000, the Company spent approximately $4,120,000,  $6,036,000 and $5,210,000
respectively,   on  research  and  development.   The  Company's   research  and
development  is heavily  oriented  toward  market  demand.  Based on its ongoing
contact with  consumers,  retailers and  distributors  worldwide,  the Company's
sales and  marketing  departments  seek to  understand  and assist  the  product
development teams in responding to consumer and retailer preferences.  The sales
department also targets certain retail price points for new products which drive
the  Company's  product   development,   with  designs,   features,   materials,
manufacturing and distribution all developed within the parameters of the target
retail price.

SEGMENT INFORMATION

      See Note 22 of the Notes to the Consolidated Financial Statements included
herein.

ORIGINAL DESIGN MANUFACTURING

      In 1995,  the Company was successful in  establishing a relationship  with
the Hasbro  Games Group to design and  manufacture  product  for them.  In April
1999, the Company signed two new  agreements  with Hasbro.  The first, a new ODM
agreement and the second,  a license  agreement  allowing  Radica to continue to
sell high end versions of Yahtzee(TM), Connect Four(TM) and Battleship(TM) under
its Radica Gold brand name.  The new ODM  agreement is a  three-year  agreement,
which automatically extends to a fourth year unless notice is given prior to the
expiration of the third year. The agreement establishes purchasing terms for all
products  built  and  designed  for  Hasbro  and  guarantees   Radica  exclusive
manufacturing  rights for the first two years of  production of any new product.
The Company  intends to pursue other ODM  business in the future.  However it is
uncertain  whether the  Company  can retain its current  business on a long-term
basis or successfully attract additional original design manufacturing  business
or that it will be profitable.

INTELLECTUAL PROPERTY

      The Company  currently  owns 71 design  patents,  2 utility  patents,  112
trademarks and has 14 copyrights over its artwork. It also has 9 design patents,
6 utility patents and 73 trademarks applications in process and will continue to
obtain copyrights,  trademarks,  design and utility patents for new products. In
February of 2000 at the Javitz Center Toy Fair  Exhibition,  US Marshalls seized
quantities of Deep Sea  Fishin'(TM)  knockoffs and marketing  materials from Dai
Daixing of Hong  Kong.  Radica  later  received a  judgement  in its favor.  The
Company  has a number of  ongoing  negotiations  with  companies  in the  United
Kingdom,   China  and  the  United  States  with  regards  infringement  of  its
intellectual property rights.

      The Company  anticipates  that patents,  trademarks,  copyrights and other
intellectual   property  rights  will  become  increasingly   important  in  the
electronic handheld and mechanical games industry in which the Company operates,
particularly  since the Company is  introducing  a wider range of products  with
themes and  features  that do not  duplicate  casino or heritage  games.  As the
industry focuses on intellectual


                                       21

<PAGE>


property  matters,  there will be  opportunities  for the Company to protect its
products through patents,  trademarks and other formalized filings, although the
efficacy  of these  protections  is variable  at best.  By the same  token,  the
Company will be exposed to risks that its products will be found to infringe the
intellectual  property  rights  of  others.  See "Risk  Factors  -  Intellectual
Property Risks".

COMPETITION

      The games business is highly  competitive.  Radica believes that it is one
of the dominant  sellers of handheld  electronic  games.  The Company's  primary
competitor is the Hasbro Games Group,  which  includes Tiger  Electronics,  Inc.
Hasbro procures its products from  manufacturers  in China. The barriers for new
producers  to enter the  Company's  markets are  relatively  low and the Company
expects  that it will face  increased  competition.  The  Company  competes  for
consumer  purchases  on the basis of price,  quality and game  features  and for
retail  shelf  space  also on the basis of  service,  including  reliability  of
delivery,  and breadth of product line. Some competitors offer products at lower
prices than the Company,  are better  established  in the toy and games industry
and are larger than the Company.  The Company's products also compete with other
gifts and  games for  consumer  purchases.  In  addition,  with  respect  to ODM
activities,  the Company will compete with a number of substantially  larger and
more  experienced  manufacturers.  As  the  Company  enters  other  markets  and
businesses, it expects to face new competition.

      In the  peripherals  market,  Radica  UK was the  largest  distributor  of
peripherals in the UK in 2000 according to Chart Track.  The peripherals  market
share is spread  primarily  amongst ten  companies  owning  54.5% of the overall
market share. The Company began  distributing  peripherals in limited quantities
in the US market in 2000. Like the handheld electronic games market, the Company
competes for customer purchases on the basis of price,  quality,  and peripheral
features and for retail shelf space on the basis of service.

TAXATION OF THE COMPANY AND ITS SUBSIDIARIES

      There is currently no Bermuda  income,  corporation or profits tax payable
by the  Company.  As an  exempted  company,  the Company is liable to pay to the
Bermuda  government  an annual  registration  fee  calculated on a sliding scale
basis by reference to its  assessable  capital,  that is, its  authorized  share
capital plus any share premium on its issued shares of Common Stock currently at
a rate not exceeding $25,000 per annum.

      The Hong Kong profits tax rate currently  applying to corporations is 16%.
Currently,  Radica HK and one other  Hong  Kong-based  subsidiary  pay Hong Kong
profits tax on service and sales income.

      On July 1, 1994, the Company's  manufacturing  operations were transferred
to a Sino-Foreign  Joint  Venture.  As Radica Games itself does not carry on any
business in China,  it is not subject to tax.  The Joint  Venture  enjoyed a two
year tax holiday  which  expired in 1999.  From  January 1, 1999 to December 31,
2001 its profits  will be taxed at a reduced  rate of 12%,  half the regular tax
rate of 24%.  After this the Company will be taxed at the regular tax rate,  but
expects to apply for a continued tax holiday amounting to 50% of the regular tax
rate.

      Radica USA and Disc are fully subject to US federal  taxation,  as well as
any applicable state or local taxation, on their taxable income.  Currently, the
highest  marginal rate of US federal  corporate  income tax is 35%. In addition,
dividends paid by Radica USA and Disc to the Company will be subject to a 30% US
federal  withholding tax,  resulting in an effective rate of US federal taxation
on distributed profits of up to 54.5%.


                                       22

<PAGE>


         Radica UK is fully subject to UK corporate taxation. The UK profits tax
rate currently applying to corporations is 30%.

EMPLOYEES

      As of December  31, 2000 the  Company's  workforce  was  comprised  of the
following:

<TABLE>
<CAPTION>
-------------- ------------ ------------- -------- ----------- -------------- -----------
                Production    Sales and      R&D     Finance     Operations    Total by
                              Marketing                           & Admin      location
-------------- ------------ ------------- -------- ----------- -------------- -----------
<S>                   <C>        <C>         <C>      <C>           <C>

Asia                 2638          8          98        23           184         2951
-------------- ------------ ------------- -------- ----------- -------------- -----------
USA                     8         21          22         6             7           64
-------------- ------------ ------------- -------- ----------- -------------- -----------
Europe                  9          9           7         4             4           33
-------------- ------------ ------------- -------- ----------- -------------- -----------
Total                2655         38         127        33           195         3048
-------------- ------------ ------------- -------- ----------- -------------- -----------
</TABLE>

      At December  31, 1999 and 1998 the  Company's  workforce  comprised  4,330
persons and 4,378 persons, respectively.

      None of the  Company's  employees  are subject to a collective  bargaining
agreement  and the Company has never  experienced  a work  stoppage.  Management
believes that its employee relations are good.

DESCRIPTION OF PROPERTIES

      See  "Manufacturing  Facilities"  above.  The Company  completed the first
phase of construction  of its Factory  (241,000 sq. ft.) on a 3.7 acre parcel of
land in May 1995 and the second  phase  (223,000  sq.  ft.) in August  1998.  An
extension  of the factory  commenced  in December of 1999 to add 202,000  square
feet of factory space and 178,000 square feet of dormitory space. As a result of
the drop in demand  for  Radica  product  in the US during  2000,  work  towards
completion  of this  addition has been  postponed  and will continue when market
demand  warrants  use of the  additional  space.  The  Company  owns a long-term
leasehold on its executive  offices  (15,400 sq. ft.) and warehouse space (7,900
sq. ft.) in Fo Tan,  Hong Kong as well as two houses for  employees in Hong Kong
(2,100 sq. ft. each),  which are made  available to Mr.  Howell and Mr.  Storey,
officers of the  Company.  Radica  operates  its Factory  under the terms of the
Joint Venture Agreement and Processing Agreement.  The Company leases additional
storage and office space in Hertfordshire,  UK; Toronto, Canada and office space
in Dallas, Texas; Pasadena,  California and recently San Francisco,  California,
which has replaced the San Rafael, California office.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

RESULTS OF OPERATIONS

      In December of 1998, Radica Games' Board of Directors approved a change in
the Company's fiscal year end from October 31 to December 31. This resulted in a
transition  period from  November 1, 1998 to December 31,  1998,  which has been
audited. However, for clarity of presentation and comparability,  the discussion
of results of operations compares the fiscal year ended December 31, 2000 to the
fiscal year ended December 31, 1999,  followed by a comparison of the year ended
December 31, 1999 to the  unaudited  twelve  months  ended  December 31, 1998, a
comparison  of the  unaudited  two months ended  December 31, 1998 to two months
ended  December 31, 1997 and a comparison  of the fiscal year ended  October 31,
1998 to the fiscal year ended October 31, 1997.  For purposes of the  comparison
of the year ended  December  31, 1999 to the twelve  months  ended  December 31,
1998, the unaudited twelve months ended December 31, 1998 are referred to as the
prior year.


                                       23

<PAGE>


FISCAL 2000 COMPARED TO FISCAL 1999

      The  following  table sets forth  items  from the  Company's  Consolidated
Statements of Income as a percentage of net revenues:

                                                 Year ended December 31,
                                             -------------------------------
                                                  1999             2000
                                             --------------     ------------

Net revenues                                     100.0%           100.0%
Cost of sales                                     58.6%            77.6%

Gross margin                                      41.4%            22.4%
Selling, general and administrative expenses      21.0%            31.2%
Research and development                           4.5%             5.0%
Depreciation and amortization                      3.7%             5.3%
Restructuring charge                               0.0%             1.2%

Operating income (loss)                           12.2%           (20.3%)
Other income                                       0.9%             1.2%
Share of loss of affiliated company                1.3%             0.0%
Interest income, net                               1.1%             0.7%

Income (loss) before income taxes                 12.9%           (18.4%)
(Provision) credit for income taxes               (0.1%)            0.9%

Net income (loss)                                 12.8%           (17.5%)


      An after tax loss of $18.1 million for fiscal year 2000 or $1.03 per fully
diluted share  including  restructuring  charges was taken in the second quarter
versus an after tax profit of $17.1 million or $0.90 for fiscal year 1999.

      Total  revenues  for the year  were  $103.4  million,  compared  to $133.5
million  for the same  period  in 1999.  The  revenue  decline  during  2000 has
resulted  primarily from severely  adverse  market  conditions in the electronic
handheld game category  which have only  partially  been offset by the growth of
the Company's  Girl Tech(R)  product line and the  introduction  of Radica's new
Play TV(TM) line of games.

      Summary of sales achieved from each category of products:


                                       24

<PAGE>

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                                    1999                                     2000
                            NET            % OF NET                 NET            % OF NET
PRODUCT LINES           SALES VALUE       SALES VALUE           SALES VALUE       SALES VALUE
-------------          ------------       -----------           -----------       -----------
                      (in thousands)                           (in thousands)
<S>                       <C>                <C>                  <C>                 <C>
Handheld                  $ 87,775           65.7%                $ 49,307            47.8%
Play TV                         --            0.0%                   8,561             8.3%
Girl Tech                    7,444            5.6%                  13,897            13.4%
ODM                         27,897           20.9%                  19,271            18.6%
Peripherals                 10,406            7.8%                  12,345            11.9%
                         ---------          -----                ---------           -----
Total                     $133,522          100.0%                $103,381           100.0%
</TABLE>


         During the year Radica took non-recurring charges of $10.2 million
related to the restructuring of its organization and provisions against
inventories, prepaid royalties, receivables and bad debts as a result of the
downturn in its handheld games business. Gross margin for the year was 22.4%
compared to 41.4% in fiscal year 1999 as a result of these charges and a mix
shift to lower margin Gamester(R) business.

      Operating expenses for the year including  restructuring  charges incurred
in Q2 were $44.1 million compared to $39 million in fiscal year 1999.

      The  following  table lays out the changes in  operating  expenses for the
major expense categories:

                                                        December 31,
                                                  -----------------------
                                                   1999              2000
                                                  -----             -----
                                                  (US dollars in millions)
Commissions                                       $ 2.9             $ 2.3
Indirect salaries and wages                         8.2               7.5
Advertising and promotion expenses                  8.9              11.1
Research and development expenses                   6.0               5.2

      The decrease in commissions in 2000 was the result of both the decrease in
sales from 1999 and Radica USA's decision to increase efficiency by changing its
sales force from third party sales representative to an in-house sales team. The
decrease in indirect  salaries and wages in 2000 was the result of the Company's
reorganization  in  the  second  quarter.   Advertising  and  promotional  costs
increased in 2000 due to the introduction of the Play TV(TM) line in the US.

CAPITAL RESOURCES AND LIQUIDITY

      At December  31,  2000 the  Company  had $23.1  million of cash ($1.31 per
share) and net assets of $67.4 million ($3.84 per share). Inventories dropped to
$14 million from $24.6 million at December 31, 1999 primarily as a result of the
Company's  successful moves to close out old inventories.  The Company also took
additional stock provisions in Q2 of 2000.  Receivables were at $25.9 million at
December 31, 2000  compared to $23.8  million at December  31, 1999.  These were
higher than the Company had hoped for due to an internal,  short-term problem in
its EDI system for computerized  collections.  By mid-February  2001 the Company
had  collected   approximately  $16  million  of  these   receivables.   Current
liabilities were $26.5 million at December 31, 2000 compared to $25.2 million at

                                       25

<PAGE>


December 31,  1999.  The  increase  was  primarily  the result of an increase in
short-term borrowings and debt offset by a decrease in account payable.  Working
capital at December 31, 2000 was $42.5  million,  a $22.6 million  decrease from
December  31,  1999.  Net  cash  used  in  operating  activities  and  investing
activities  for the year  ended  December  31,  2000 was $4.7  million  and $4.3
million, respectively.  Investing activities, consisted primarily of purchase of
property,  plant and machinery and intangible  assets.  As of December 31, 2000,
the Company had more than $6 million of various  lines of credit  available  for
use. The Company  believes that its existing cash and cash  equivalents and cash
generated  from  operations  are  sufficient to satisfy the current  anticipated
working capital needs of its core business.

FISCAL 1999 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1998

      On June 24, 1999 the Company  acquired all of the  business and  operating
assets of Leda Media  Products  Limited,  now called Radica UK Limited  ("Radica
UK") for total transaction costs of $14.6 million including  acquisition-related
costs.  The  transaction has been accounted for using the purchase  method.  The
Company's  consolidated  results of operations  include the results of Radica UK
from the  date of  acquisition  (see  Note 6 of the  Notes  to the  Consolidated
Financial Statements).

      Net sales for the year  ended  December  31,  1999  were  $133.5  million,
decreasing  16.2% from $159.4 million for the prior year.  Approximately  19% of
sales related to Fishing  games,  8.1% to Hunting  games,  8.7% to Action games,
12.1% to Sports games, 10.2% to Heritage games, 5.6% to Girl Tech(R) games, 7.6%
to Casino  games,  7.8% to  peripherals  and 20.9% to ODM sales  during the year
ended December 31, 1999 in comparison to 40.4%,  0%, 9.8%,  11.5%,  7.2%,  0.1%,
8.2%, 0% and 22.8% in the same period in 1998.

      During 1999, the Company sold 267 different models of games, totaling 17.2
million  units,  compared to 132 models  totaling  18.1 million units in 1998, a
decrease of 5.0%. Twenty-seven new models were sold during 1999.

      The gross profit for fiscal year 1999 was $55.3 million  compared to $85.9
million for fiscal 1998, a decrease of 35.6%.  The gross margin for the year was
41.4%  compared to 53.9% for fiscal year 1998.  The decrease in gross margin was
due to the effect of the sales of lower margin controller product through Radica
UK, the effect of increased  licenses,  reduced ODM margins,  together  with the
effect of certain  amounts of air freight due to shortages of raw  materials due
to the Taiwan earthquake earlier this year.

      Operating  profit for fiscal  year 1999 was $16.3  million,  a decrease of
66.1% from $48.1 million in fiscal 1998.  Operating  expenses increased to $39.0
million  from $37.8  million in 1998.  The  increase was the result of increased
research  and  development  costs,  together  with  increased  depreciation  and
amortization due to the acquisition of Radica UK.

         The following table lays out the changes in operating expenses for the
major expense categories.

                                                     December 31,
                                              -----------------------
                                               1998              1999
                                              -----             -----
                                              (US dollars in millions)
Commissions                                   $ 5.0             $ 2.9
Indirect salaries and wages                     6.9               8.2
Advertising and promotion expenses              8.8               8.9
Research and development expenses               5.6               6.0


                                       26

<PAGE>


      The  decrease  in  commissions  in 1999 was the result of the  decrease in
sales from 1998 combined with Radica USA's  decision to move the sales  function
to  several  of its  retail  customers  in-house.  Indirect  wages and  salaries
increased in 1999 as a result of the  acquisition of Radica UK and  management's
decision to increase  research and  development  and add several key  management
positions in the United States.

      The effective  blended tax rate for the year ended December 31, 1999 was a
provision  of 0.9% on  continuing  operations  compared  to a credit of 0.3% for
fiscal 1998.  The tax provision for the year was comprised of an expense of $0.2
million  representing 0.9% of pre-tax income.  This compared to a credit of $0.6
million in 1998,  or 1.2% of pre-tax  income.  The increase in the tax provision
for the  year was as a  result  of  taxable  income  in the US and the  one-time
deferred tax credit of $4.6 million in 1998.

      During 1999,  the Company  wrote down a $1 million  loan to its  affiliate
Sharegate due to actual losses in 1999 and  anticipated  ongoing losses in 2000.
As the  investment  in Sharegate  was at zero on the balance sheet at the end of
1999, there will be no further charges as a result of Sharegate in 2000.

      Net  profit  for  fiscal  year 1999 was $17.1  million  or $0.90 per share
compared to $51.0 million or $2.41 per share in fiscal 1998.

TWO MONTHS ENDED DECEMBER 31, 1998 COMPARED TO TWO MONTHS
ENDED DECEMBER 31, 1997

      Net sales for the two months ended  December 31, 1998 were $21.1  million,
increasing 22% from $17.3 million for the prior year. Approximately 25% of sales
related to Fishing games,  12.2% to Action games, 18.2% to Sports games, 7.0% to
Heritage  games,  0.7% to Girl Tech(R) games,  9.5% to Casino games and 27.4% to
ODM sales during the two months ended  December 31, 1998 in comparison to 53.9%,
7.2%, 6.1%, 8.7%, 0%, 12.2% and 11.9% in the same period in 1997.

      During the two  months  ended  December  31,  1998,  the  Company  sold 97
different  models of games,  totaling 2.4 million units,  compared to 100 models
totaling  two million  units in the same period in 1997,  an increase of 20%. Of
the 81 models of Radica,  Girl Tech(R) and Monte Carlo (now called  Radica Gold)
games sold during the period a number of models were discontinued  lines,  which
unless the market  warranted  reintroduction,  the Company  intended to continue
selling so long as  inventories  exist.  Seven new models  were sold  during the
period.

      The gross  profit for the two months  ended  December  31,  1998 was $10.4
million  compared to $9.5 million for the two months ended December 31, 1997, an
increase of 9.5%.  The gross margin for the two months  ended  December 31, 1998
was 49.1% compared to 54.6% for the same period in 1997.

      Operating  profit  for the two months  ended  December  31,  1998 was $5.4
million,  a decrease of $0.4  million  from $5.8  million for the same period in
1997. Operating expenses increased to $5.0 million from $3.6 million for the two
months ended December 31, 1997.

      The  following  table lays out the changes in  operating  expenses for the
major expense categories.


                                       27

<PAGE>


                                           Two months ended December 31,
                                           -----------------------------
                                              1997             1998
                                             ------           ------
                                             (US dollars in millions)
Commissions                                  $ 0.55           $ 0.79
Indirect salaries and wages                    0.73             1.24
Advertising and promotion expenses             0.73             0.42
Research and development expenses              0.32             0.73


      The effective  blended tax rate for the two months ended December 31, 1998
was a provision of 2.9%  compared to 1.2% for the two months ended  December 31,
1997.  The increase in tax expense for the period was as a result of the brought
forward losses in the US subsidiary being used up resulting in the US profits of
the distribution operation becoming fully taxable.

      Net profit for the two months  ended  December 31, 1998 of $5.8 million or
$0.31 per share  compared to $6.1 million or $0.29 per share for the same period
in 1997.

FISCAL 1998 COMPARED TO FISCAL 1997

      Net  sales for the year  ended  October  31,  1998  were  $155.6  million,
increasing  77.2% from $87.8  million for the prior year.  Approximately  44% of
sales related to Fishing games,  9.1% to Action games, 10% to Sports games, 7.4%
to Heritage  games,  8.5% to Casino games and 21% to ODM sales in fiscal 1998 in
comparison to 40.7%,  2.7%, 9.3%, 12.3%,  15.6% and 19.4% in fiscal 1997. During
1998,  the Company sold 125  different  models of games,  totaling  17.7 million
units,  compared to 156 models  totaling 12.4 million units in 1997, an increase
of 42.7%.  Of the 125 models of Radica and Monte Carlo (now called  Radica Gold)
games sold during the period a number of models were discontinued  lines,  which
unless the market  warranted  reintroduction,  the Company  intended to continue
selling so long as inventories exist. Twenty new models were sold during 1998.

      The gross profit for fiscal year 1998 was $85.0 million  compared to $46.9
million for fiscal 1997, an increase of 81.2%. The gross margin for the year was
54.6% compared to 53.4% for fiscal year 1997.

      Operating  profit for fiscal year 1998 was $48.6  million,  an increase of
$20.5 million from $28.1 million in fiscal 1997. Operating expenses increased to
$36.4 million from $18.8 million in 1997.

      The  following  table lays out the changes in  operating  expenses for the
major expense categories.

                                                    October 31,
                                            -------------------------
                                              1997               1998
                                            ------             ------
                                              (US dollars in millions)
Commissions                                 $ 2.45             $ 4.73
Indirect salaries and wages                   4.72               6.36
Advertising and promotion expenses            0.80               9.20
Research and development expenses             2.10               3.71


      The  effective  blended tax rate for the year ended October 31, 1998 was a
credit of 0.5% on  continuing  operations  compared to a  provision  of 0.6% for
fiscal  1997.  The tax credit for the year was  comprised  of an expense of $4.0
million  representing 7.8% of pre-tax income,  offset by a one time deferred tax
credit of $4.6  million.  This  compared to a charge of $0.2 million in 1997, or
0.6% of pre-tax


                                       28

<PAGE>


income.  The increase in tax expense for the year was as a result of the brought
forward losses in the US subsidiary being used up resulting in the US profits of
the distribution operation becoming fully taxable.

      Net  profit  for  fiscal  year  1998 of $51.3  million  or $2.53 per share
compared to $29.6 million or $1.43 per share in fiscal 1997.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

      The following table sets forth the directors and executive officers of the
Company in fiscal 2000.

<TABLE>
<CAPTION>
                              Term
Name                          Expires       Residency       Position
----                          -------       ---------       --------
<S>                              <C>        <C>             <C>
Patrick S. Feely                 2001       USA             President, Chief Executive Officer,
                                                            Chief Operating Officer and Director

Jon N. Bengtson                  2001       USA             Chairman of the Board and Director

Robert E. Davids(2)(3)           2001       Hong Kong       Vice-Chairman of the Board and Director

David C.W. Howell                2001       Hong Kong       President Asia Operations,
                                                            Chief Financial Officer and Director

Siu Wing Lam                     2001       USA             Executive Vice President, Engineering and Director

James O'Toole(1)(2)(3)           2001       USA             Director

Millens W. Taft(1)(2)(3)         2001       USA             Director

Peter L. Thigpen(1)(2)(3)        2001       USA             Director

Henry Hai-Lin Hu(1)(2)(3)        2001       Australia       Director

Craig D. Storey                   N/A       Hong Kong       Vice President and Chief Accounting Officer

James M. Romaine                  N/A       USA             Senior Vice President Sales

Jeanne M. Olson                   N/A       USA             Senior Vice President Marketing

Neil Doughty                      N/A       UK              Managing Director, Radica UK

John Doughty                      N/A       UK              General Manager, Radica UK

Kam Cheong Wong                   N/A       Hong Kong       Vice President of China Operations

Steven Chi Shing Tsui             N/A       Hong Kong       Vice President of Engineering

Rick C.K. Chu                     N/A       Hong Kong       International Sales Director

Hermen H.L. Yau                   N/A       Hong Kong       MIS Director

Margaret H.K. Lok                 N/A       Hong Kong       Director of Global Quality

</TABLE>

                                       29


<PAGE>


<TABLE>
<CAPTION>
<S>                               <C>       <C>             <C>
Ben Hui                           N/A       Hong Kong       Materials Director

Louis Shu Wing Kwok               N/A       Hong Kong       Plant Administration Director

You Liang Wang                    N/A       China           Quality Director
</TABLE>

(1)  Member of the Audit Committee.

(2)  Member of the Compensation, Organization and Nominating Committee.

(3)  Member of the Executive Committee.

      The Company  annually  prepares a proxy  statement/management  information
circular for  distribution  to its  shareholders  in connection  with its annual
meeting of  shareholders.  Additional  information  is  contained  in such proxy
statement with respect to the ownership of shares of the Company's  common stock
by directors and executive officers, the ages of such persons, and the functions
or board  practices of the committees of the Company's  board of directors.  The
information  contained in such proxy  statement  for the current  fiscal year is
incorporated  herein by reference.  Such proxy statement is filed as part of the
Company's report on Form 6-K for the period in which the proxy statement is sent
to shareholders.

      Patrick S. Feely has been Chief Executive Officer since April 1999. He has
been Chief Operating  Officer and President of the Company since July 1997 and a
director of the Company since July 1996. Previously, he was President and CEO of
Spectrum  HoloByte,  Inc. from 1993 to 1995;  President of Bandai America,  Inc.
from 1991 to 1992;  founder and  President of Toy Soldiers,  Inc.  (which merged
with Bandai  America)  from 1988 to 1991;  and  President of the Tonka  Products
Division of Tonka,  Inc. from 1986 to 1988, after  previously  serving as Senior
Vice President  Commercial  Operations from 1982 to 1986. As president of Tonka,
Mr.  Feely was  responsible  for the  successful  launch of the Sega  video game
system into the U.S. market. Mr. Feely was an executive at Mattel Toys from 1977
to 1982 and began his career at RCA  Corporation  in 1970.  Mr.  Feely is also a
Director and  Chairman of the Toy  Manufacturers  Association.  He has a BA from
Duke University and an MBA from the University of Michigan.

      Jon N. Bengtson, formerly the Executive Vice President and Chief Operating
Officer of the  Company,  became  the  Chairman  of the Board of the  Company in
January  1996,  and has been a director of the Company since January 1994. He is
currently the Chairman of Sharegate,  Inc. a telecommunications  company. He was
Chief Financial  Officer of the Company from January 1994 to September 1995, and
was appointed  President and Chief  Executive  Officer of Radica USA in December
1993.  Mr.  Bengtson  joined  The Sands  Regency  in 1984 and  served in various
positions,  including  Vice  President  of  Finance  and  Administration,  Chief
Financial  Officer,  Treasurer and Director,  Senior Vice President and Director
and Executive  Vice  President and Chief  Operating  Officer and Director  until
December  1993.  From 1980 to 1984,  Mr.  Bengtson  was a director and served in
various  positions  with  International  Game  Technology   ("IGT"),   including
Treasurer and Vice President of Finance and Administration and Vice President of
Marketing. Mr. Bengtson is currently a director of The Sands Regency.

      Robert E. Davids became  Chairman of the Executive  Committee of the Board
of Directors, Vice Chairman of the Board and Chief Executive Officer-Emeritus in
April 1999 and has been a director since  December 1989. He was Chief  Executive
Officer of the Company  from January  1994 to April 1999,  and  President of the
Company from December 1993 to July 1997.  Prior to 1993, Mr. Davids had been the
Co-Chief Executive Officer and director of Radica HK since he joined the Company
in 1988. Mr. Davids has over 30 years experience in the development,  design and
engineering  of  non-gambling   casino  gifts,


                                       30

<PAGE>


commercial gaming machines,  automobiles and other products.  From 1984 until he
joined the Company,  he was the General Manager of Prospector Gaming Enterprises
Inc., a casino in Reno,  Nevada.  From 1978 through  1984,  Mr. Davids served in
various positions at IGT, including Director of Special Projects and Director of
Engineering.

      David C.W.  Howell was  appointed  President  Asia  Operations in December
1998. He has been  Executive Vice  President and Chief  Financial  Officer and a
director  of the  Company  since  September  1995.  Prior to  that,  he was Vice
President  and Chief  Accounting  Officer  and a director  of the  Company  from
January  1994 to September  1995.  From 1992 to 1994,  Mr.  Howell was a Finance
Director and Company  Secretary of Radica HK. From 1984 to 1991,  Mr. Howell was
employed by Ernst & Young in London,  Hong Kong and Vietnam. He has a B.Sc. from
Nottingham University,  is a Fellow of the Institute of Chartered Accountants in
England and Wales and is a Fellow of the Hong Kong Society of Accountants.

      Siu Wing Lam has been Executive Vice President, Engineering of the Company
since  December  1998  and was  previously  Vice  President,  Engineering  and a
director of the Company since  January  1994.  Prior to that, he was the head of
the Radica HK  engineering  department for eight years since joining the Company
in 1985.  Mr.  Lam has over 20 years of  experience  in  manufacturing,  product
design and engineering  management.  He has an  Associateship  in Production and
Industrial  Engineering from Hong Kong  Polytechnic,  a post graduate diploma in
Engineering  Management from City  Polytechnic of Hong Kong, and is an associate
member of the Institute of Electrical Engineers of UK.

      James  O'Toole has been a director of the Company  since June 1994.  He is
Research  Professor in the Center for Effective  Organizations at the University
of Southern  California's  Marshall  School of  Business.  He is Chairman of the
Board of Academic  Advisors of the Booz, Allen & Hamilton  Strategic  Leadership
Center.

      Millens W. Taft has been a director  of the Company  since April 1997.  He
brings with him five decades of toy and games  experience and currently  advises
companies in the toy industry on marketing, product development and licensing in
both the domestic and international  markets. He retired from the Milton Bradley
Company in 1984,  where he was Corporate  Senior Vice  President of Research and
Development  and was also a Director of the firm.  Mr. Taft had been with Milton
Bradley since  graduating from Harvard  Business School in June of 1949 with the
degree  of Master of  Business  Administration.  From 1942 to 1945 he was in the
military service with the 8th Air Force as First Lieutenant and Pilot.  Upon his
early  retirement  from Milton Bradley,  he started his own company,  Mel Taft &
Associates in 1984,  which helps  companies in the USA and around the world with
marketing,  product  development  and licensing  projects  primarily in the Toy,
Games, Craft, Specialty and International Markets.

      Peter L.  Thigpen has been a director of the Company  since June 1998.  He
owns  Executive  Reserves,  a  consulting  company that  specializes  in quality
processes,  ethics and marketing strategy. Prior to starting Executive Reserves,
Mr.  Thigpen  was Senior  Vice  President  - US  Operations  and a member of the
Executive  Management  Committee  at Levi Strauss & Company,  retiring  after 23
years with the San  Francisco-based  apparel company.  During his tenure at Levi
Strauss,  Mr.  Thigpen  held  positions  of  President  of European  Operations,
President - Levi Strauss USA,  President - The Jeans Company and was a member of
the Board of  Directors.  Mr.  Thigpen is a Senior Fellow and a Moderator at the
Aspen Institute, a lecturer on ethics at the Haas Graduate School of Business at
the University of California, Berkeley.

      Henry Hai-Lin Hu was appointed a director of the Company in December 1998.
He is currently  the Principal of Business Plus  Consultants  Limited  providing
services to Hong Kong toy companies on


                                       31

<PAGE>


business  development.  From  1993  through  1996,  he was  Chairman  and  Chief
Executive Officer of Zindart  Industrial Co. Ltd., a NASDAQ listed  manufacturer
of die cast car replicas and premium giftware. He co-founded Wah Shing Toy Group
in 1982, a Singapore listed toy company, and retired from Wah Shing in 1991. Mr.
Hu has served in director and senior  officer  roles in several toy companies in
Hong Kong since 1967. He has a B.Sc. in  Mechanical  Engineering  from Hong Kong
University,  is  a  Registered  Professional  Engineer,  and  a  member  of  the
Institution of Electrical Engineers, Hong Kong.

      Craig D. Storey has been Vice  President and Chief  Accounting  Officer of
the Company since July of 1999.  Prior to that, he was the Financial  Controller
of Radica USA from 1995 to 1999.  From 1993 to 1995,  Mr. Storey was employed by
Kafoury,  Armstrong and Company in Reno,  Nevada. He has a BS from Arizona State
University  and is a  member  of the  American  Institute  of  Certified  Public
Accountants and the Nevada Society of CPA's.

      James M.  Romaine  joined  Radica USA in  September  1999,  as Senior Vice
President  of Sales for Radica USA. He has been an executive in the Toy Industry
for over 26  years.  He spent  the  1980's  and into the  early  90's at  Parker
Brothers  where he was Senior  Vice  President  of Sales.  Mr.  Romaine  was the
President  of Play Tech Inc.,  a Vtech  company for seven years  before  joining
Radica USA. His most recent  educational  credentials  include the completion of
the  Executive  Program for General  Managers at the  University  of  Michigan's
School of Business.

      Jeanne M.  Olson  has been the  Senior  Vice  President,  Marketing  since
October 2000. Prior to joining the Company, she was the Senior Vice President of
Sales & Marketing at Lyrick Studios, a privately-held  children's  entertainment
company.  Ms. Olson has over 15 years of experience in the toy industry,  having
held executive  marketing and management  positions at Mattel Toys, Hasbro Inc.,
and Tonka Toys. She started her career in marketing  research with the Pillsbury
Company and with Custom Research Inc.

      Neil Doughty has been  Managing  Director of Radica UK Ltd ("Radica  UK"),
previously Leda Media Products Ltd, since its acquisition by Radica on 24th June
1999. He was previously in the position of Sales  Director/  Shareholder and was
heavily involved in the running of the business (heightened by the ill health of
the previous  managing  director).  Mr. Doughty was  responsible for Radica UK's
introduction to the video game  peripherals  market place in 1991,  which is now
Radica UK's  primary  source of revenue.  He is one of the main  pioneers of the
European  peripherals market and was responsible for the establishment of Radica
UK's network of European  distributors.  Mr. Doughty has 16 years  experience in
Sales & Marketing  management,  of which 14 have been spent  within the consumer
electronics industry.

      John Doughty has been General  Manager with Radica UK since November 2000,
having  previously  held the  positions  of Head of Sales &  Marketing,  Head of
Sales,  and UK Sales Manager since joining in March 1998. He personally  manages
Radica UK's major European Accounts, and also oversees the day to day running of
the UK  operation.  Mr.  Doughty  has had 14 years  experience  in the  'gaming'
industry having  previously  worked at Entertainment  UK, part of the Kingfisher
Group, as Senior Buyer, and prior to that having worked at HMV UK, as a Buyer.

      Kam Cheong Wong has been the Vice  President of China  Operations  for the
Company since May 1998. Prior to that, he was the Director of Manufacturing  for
the Company from June 1994 to May 1998. Mr. Wong has over 20 years of experience
in product design, R&D,  production and sales in toys, consumer  electronics and
the  electrical  appliance  industry.   Mr.  Wong  has  a  B.Sc.  in  Mechanical
Engineering  from Taiwan  University,  a post graduate  diploma in Manufacturing
Technology  from City  University,  London and is a member of the  Institute  of
Management, UK.


                                       32

<PAGE>


      Steven Chi Shing Tsui has been Vice President,  Engineering of the Company
since  August 2000.  Mr. Tsui has over 20 years of  experience  in R&D,  product
development  and  manufacturing  for  the  semiconductor,   computer,   consumer
electronics and toy industries.  Prior to joining the Company,  Mr. Tsui was the
Engineering Vice President for STD Manufacturing Ltd. from 1996. Mr. Tsui has an
Associateship in Electronics  Engineering from Hong Kong Polytechnic University,
an MBA from University of Hull and a Postgraduate  Diploma in Marketing from the
Chartered Institute of Marketing, UK.

      Rick C.K.  Chu has been the  International  Sales  Director of the Company
since April 1996. Prior to that, Mr. Chu was International Sales  Administration
Manager of the Company from April 1994 to April 1996.  He has more than 16 years
experience in international trade and business management. From 1988 to 1994, he
was the Senior Manager managing the sales administration  function and marketing
of industrial materials for a leading trading company in Hong Kong.

      Hermen H.L.  Yau has been the MIS  Director of the Company  since March 1,
1994.  From 1982 to 1994, he worked in Outboard Marine  Corporation  Asia Ltd in
various positions in the Systems & Data Processing Department.  He has more than
17 years experience in Information  Technology and particular  experience in IBM
mid-range  computer  systems and solutions.  He has a Higher Diploma in Computer
Studies  from the  National  Computing  Center  UK and a Diploma  in  Management
Studies from the Hong Kong Polytechnic and Hong Kong Management Association.

      Margaret  H.K.  Lok is the  Director  of  Global  Quality  and has run the
Company's  ISO9001 quality system since 1994.  Prior to that, she was working as
the Costing  Manager,  Document  Control  Manager and Industrial  Engineer in HK
manufacturing and trading companies.  From 1991 to 1993, she worked in Australia
in a  project  control,  scheduling,  material  planning  and  purchasing  for a
multinational  company.  Ms. Lok has over 15 years  experience in  manufacturing
systems. She has an M.Sc. in Industrial  Engineering from the University of Hong
Kong.

      Ben Hui has been the Materials  Director since May 1998. Prior to that, he
has previously held materials and purchasing management jobs with companies such
as Sunciti  Manufacturers  Limited,  HK Air Cargo  Terminals  Limited,  Computer
Products  and  Saitek  Ltd.  Mr.  Hui  has  20  years  extensive  experience  in
manufacturing management with responsibility for purchasing, shipping, inventory
and  warehousing.  He has been a full member of the Institute of Purchasing  and
Supply of Hong Kong since 1990.

      Louis  Shu Wing  Kwok has been the Plant  Administration  Director  of the
company since January 2, 2001. Prior to his present  position,  he has extensive
experience in manufacturing  plant operations such as  administration,  customs,
purchasing  and materials  management,  inventory and warehouse  keeping.  Major
companies  he has worked with are  Fyrnetics  (Hong Kong)  Limited,  Management,
Investment and Technology Company Limited, and Sunciti Manufacturers Limited. He
has more than 15 years working  experience in plant operations.  He has a Higher
Diploma  in   Mechanical   engineering,   Diploma  in   Mechanical   Engineering
(Manufacturing Technology), and National Diploma in Mechanical Engineering.

      You Liang Wang has been the Quality Director of the Company since December
1993. Prior to that, he was Head of the Quality Assurance Section of Foxboro Co.
Ltd in Shanghai  from 1986 to 1993 and a Quality  Control  Engineer from 1982 to
1986.


                                       33

<PAGE>

COMPENSATION OF OFFICERS AND DIRECTORS

COMPENSATION

      In fiscal 2000, the aggregate amount of compensation paid to all executive
officers  and  directors  as  a  group  for  services  in  all   capacities  was
approximately $2.2 million.

      Each  outside  (i.e.,  non-employee  and  non-affiliated)  director of the
Company receives a $10,000 annual fee paid in quarterly installments.  Directors
may elect to receive half of this fee payable in shares of the Company's  Common
Stock  valued at the then current  market  price.  Each outside  director of the
Company also receives a fee of $600 for  attendance at each  Committee  meeting.
Directors  who are  employees or affiliates of the Company are not paid any fees
or additional  remuneration  for service as members of the Board of Directors or
its Committees.

      Upon each  annual  re-election  to the Board of  Directors,  each  outside
director  receives  non-qualified  stock  options to purchase  2,500  shares per
quarter  (i.e.  10,000  shares per annum) of Common  Stock of the  Company at an
exercise  price equal to the then current  market price of the Company's  Common
Stock.  The quarterly  exercise prices  averaged $2.54 per share in 2000.  These
options are exercisable after one year from the date of grant.

EMPLOYMENT AGREEMENTS

      Messrs.  Feely,  Howell,  Lam, Bengtson and Neil Doughty have each entered
into individual employment  agreements with the Company.  After giving effect to
the latest  renewals,  the  employment  agreements  are for periods of two years
each, from July 2000 for Mr. Feely, from December 2000 for Messrs.  Howell, Lam,
and Bengtson,  and from July 1, 1999 for Mr. Doughty.  Each employment agreement
is terminable by the Company for cause. Messrs. Feely, Howell, Lam, Bengtson and
Doughty shall each receive  minimum annual base salaries of $185,000,  $182,000,
$160,000,  $43,200 and $171,720  (the latter  amount is stated in UK currency as
(pound)106,000),  respectively.  The agreement with Mr.  Bengtson,  in operation
since December 1995, is for part-time  services.  The employment  agreements for
Messrs.  Feely,  Howell,  Lam and Doughty contain certain  restrictions on their
involvement  in  businesses  other than the  Company  during the course of their
employment and certain  provisions  applicable  after  termination of employment
which prohibit the solicitation of customers and other employees of the Company,
employment  or  engagement  with  competing  entities,   or  the  disclosure  of
proprietary  information of the Company. The Company provides residences for Mr.
Howell and Mr.  Storey in Hong Kong.  In the  agreement  for Mr.  Feely,  he was
granted  300,000 stock options of the Company  common stock at $3.625 per share,
another 60,000 stock options at $14.125 per share in November 1998 and a further
60,000  stock  options at $3.00 per share in May 2000,  subject to the terms and
conditions of the agreement and the 1994 Stock Option Plan. Additionally, in May
2001,  Mr.  Feely would have been granted  60,000 stock  options at market price
provided he achieved  certain  conditions as stated in the agreements,  however,
these were not achieved. In the agreements for Mr. Howell and Mr. Lam, they were
granted each 25,000 stock options of the Company common stock at $3.00 per share
in May 2000. In May 2001 and 2002, Mr. Howell and Mr. Lam will be granted 25,000
stock  options (up to 50,000  shares in the aggregate for each) at market price,
subject to the terms and  conditions  of the agreement and the 1994 Stock Option
Plan, and provided  certain  conditions are achieved as stated in the agreement.
In the agreement  for Mr.  Doughty,  he was granted  50,000 stock options of the
Company  common stock at $10.625 per share in June 1999 and 25,000 stock options
at $3.00  per share in May 2000  subject  to the  terms  and  conditions  of the
agreement and the 1994 Stock Option Plan. Additionally, in May of 2001 and 2002,
Mr.  Doughty will be granted  25,000 stock  options (up to 50,000  shares in the
aggregate) at market price provided certain conditions are achieved as stated in
the agreement.


                                       34

<PAGE>


OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

      The  Company's  1994 Stock Option Plan  provides for the granting of stock
options to directors,  officers and  employees of the Company.  The Stock Option
Plan is administered by the Compensation,  Organization and Nominating Committee
of the Board of Directors.  Subject to the  provisions of the Stock Option Plan,
the  Compensation,   Organization  and  Nominating  Committee  shall  have  sole
authority to  determine  which of the eligible  directors  and  employees of the
Company shall receive stock options,  the terms,  including  applicable  vesting
periods, of such options,  and the number of shares for which such options shall
be granted.

      The  total  number of shares of the  Company's  Common  Stock  that may be
purchased pursuant to stock options under the Stock Option Plan shall not exceed
in the aggregate 3.7 million shares.  The option price per share with respect to
each such option  shall be  determined  by the  Compensation,  Organization  and
Nominating Committee but shall be not less than 100% of the fair market value of
the  Company's  Common Stock on the date such option is granted as determined by
the  Compensation,  Organization and Nominating  Committee.  Ordinarily,  twenty
percent of the stock  options vest and become  exercisable  on each of the first
five  anniversaries  of the date of grant,  and all of the options expire in ten
years. The Stock Option Plan terminates in 2004 unless terminated earlier.

      In fiscal year 1999,  an aggregate of 235,000  options  (exclusive  of the
outside  directors'  options and net of stock  options that were both issued and
canceled in the year) were granted to  directors,  officers and other  employees
under the Stock Option Plan to purchase the Company's  shares at exercise prices
ranging from $8.38 to $15 per share.

      In fiscal year 2000,  an aggregate of 788,000  options  (exclusive  of the
outside  directors'  options and net of stock  options that were both issued and
canceled in the year) were granted to  directors,  officers and other  employees
under the Stock Option Plan to purchase the Company's  shares at exercise prices
ranging from $1.63 to $3.25 per share.

      As a result of the foregoing, at the end of fiscal year 2000, after giving
effect to all prior  exercises  and  cancellations  of options,  an aggregate of
2,148,800 options (exclusive of the outside directors' options) were outstanding
at exercise prices ranging from $1.09 to $19.63 per share,  and of such amount a
total of 1,147,280 options were held by directors and executive  officers of the
Company as a group.  Also, an aggregate of 205,000  outside  director's  options
were  outstanding  at exercise  prices  ranging  from $1.50 to $18.75 per share.
During 2000, a total of 71,600  shares were issued upon the exercise of options,
at exercise prices ranging from $1.09 to $6.78 per share. Prior to 2000, a total
of 990,000  shares had been  issued  upon the  exercise  of options at  exercise
prices ranging from $0.57 to $11.00 per share.

      Additional  information with respect to stock options is contained in Note
16 of the  Notes  to the  Consolidated  Financial  Statements  included  in this
filing.

      Information with respect to employees is contained in Item 4 above.


                                       35

<PAGE>


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

CONTROL OF REGISTRANT

(a)   The  registrant is not  controlled by another  corporation  or any foreign
      government.

(b)   The following  table is based on information  available to the Company and
      identifies  the owners of more than five percent (5%) of the  registrant's
      common  stock and the amount of common  stock  owned by the  officers  and
      directors as a group, as of January 1, 2001:

<TABLE>
<CAPTION>
                               Identity of
           Title of Class     Person or Group                     Amount Owned     Percent of Class
           --------------     ---------------                     ------------     ----------------
<S>                           <C>                                   <C>                  <C>
           Common stock       Dito Devcar Corporation et al         7,223,938            41.1%
           Common stock       RAD Partners 1999 LLC et al           1,742,082             9.9%
           Common stock       Robert E. Davids                      1,685,800             9.6%
           Common stock       Officers & Directors as a Group       2,210,882            12.6%

</TABLE>

      In  addition  to  the  foregoing,  the  Company  is  aware  of  one  other
      significant  shareholder  who is believed to own  approximately  5% of the
      Company's  common stock.  This is The John and Mary Hansen 1989 Trust (the
      "Hansen Trust")  (including  shares owned by other Hansen family trusts or
      individuals).

      Over  the  last  three  years,   the  identity  of  the  foregoing   major
      shareholders  has not changed but the relative  percentages  owned by them
      have changed  somewhat.  Since  December 1, 1997,  the amount owned by Mr.
      Davids has decreased by approximately 7 percentage points, and the amounts
      owned by Dito  Devcar  Corporation  and RAD  Partners  have  increased  by
      approximately 18 percentage points and 4 percentage points, respectively.

(c)   There  are  no  arrangements  known  to  the  registrant  which  may  at a
      subsequent date result in a change of control of the registrant.

(d)   As of December 31, 2000, the Company had  approximately 120 record holders
      of its Common Stock,  and  approximately  80% of such stock was held by US
      holders.

INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

      Robert E. Davids, the Hansen Trust,  certain other former stockholders and
the  Company  were  parties  to  a  shareholders  agreement  (the  "Shareholders
Agreement") which provided for certain matters relating to the management of the
Company and ownership of its Common Stock.  In January  1998,  the  Shareholders
Agreement  was amended to  eliminate  provisions  respecting  the  election  and
removal of directors, restrictions on transfer and a right of first refusal. The
registration rights provisions of the Shareholders Agreement remain operative.

      Pursuant to the  Shareholders  Agreement,  the Company has agreed,  at any
time after February 16, 1996 and subject to certain specified conditions, to use
its reasonable efforts to prepare and file one registration  statement on behalf
of each shareholder that is a party to the Shareholders Agreement (collectively,
the "Shareholders")  under the Securities Act of 1933, and to use its reasonable
efforts to qualify the shares for offer and sale under any  applicable  US state
securities laws. The Shareholders Agreement also grants each Shareholder certain
"piggyback"  registration  rights entitling each Shareholder,  at any time after
February  16,  1996,  to sell Common  Stock in certain  registered  offerings of
equity  securities of the Company.  These  "piggyback"  registration  rights are
exercisable by each Shareholder

                                       36

<PAGE>


only twice. The foregoing  registration  rights are subject to other limitations
set forth in the Shareholders  Agreement. In 1997, the Company effected a demand
registration  at the request of Mr. Davids and also included  certain  shares at
the request of the Hansen  Trust.  Such  registration  covered an  aggregate  of
1,855,000 million shares.  In 1999, the Company effected a further  registration
for Mr. Davids that covered 2,815,800 shares.

      Additional information on management  transactions is contained under Item
6 above.

ITEM 8.  FINANCIAL INFORMATION

FINANCIAL STATEMENTS

      Our Consolidated Financial Statements are included herein.

LEGAL PROCEEDINGS

      The company is subject to pending claims and litigation. Management, after
review and  consultation  with counsel,  considers  that any liability  from the
disposition of such lawsuits  would not have a material  adverse effect upon the
consolidated financial condition of the Company.

ITEM 9.  THE OFFER AND LISTING

      The Company's  common stock is traded on the NASDAQ  National Market under
the symbol RADA. The Company's common stock is not traded on any foreign trading
market.  The following table lists the high and low closing stock price for each
quarter of fiscal 2000 and fiscal 1999

                            Fiscal year ended           Fiscal year ended
                            December 31, 1999           December 31, 2000
                           -------------------         -------------------
                            High         Low            High         Low
                           -------     -------         -------      ------
                             $           $               $           $
First Quarter              16           12 3/8         10           6 3/4
Second Quarter             13 5/16       9 1/4          7 1/16      2 11/16
Third Quarter              10 3/4        8 3/8          3 1/2       2 5/8
Fourth Quarter              9 1/2        7 1/4          2 3/4       1 5/8

      The annual high and low closing  stock  prices in fiscal 1998 were $21 and
$10 7/16;  in fiscal 1997 were $15 3/16 and $1 1/16;  and in fiscal 1996 were $2
and $3/4.

      The monthly high and low closing  stock prices over the last six months in
fiscal  2000 were $3 1/2 and $2 15/16 in July 2000;  $3 1/4 and $2 5/8 in August
2000; $2 7/8 and $2 5/8 in September 2000; $2 3/4 and $2 1/8 in October 2000; $2
3/8 and $2 in November 2000; and $2 and $1 5/8 in December 2000.

      Radica Games  Limited was formed in 1994 as a holding  company and has not
paid any dividends. Except to the extent set forth below, the Company intends to
retain its  earnings  for  operations  and  expansion  of its  business  for the
foreseeable  future.  The  payment  of  any  future  dividends  will  be at  the
discretion of the Board of Directors and will depend upon,  among other factors,
the Company's earnings,  financial  condition,  capital requirements and general
business  outlook at the time the payment is considered.  The Company intends to
make cash  distributions at the end of its taxable year at least equal to 50% of
its  foreign  personal  holding  company  income  for any  year in which it is a
personal  foreign  holding  company.  (See Item 10.  Additional  Information  --
Taxation.)

                                       37

<PAGE>


ITEM 10. ADDITIONAL INFORMATION

MEMORANDUM AND BYE-LAWS

      A summary of the Company's  memorandum  and bye-laws and other  provisions
pertaining  to its  common  stock is  contained  in the  Company's  registration
statement on Form F-3 filed with the Securities  and Exchange  Commission on May
21, 1999 (file no.  33-79005).  Such summary in that  registration  statement is
incorporated herein by reference.

EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

      The Company has been  designated as a non-resident of Bermuda for exchange
control purposes by the Bermuda Monetary Authority.

      The  transfer  of  shares  of the  Company  between  persons  regarded  as
non-resident of Bermuda for exchange control purposes and the issue of shares to
or by such persons may be effected  without  specific consent under the Exchange
Control Act 1972 and regulations  thereunder subject to such shares being listed
on the National  Association of Securities Dealers Automated Quotation System or
other  appointed  stock  exchange  (as  defined  in the  Companies  Act  1981 of
Bermuda).  Issues and  transfers  of shares  involving  any person  regarded  as
resident  in Bermuda  for  exchange  control  purposes  require  specific  prior
approval under the Exchange Control Act 1972.

      There are no limitations on the rights of non-Bermuda  resident holders of
the Common  Stock to hold or vote their  shares.  Because  the  Company has been
designated as non-resident for Bermuda exchange control  purposes,  there are no
restrictions  on its ability to  transfer  funds in and out of Bermuda or to pay
dividends to United States residents who are holders of the Common Stock,  other
than in respect of local Bermuda currency.

      In accordance with Bermuda law, share  certificates are only issued in the
names of corporations or  individuals.  In the case of an applicant  acting in a
special capacity (for example, as an executor or trustee),  certificates may, at
the request of the  applicant,  record the  capacity in which the  applicant  is
acting.  Notwithstanding the recording of any such special capacity, the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust.

      The  Company  will take no notice  of any trust  applicable  to any of its
shares whether or not it had notice of such trust.

      As an  exempted  company,  the  Company is exempt  from the usual  Bermuda
requirement  which restricts the percentage of share capital that may be held by
non-Bermudians,  but  as  an  exempted  company  the  Company  may  not,  unless
authorized by its memorandum of association and with the consent of the Minister
of Finance,  participate in certain business  transactions,  including:  (1) the
acquisition  and  holding  of land in  Bermuda  (except  that  required  for its
business and held by way of lease or tenancy for terms of not more than 50 years
or with the Minister's consent,  land by way of lease or tenancy agreement for a
term not exceeding 21 years in order to provide  accommodation  or  recreational
facilities for its officers and employees);  (2) the taking of mortgages on land
in Bermuda to secure an amount in excess of $50,000;  (3) the acquisition of any
bonds or  debentures  secured on any land in Bermuda  except bonds or debentures
issued by the Bermuda  Government or a public authority;  or (4) the carrying on
of business of any kind in Bermuda, except in furtherance of the business of the
Company carried on outside Bermuda or under a license granted by the Minister of
Finance of Bermuda.


                                       38

<PAGE>


TAXATION

      The  following   discussion  is  a  summary  of  certain  anticipated  tax
consequences  of the ownership of Common Stock under Bermuda tax laws, Hong Kong
income tax laws, United Kingdom income tax laws and United States Federal income
tax laws.  The  discussion  does not deal  with all  possible  tax  consequences
relating to the Company's  operations  or to the  ownership of Common Stock.  In
particular,  the discussion does not address the tax  consequences  under State,
local and other  (e.g.,  non-Bermuda,  non-Hong  Kong,  non-United  Kingdom  and
non-United States Federal) tax laws. Accordingly,  each owner should consult his
tax advisor regarding the tax consequences of the ownership of Common Stock. The
discussion is based upon laws and relevant  interpretations thereof in effect as
of the date of this report, all of which are subject to change.

BERMUDA TAXATION

      The Company is incorporated in Bermuda.  At date of this filing,  there is
no Bermuda income,  corporation or profits tax,  withholding  tax, capital gains
tax,   capital   transfer  tax,  estate  duty  or  inheritance  tax  payable  by
shareholders  of the  Company  other than  shareholders  ordinarily  resident in
Bermuda. The Company is not subject to stamp or other similar duty on the issue,
transfer or redemption of its shares of Common Stock.  Furthermore,  the Company
has  received  from the  Minister  of  Finance  of  Bermuda  under The  Exempted
Undertakings  Tax  Protection  Act 1966,  an assurance  that,  in the event that
Bermuda enacts any  legislation  imposing any tax computed on profits or income,
or computed  on any  capital  assets,  gain or  appreciation,  or any tax in the
nature of estate duty or  inheritance  tax, the imposition of such tax shall not
be  applicable  to the  Company  or any of  its  operations,  or to the  shares,
debentures  or other  obligations  of the Company,  until March 28,  2016.  This
assurance does not,  however,  prevent the imposition of any such tax or duty on
such  persons as are  ordinarily  resident in Bermuda and holding  such  shares,
debentures or  obligations of the Company or on land in Bermuda leased or let to
the Company.

         The United States does not have a comprehensive income tax treaty with
Bermuda.

HONG KONG TAXATION

      Under the laws of Hong Kong,  as currently  in effect,  a holder of Common
Stock is not  subject to Hong Kong tax on  dividends  paid with  respect to such
shares  and no  holder  of  Common  Stock is  liable  for Hong Kong tax on gains
realized on sale or other disposition of such Common Stock except that Hong Kong
profits tax may be chargeable on revenue profits,  to the extent that they arise
in or derive from Hong Kong, arising on the sale or disposal of the Common Stock
where such  transactions  are or form part of a trade,  profession  or  business
carried  on in Hong  Kong.  Hong  Kong  does  not  impose a  withholding  tax on
dividends paid by the Company or its subsidiaries. In addition, the Company will
not be subject to Hong Kong taxes as a result of its receipt of  dividends  from
any of its subsidiaries.

      Hong Kong stamp  duty is levied on the  transfer  of Common  Stock of Hong
Kong companies at the rate of 0.03% on the fair  consideration  of the transfer.
For companies not  incorporated in Hong Kong, no stamp duty is chargeable on the
transfer so long as the shareholders' registers are kept outside of Hong Kong.

      Hong Kong also  levies an estate  duty on the estate of a person who holds
Common  Stock in a Hong Kong  company at the time of his death.  No such duty is
levied  where the company is not  incorporated  in Hong Kong and where its share
register is kept outside of Hong Kong.


                                       39

<PAGE>


UNITED STATES FEDERAL INCOME TAXATION

      General. The following is a general discussion of the principal US federal
income tax  consequences  to a US Holder (as defined  below) of the ownership of
Common  Stock and does not  address  the US tax  treatment  of certain  types of
investors (e.g.,  individual  retirement and other tax-deferred  accounts,  life
insurance companies, tax-exempt organizations, dealers in securities, traders in
securities  that  elect  to  mark to  market  and  persons  owning  directly  or
indirectly  (under  constructive  ownership  rules)  10% or more  of the  Common
Stock),  all of whom may be subject to tax rules that differ  significantly from
those summarized below.

      A "US Holder" is a  beneficial  owner of Common Stock that is a US citizen
or resident,  a domestic  corporation,  an estate  subject to US federal  income
taxation on a net income basis in respect of the Common  Stock,  or a trust if a
court within the United States is able to exercise primary  supervision over the
administration  of the  trust and one or more  United  States  persons  have the
authority to control all substantial decisions of the trust.

      Dividends.  Subject to the FPHC discussion  below, a US Holder receiving a
distribution  on Common Stock will be required to include such  distribution  in
gross income as a dividend to the extent such  distribution is paid from current
or  accumulated  earnings  and  profits of the  Company as  determined  under US
federal income tax law.  Distributions  in excess of the earnings and profits of
the Company will be treated, for US federal income tax purposes, as a nontaxable
return on capital to the extent of the US Holder's basis in the Common Stock and
then as gain from the sale or exchange of a capital asset.  Dividend income with
respect to the Common Stock generally will constitute  foreign source  "passive"
income,  or in the case of certain US Holders,  "financial  services" income for
purposes of the foreign tax credit limitation.  A corporate shareholder will not
be eligible for the dividends received deduction.

      Sale or Exchange of Common Stock.  Gain or loss on the sale or exchange of
the Common  Stock by a US Holder  generally  will be treated as capital  gain or
loss and will be  long-term  capital  gain or loss if the US Holder has held the
Common Stock for more than one year at the time of the sale or  exchange.  Gain,
if any,  realized by a US Holder will  generally  be US source  gain.  Long-term
capital gain of a non-corporate US Holder is generally  subject to a maximum tax
rate of 20%.

      FPHC Rules. A foreign corporation will be classified as a foreign personal
holding company ("FPHC") if (i) five or fewer individuals who are US citizens or
residents  directly or indirectly own more than 50% of the  corporation's  stock
(measured  either by voting  power or value) (the  "shareholder  test") and (ii)
more than 50% (or 60%,  in  certain  years) of its gross  income,  as  specially
adjusted, consists of foreign personal holding company income (defined generally
to include dividends,  interest,  royalties, rents, gains from the sale of stock
or securities and certain other types of passive income) (the "income test"). US
citizens or residents, domestic corporations,  domestic partnerships and estates
or trusts other than  foreign  estates or trusts who are  shareholders  of FPHCs
("US  shareholders") are required to include in income the undistributed  income
of a FPHC.

      The Company is not a FPHC because the income test was not met in 2000. The
Company  intends  to manage its  business  such that it will not meet the income
test until such time that it begins to receive  significant  dividends  from its
subsidiaries,  which is not  expected to occur in the  foreseeable  future.  The
Company  would then be a FPHC only if, in the same taxable year, it also met the
shareholder test.

      If the  Company  is a FPHC for any  year,  each US  shareholder  who holds
Common Stock on the last day of the  Company's  taxable year or, if earlier,  on
the last day on which the ownership test is met, would be required to include in
income as a dividend its pro rata share of the Company's  undistributed  foreign


                                       40

<PAGE>


personal holding company income. The shareholder's tax basis in the Common Stock
would be  increased  by the amount  included  in income.  Such  income  would be
taxable to any such US shareholder as a dividend  whether or not  distributed in
cash.  For any  year in  which  the  Company  is a FPHC,  any 5% or  greater  US
shareholder would be required to report on its tax return in complete detail the
gross  income,   deductions  and  credits,   taxable  income,  FPHC  income  and
undistributed  FPHC income of a FPHC.  The Company will furnish any  shareholder
required so to report the information required to be reported. In addition,  any
holder who  acquires  Common  Stock from a decedent  would be denied the date of
death value as the tax basis for such  Common  Stock  (which  would have a basis
equal to the lower of fair market value or the decedent's  basis) if the Company
was a FPHC with  respect  to its  taxable  year next  preceding  the date of the
decedent's death.

      For any year in which  it is a FPHC,  the  Company  intends  to make  cash
distributions  to  shareholders of record on the last day of its taxable year in
an amount at least equal to 50% of its foreign  personal  holding company income
(which amount should be sufficient for  shareholders to pay US federal and state
income  taxes  on such  distributions  and any  undistributed  foreign  personal
holding company income taxable as a dividend).

      PHC Rules. A corporation  (including a foreign  corporation  that is not a
FPHC) will be classified as a personal  holding  company  ("PHC") if (i) five or
fewer individuals (without regard to their citizenship or residence) directly or
indirectly  own  more  than  50%  in  value  of  the  corporation's  stock  (the
"shareholder  test")  and (ii) at least 60% of its  ordinary  gross  income,  as
specially  adjusted,  consists  of  personal  holding  company  income  (defined
generally to include  dividends,  interest,  royalties,  rents and certain other
types of passive income) (the "income  test").  A PHC is subject to a US federal
income  tax of  39.6%  on its  undistributed  personal  holding  company  income
(generally limited, in the case of a foreign corporation, to US source income).

      The  Company  is not a PHC as the  income  test was not met in  2000.  The
Company intends to cause any subsidiary that is a PHC to make distributions on a
basis such that it will not have undistributed personal holding company income.

      CFC Rules.  A foreign  corporation  generally  is treated as a  controlled
foreign  corporation ("CFC") for US federal income tax purposes if more than 50%
of its stock is owned by certain 10% shareholders.  The Company believes that it
is not currently a CFC because such  shareholder  test is not met. The treatment
of the Company as a CFC would not in any event  adversely  affect any person who
owns  (directly or  indirectly  or by  attribution)  less than 10% of the Common
Stock.

      PFIC  Rules.  The Company  believes  that the Common  Stock  should not be
treated as stock of a passive foreign  investment  company (a "PFIC") for United
States  federal  income  tax  purposes,   but  this   conclusion  is  a  factual
determination  made  annually and thus may be subject to change.  If the Company
were to be treated as a PFIC, a gain  realized on the sale or other  disposition
of Common  Stock  would in general  not be treated as a capital  gain,  and a US
Holder would be treated as if such holder had  realized  such a gain and certain
"excess  distributions"  ratably over the holder's holding period for the Common
Stock and would be taxed at the highest tax rate in effect for each such year to
which the gain was allocated, together with an interest charge in respect of the
tax attributable to each such year.

      In general, the Company will be a PFIC with respect to a US Holder if, for
any taxable year in which the US Holder held the Company's Common Stock,  either
(i) at least 75% of the gross  income of the  Company  for the  taxable  year is
passive  income or (ii) at least 50% of the value  (determined on the basis of a
quarterly  average)  of the  Company's  assets is  attributable  to assets  that
produce or are held for the  production  of passive  income.  For this  purpose,
passive income generally includes dividends,


                                       41

<PAGE>


interests,  royalties,  rents (other than certain rents and royalties derived in
the active conduct of a trade or business), annuities and gains from assets that
produce passive income.

DOCUMENTS ON DISPLAY

      The documents  concerning the Company which are referred to in this report
may be inspected  on-line at websites  maintained by the Securities and Exchange
Commission and by private  companies  offering access to the SEC database.  See,
e.g., www.sec.gov.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK DISCLOSURES

      The  following  discussion  about the  Company's  market risk  disclosures
contains forward-looking  statements.  Forward-looking statements are subject to
risks and  uncertainties.  Actual  results  could differ  materially  from those
discussed in the  forward-looking  statements.  The Company is exposed to market
risk related to changes in interest rates and foreign  currency  exchange rates.
The  Company  does  not  have  derivative  financial  instruments  for  hedging,
speculative, or trading purposes.

INTEREST RATE SENSITIVITY

      The  Company's  long-term  loan  agreement is based upon the US$ Singapore
Interbank  Offered  Rate  ("SIBOR")  and, as such,  is  sensitive  to changes in
interest rates. The Company has not used derivative financial instruments in its
indebtedness.  At December 31, 2000, the result of a hypothetical one percentage
change in the underlyng  US$ SIBOR rates would have  resulted in an  approximate
$0.1 million change in the annual amount of interest payable on such debt.

FOREIGN CURRENCY RISK

      The  Company  has net  monetary  asset and  liability  balances in foreign
currencies  other  than the U.S.  dollar,  including  the  Pound  Sterling,  the
Canadian  dollar,   the  Hong  Kong  dollar  and  the  Renminbi.   International
distribution and sales revenues  usually are made by the Company's  subsidiaries
in the United States,  United Kingdom and Canada, and are denominated  typically
in their local currency.  However,  the expenses incurred by these  subsidiaries
are also denominated in the local currency.  As a result,  the operating results
of the  Company  are  exposed to changes in  exchange  rates  between the United
States Dollar and the Pound  Sterling or the Canadian  dollar.  The Company does
not currently hedge its foreign  exchange risk, which is not significant at this
time.   The  Company   will   continue  to  monitor  its  exposure  to  currency
fluctuations,  and, where  appropriate,  may use financial hedging techniques in
the  future  to  minimize  the  effect  of these  fluctuations.  There can be no
assurance  that  exchange  rate  fluctuations  will not harm the business in the
future.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

      Not Applicable

                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND AVERAGES AND DELINQUENCIES

      None


                                       42
<PAGE>


ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
           OF PROCEEDS

      None or Not Applicable

ITEM 15.   RESERVED

ITEM 16.   RESERVED

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS

         Not Applicable

ITEM 18.  FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS                                              PAGE

         Independent Auditors' Report                                       F-1

         Consolidated Balance Sheets                                        F-2

         Consolidated Statements of Operations                              F-3

         Consolidated Statements of Shareholders' Equity                    F-4

         Consolidated Statements of Cash Flows                              F-5

         Notes to the Consolidated Financial Statements                     F-7

ITEM 19. EXHIBITS

         *   3.1     Memorandum of Association

         *   3.2     Bye-Laws

         *   3.3     Certificate of Incorporation on Change of Name

         *   4.1     Specimen Certificate for the Shares of Common Stock

         *  10.1     Processing  Agreement,  dated December 4, 1991,  between
                     Radica HK and foreign Economic  Development Co. of Humen
                     Town, Dongguan, relating to the Tai Ping Factory

         *  10.2     Processing  Agreement,  dated December 27, 1993, between
                     Radica HK and Foreign Economic  Development Co. of Humen
                     Town, Dongguan

                                       43

<PAGE>


         @  10.3     Cooperative  Joint Venture Contract of D.G. Radica Games
                     Manufacturing  Co.,  Ltd.,  dated  June  24,  1994  (see
                     exhibit 10.16 to 20-F for year ended October 31, 1994)

         *  10.4     Shareholders  Agreement,  dated January 12, 1994,  among
                     the Company and the shareholders parties thereto

         *  10.5     Amendment  to  Shareholders   Agreement,   dated  as  of
                     February   16,   1994,   among  the   Company   and  the
                     shareholders party thereto.

         ** 10.5(a)  Amendment  to  Shareholders   Agreement,   dated  as  of
                     September   5,   1997,   among  the   Company   and  the
                     shareholders party thereto.

         *  10.8     Employment  Agreement,  dated as of November  28,  1993,
                     among Radica HK, Radica USA and Jon N. Bengtson

         *  10.8(a)  Form of Amendment to Employment  Agreement  among Radica
                     Games  Limited,   Radica  HK,  Radica  USA  and  Jon  N.
                     Bengtson.

         #  10.8(b)  December 1995 Amendment to such Employment Agreement.

         ~  10.8(c)  December 1997 Amendment to such Employment Agreement.

            10.9     1994  Stock  Option  Plan,  as most  recently  amendment
                     restated in May 2000 to increase options

            10.11    Amendment and Restatement to Employment  Agreement among
                     Radica USA, Radica Games Limited and Patrick Feely dated
                     September 27, 2000

            10.13    Amendment  and   Restatement  to  Employment   Agreement
                     between Radica Games Limited and David C.W. Howell dated
                     September 29, 2000

            10.14    Amendment  and   Restatement  to  Employment   Agreement
                     between  Radica  Games  Limited  and Siu Wing Lam  dated
                     October 4, 2000

            10.15    Amendment  and   Restatement  to  Employment   Agreement
                     between  Radica  Games  Limited and Neil  Doughty  dated
                     September 29, 2000

         ## 10.16    Share  Purchase  Agreement  dated as of June  24,  1999,
                     relating to the  acquisition  of the entire issued share
                     capital of Leda Media  Products  Limited  (now Radica UK
                     Limited).

            11.1     Statement re Computation of Per Share Earnings

            12.1     Statement re Selected Quarterly Financial Data

            21.1     List of subsidiaries

            23.1     Consent of Deloitte Touche Tohmatsu

                                       44
<PAGE>


*     Incorporated by reference to Registration  Statement on Form F-1, File No.
      33-75794 filed by the Registrant.

@     Incorporated  by  reference  to Form 20-F for the year ended  October  31,
      1994.

#     Incorporated  by  reference  to Form 20-F for the year ended  October  31,
      1996.

~     Incorporated  by  reference  to Form 20-F for the year ended  October  31,
      1997.

**    Incorporated  by  reference  to Form 20-F for the year ended  October  31,
      1998.

##    Incorporated  by  reference  to Form 20-F for the year ended  October  31,
      1999.

The other exhibits not footnoted are included as part of this filing.


                                       45

<PAGE>

                              RADICA GAMES LIMITED

                        CONSOLIDATED FINANCIAL STATEMENTS










                                                                        Page
                                                                        ----

    Independent Auditors' Report .....................................   F-1

    Consolidated Balance Sheets ......................................   F-2

    Consolidated Statements of Operations ............................   F-3

    Consolidated Statements  of Shareholders' Equity  ................   F-4

    Consolidated Statements of Cash Flows ............................   F-5

    Notes to the Consolidated Financial Statements ...................   F-7







<PAGE>



                          INDEPENDENT AUDITORS' REPORT



To the Shareholders and Directors of Radica Games Limited


         We have audited the accompanying  consolidated balance sheets of Radica
Games Limited and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
the years ended  December 31, 2000 and 1999,  the two months ended  December 31,
1998 and the year ended October 31, 1998.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

         In our  opinion,  such  financial  statements  present  fairly,  in all
material   respects,   the  financial  position  of  Radica  Games  Limited  and
subsidiaries  as of  December  31,  2000  and  1999,  and the  results  of their
operations  and their cash flows for the years ended December 31, 2000 and 1999,
the two months ended  December 31, 1998 and the year ended  October 31, 1998, in
conformity with accounting principles generally accepted in the United States of
America.




/S/ Deloitte Touche Tohmatsu

HONG KONG
February 12, 2001


                                      F-1

<PAGE>

<TABLE>
<CAPTION>
                                     RADICA GAMES LIMITED
                                 CONSOLIDATED BALANCE SHEETS


                                     ASSETS
(US Dollars in thousands, except share data)                      December 31,  December 31,
                                                                  ------------  ------------
                                                                      2000         1999
                                                                  ------------  ------------
<S>                                                                 <C>         <C>
Current assets:
Cash and cash equivalents                                           $ 23,097    $ 32,159
Accounts receivable, net of allowances for doubtful accounts
  of $2,073 ($389 at Dec. 31, 1999)                                   25,931      23,750
Inventories, net of provision of $5,788 ($2,339 at Dec. 31, 1999)     13,971      24,625
Prepaid expenses and other current assets                              1,574       4,752
Income taxes receivable                                                4,277       1,257
Deferred income taxes                                                    223       3,746
                                                                  ------------  ------------

        Total current assets                                          69,073      90,289
                                                                  ------------  ------------

Property, plant and equipment, net                                    17,975      17,523
                                                                  ------------  ------------

Intangible assets, net of accumulated amortization
  of $6,976 ($4,317 at Dec. 31, 1999)                                 11,353      14,351
                                                                  ------------  ------------

Deferred income taxes, noncurrent                                        993          11
                                                                  ------------  ------------

        Total assets                                                $ 99,394    $122,174
                                                                  ============  ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings                                               $  3,780    $  1,464
Current portion of long-term debt                                      3,648       1,399
Accounts payable                                                       7,077      10,929
Accrued warranty expenses                                                950       1,100
Accrued payroll and employee benefits                                    950       2,511
Other accrued liabilities                                              9,834       7,614
Income taxes payable                                                     215          70
Deferred income taxes                                                     79          79
                                                                  ------------  ------------

        Total current liabilities                                     26,533      25,166
                                                                  ------------  ------------

Long-term debt                                                         5,473      10,946
                                                                  ------------  ------------

        Total liabilities                                             32,006      36,112
                                                                  ------------  ------------

Shareholders' equity:
Common stock
  par value $0.01 each, 100,000,000 shares authorized,
  17,564,297 shares outstanding (17,639,594 at Dec. 31, 1999)            176         176
Additional paid-in capital                                             1,855       1,757
Retained earnings                                                     65,386      84,100
Accumulated translation adjustment                                       (29)         29
                                                                  ------------  ------------

       Total shareholders' equity                                     67,388      86,062
                                                                  ------------  ------------

       Total liabilities and shareholders' equity                   $ 99,394    $122,174
                                                                  ============  ============
<FN>
               See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>

                                             F-2
<PAGE>

<TABLE>
<CAPTION>
                                                        RADICA GAMES LIMITED
                                               CONSOLIDATED STATEMENTS OF OPERATIONS


(US Dollars in thousands,                                                  Year ended            Two months ended       Year ended
 except per share data)                                                   December 31,              December 31,        October 31,
                                                              --------------------------------      -------------      -------------
                                                                   2000               1999              1998               1998
                                                              -------------      -------------      -------------      -------------

<S>                                                           <C>                <C>                <C>                <C>
Revenues:
Net sales                                                     $    103,381       $    133,522       $     21,071       $    155,618
Cost of sales                                                      (80,232)           (78,229)           (10,717)           (70,576)
                                                              -------------      -------------      -------------      -------------
Gross profit                                                        23,149             55,293             10,354             85,042
                                                              -------------      -------------      -------------      -------------

Operating expenses:
Selling, general and administrative expenses                       (32,273)           (28,049)            (3,657)           (27,788)
Research and development                                            (5,210)            (6,036)              (730)            (3,710)
Depreciation and amortization                                       (5,427)            (4,956)              (612)            (3,423)
Restructuring charge                                                (1,190)              --                 --               (1,500)
                                                              -------------      -------------      -------------      -------------
Total operating expenses                                           (44,100)           (39,041)            (4,999)           (36,421)
                                                              -------------      -------------      -------------      -------------

Operating (loss) income                                            (20,951)            16,252              5,355             48,621

Other income                                                         1,287              1,231                471                807

Share of loss of affiliated company                                   --               (1,748)              (120)              (334)

Net interest income                                                    664              1,469                289              1,896
                                                              -------------      -------------      -------------      -------------

(Loss) income before income taxes                                  (19,000)            17,204              5,995             50,990

Credit (provision) for income taxes                                    901               (149)              (176)               266
                                                              -------------      -------------      -------------      -------------

Net (loss) income                                             $    (18,099)      $     17,055       $      5,819       $     51,256
                                                              =============      =============      =============      =============

(Loss) earnings per share - basic:

Net (loss) earnings per share                                 $      (1.03)      $       0.94       $       0.31       $       2.53
                                                              =============      =============      =============      =============

Weighted average number of shares                               17,608,167         18,144,179         18,883,455         20,239,790
                                                              =============      =============      =============      =============

(Loss) earnings per share - assuming dilution:

Net (loss) earnings per share and
  dilutive potential common stock                             $      (1.03)      $       0.90       $       0.29       $       2.39
                                                              =============      =============      =============      =============

Weighted average number of shares and dilutive
   potential common stock used in computation                   17,608,167         18,979,349         20,094,489         21,488,364
                                                              =============      =============      =============      =============

<FN>
                                  See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>

                                                                F-3
<PAGE>

<TABLE>
<CAPTION>
                                                        RADICA GAMES LIMITED
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                      (US dollars in thousands

                                                     Common stock
                                                     ------------                                      Accumulated
                                                                           Additional                      other          Total
                                                Number                      paid-in        Retained    comprehensive   shareholders'
                                              of shares        Amount       capital        earnings    income (loss)      equity
                                              ----------    ------------   ------------   ------------ --------------   ------------

<S>                                           <C>           <C>            <C>            <C>            <C>            <C>
Balance at October 31, 1997                   20,860,200    $       209    $    28,589    $    32,800    $        (5)   $    61,593
Issuance of stock                                190,094              2          3,598           --             --            3,600
Cancellation of repurchased stock             (2,610,400)           (26)       (23,901)       (13,660)          --          (37,587)
Stock options exercised                          424,400              4          1,012           --             --            1,016
Net income                                          --             --             --           51,256           --           51,256
Foreign currency translation                        --             --             --             --              (39)           (39)
                                              ----------    ------------   ------------   ------------ --------------   ------------

Balance at October 31, 1998                   18,864,294    $       189    $     9,298    $    70,396    $       (44)   $    79,839
Stock options exercised                           32,400           --               84           --             --               84
Net income                                          --             --             --            5,819           --            5,819
Foreign currency translation                        --             --             --             --               (7)            (7)
                                              ----------    ------------   ------------   ------------ --------------   ------------

Balance at December 31, 1998                  18,896,694    $       189    $     9,382    $    76,215    $       (51)   $    85,735
Cancellation of repurchased stock             (1,538,500)           (16)        (8,821)        (9,170)          --          (18,007)
Stock options exercised                          281,400              3            529           --             --              532
Grant of warrants                                   --             --              667           --             --              667
Net income                                          --             --             --           17,055           --           17,055
Foreign currency translation                        --             --             --             --               80             80
                                              ----------    ------------   ------------   ------------ --------------   ------------

Balance at December 31, 1999                  17,639,594    $       176    $     1,757    $    84,100    $        29    $    86,062
Issuance of stock                                  9,158           --               23           --             --               23
Cancellation of repurchased stock               (156,055)            (1)           (25)          (615)          --             (641)
Stock options exercised                           71,600              1            100           --             --              101
Net loss                                            --             --             --          (18,099)          --          (18,099)
Foreign currency translation                        --             --             --             --              (58)           (58)
                                              ----------    ------------   ------------   ------------ --------------   ------------

Balance at December 31, 2000                  17,564,297    $       176    $     1,855    $    65,386    $       (29)   $    67,388
                                              ==========    ============   ============   ============ ==============   ============


The comprehensive (loss) income of the Company, which represents the aggregate of the net (loss) income and the foreign currency
translation adjustments, was $(18,157), $17,135, $5,812 and $51,217 for the years ended December 31, 2000 and 1999, the two months
ended December 31, 1998 and the fiscal year ended October 31, 1998, respectively.

<FN>
                                  See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>


                                                                F-4

<PAGE>


<TABLE>
<CAPTION>
                                                        RADICA GAMES LIMITED
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (US dollars in thousands)

                                                                       Year ended       Year ended   Two months ended    Year ended
                                                                       December 31,    December 31,    December 31,      October 31,
                                                                       ------------    ------------    ------------      -----------
                                                                           2000            1999            1998             1998
                                                                       ------------    ------------    ------------      -----------
<S>                                                                     <C>              <C>              <C>              <C>
Cash flow from operating activities:
Net (loss) income                                                       $(18,099)        $ 17,055         $  5,819         $ 51,256
Adjustments to reconcile net (loss) income to net cash
  (used in) provided by operating activities:
  Deferred income taxes                                                    2,541               82              795           (4,634)
  Depreciation                                                             2,601            2,389              362            1,923
  Amortization                                                             2,826            2,567              250            1,500
  Share of loss of affiliated company                                       --              1,748              120              334
  Acquired research and development                                         --               --               --              1,500
  Loss on disposal and write off of
    property, plant and equipment                                             10               62                1               22
  Changes in assets and liabilities:
    Accounts receivable                                                   (2,181)          (7,601)          18,389          (14,509)
    Inventories                                                           10,654           (2,986)           1,240           (9,793)
    Prepaid expenses and other current assets                              3,178           (3,572)              85             (445)
    Accounts payable                                                      (3,852)           3,365           (4,783)           3,485
    Accrued payroll and employee benefits                                 (1,561)            (177)            (822)           2,261
    Commissions payable                                                       33             (300)            (680)             529
    Accrued advertising expenses                                             181             (105)          (4,870)           5,460
    Accrued license and royalties                                          1,297            1,043             (162)             219
    Accrued sales expenses                                                 1,977           (2,742)             282            2,062
    Accrued warranty expenses                                               (150)          (1,400)              30              309
    Other accrued expenses                                                (1,268)           1,351             (309)            (272)
    Income taxes                                                          (2,875)          (2,286)            (668)           1,852
                                                                       ------------    ------------    ------------      -----------

Net cash (used in) provided by operating activities                       (4,688)           8,493           15,079           43,059
                                                                       ------------    ------------    ------------      -----------

Cash flow from investing activities:
Decrease (increase) in short-term investments                               --               --               --              2,050
Proceeds from sale of property, plant and equipment                           75               47               35               33
Purchase of property, plant and equipment                                 (3,138)          (3,306)            (805)          (5,532)
Purchase of Radica UK, net of cash acquired                                 --             (2,511)            --               --
Purchase of intangible assets                                             (1,260)            --               --             (2,400)
Investment in affiliated company                                            --             (1,045)            --               (963)
                                                                       ------------    ------------    ------------      -----------

Net cash used in investing activities                                     (4,323)          (6,815)            (770)          (6,812)
                                                                       ------------    ------------    ------------      -----------

</TABLE>

                                                                F-5

<PAGE>


<TABLE>
<CAPTION>
                                                        RADICA GAMES LIMITED
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (US dollars in thousands)

                                                                       Year ended       Year ended   Two months ended    Year ended
                                                                       December 31,    December 31,    December 31,      October 31,
                                                                       ------------    ------------    ------------      -----------
                                                                           2000            1999            1998             1998
                                                                       ------------    ------------    ------------      -----------
<S>                                                                     <C>              <C>              <C>              <C>
Cash flow from financing activities:
Repurchase of common stock                                              $   (641)        $(18,007)        $   --           $(37,587)
Funds from issuance of stock                                                  23             --               --               --
Funds from stock options exercised                                           101              532               84            1,016
Increase in short-term borrowings                                          2,316              349             --               --
Proceeds from bank loan                                                   10,945             --               --               --
Repayment of long-term debts                                             (12,737)            --               --               --
                                                                       ------------    ------------    ------------      -----------

Net cash (used in) provided by financing activities                            7          (17,126)              84          (36,571)
                                                                       ------------    ------------    ------------      -----------

Effect of currency exchange rate change                                      (58)              80               (7)             (39)
                                                                       ------------    ------------    ------------      -----------

Net (decrease) increase in cash and cash equivalents                      (9,062)         (15,368)          14,386             (363)

Cash and cash equivalents:
  Beginning of period                                                     32,159           47,527           33,141           33,504
                                                                       ------------    ------------    ------------      -----------

  End of period                                                         $ 23,097         $ 32,159         $ 47,527         $ 33,141
                                                                       ============    ============    ============      ===========

Supplementary disclosures of cash flow information:
Cash paid during the period:
  Interest                                                              $    797         $    331         $   --           $     61
  Income taxes                                                               109            1,983             --              2,381

Non-cash investing and financing activities:
  Loan notes forfeited                                                  $  1,399         $   --           $   --           $   --
  Inventory exchanged for advertising and development
    of Internet arcade game                                                  177             --               --               --
  Loan notes for purchase of Radica UK                                      --             12,345             --               --
  Grant of warrants                                                         --                667             --               --


<FN>
                                  See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>

                                                                F-6

<PAGE>




                              RADICA GAMES LIMITED
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                            (US dollars in thousands)

1.   ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS

     The Company designs,  develops,  manufactures and markets a diverse line of
     electronic  entertainment  devices  including  handheld and tabletop games,
     high-tech  toys,  video game  controllers  and  peripherals,  and  internet
     enabled appliances.

     The consolidated  financial  statements include the accounts of the Company
     and  its  subsidiaries.   All  significant  intercompany  transactions  and
     balances have been  eliminated.  The  accompanying  consolidated  financial
     statements  have been prepared in  accordance  with  accounting  principles
     generally  accepted in the United States of America and are presented in US
     dollars.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash and cash equivalents - Cash and cash equivalents include cash on hand,
     cash accounts,  interest-bearing savings accounts, and time certificates of
     deposit with a maturity at purchase date of three months or less.

     Inventories  - Inventories  are stated at the lower of cost,  determined by
     the weighted  average  method,  or market value.  Provision for potentially
     obsolete or slow-moving inventory is made based on management's analysis of
     inventory levels and future expected sales.

     Depreciation   and   amortization  of  property,   plant  and  equipment  -
     Depreciation  is provided on the  straight-line  method at rates based upon
     the estimated  useful lives of the property,  generally not more than seven
     years except for leasehold  land and buildings  which are 50 years or where
     shorter,  the  remaining  term of the lease,  by equal annual  instalments.
     Costs of leasehold  improvements  and leased assets are amortized  over the
     life of the related asset or the term of the lease, whichever is shorter.

     Upon sale or retirement,  the costs and related accumulated depreciation or
     amortization are eliminated from the respective  accounts and any resulting
     gain or loss is included in income.

     Intangible assets - Intangible assets primarily represent the excess of the
     purchase  price of acquisition of a business over the fair value of the net
     assets  acquired  ("goodwill").   Intangible  assets  also  represent  cost
     allocated to brand names and sublicensing rights. Such assets are amortized
     on a straight-line basis over the period estimated to be benefited, but not
     to exceed 20 years. The carrying value of intangible assets is periodically
     reviewed by the  Company and  impairments  are  recognized  when there is a
     permanent diminution in value.

     Revenue  recognition - Revenues are recognized as sales when merchandise is
     shipped.  The Company  permits the return of damaged or defective  products
     and accepts limited amounts of product returns in certain other  instances.
     Accordingly,  the Company provides  allowances for the estimated amounts of
     these  returns  at the time of  revenue  recognition,  based on  historical
     experience adjusted for known trends.


                                      F-7

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
     Accounting Bulletin No. 101, "Revenue Recognition in Financial  Statements"
     ("SAB 101"). This bulletin  established  guidelines for applying  generally
     accepted   accounting   principles  to  revenue  recognition  in  financial
     statements.  The  adoption  of SAB 101  did  not  have  any  impact  on the
     Company's consolidated financial statements.

     Investments  - Debt  securities  which the  Company  has both the  positive
     intent and ability to hold to maturity are  classified as  held-to-maturity
     and carried at amortized cost. Debt securities which might be sold prior to
     maturity are  classified as  available-for-sale  and carried at approximate
     fair  value.   Any  material   unrealized   gains  and  losses  related  to
     available-for-sale  investments,  net of applicable  taxes, are reported in
     other   comprehensive   income.  The  Company  determines  the  appropriate
     classification  of securities  at the time of purchase and  evaluates  such
     classification as of each balance sheet date.

     Income taxes - Income taxes are  provided  based on an asset and  liability
     approach for financial  accounting and reporting of income taxes.  Deferred
     income  tax   liabilities  or  assets  are  recorded  to  reflect  the  tax
     consequences  in future years of  differences  between the taxable basis of
     assets and liabilities and the financial  reporting  amounts at each period
     end using rates  currently in effect.  A valuation  allowance is recognized
     for any  portion of the  deferred  tax asset for which  realization  is not
     likely.

     Advertising - The production costs of advertising are expensed as incurred.
     The cost of communicating  advertising is expensed by the Company the first
     time that the  advertising  takes place.  In addition,  the Company  offers
     discounts  to  customers  who  advertise  Radica   products.   These  Co-op
     advertising  costs associated with customer benefit programs are accrued as
     the related  revenues  are  recognized.  Total  advertising  expenses  were
     approximately $11,100, $8,900, $400 and $9,100 for the years ended December
     31, 2000 and 1999,  the two months  ended  December 31, 1998 and the fiscal
     year ended October 31, 1998, respectively.

     Foreign  currency  translation - Assets and liabilities of foreign currency
     are  translated  into US dollars using the exchange  rates in effect at the
     balance  sheet  date.  Revenues  and  expenses  in foreign  currencies  are
     translated  into US dollars  using  average  rates of  exchange  prevailing
     during each reporting period. Gains and losses from translation adjustments
     are included in  stockholders'  equity in the  consolidated  balance  sheet
     caption "Accumulated  translation  adjustment".  Currency transaction gains
     and losses are  recognized in operations  and have not been  significant to
     the Company's operating results in any period.


                                      F-8
<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Mold costs - The  Company  expenses  all mold costs in the year of purchase
     or, for internally produced molds, in the year of construction.

     Post-retirement and post-employment benefits - The Company does not provide
     post-retirement   benefits   other   than   pensions   to   employees   and
     post-employment benefits are immaterial.

     Warranty - Future  warranty  costs are  provided for at the time of revenue
     recognition  based on  management's  estimate by  reference  to  historical
     experience adjusted for known trends.

     Stock-based  compensation - The Company follows Accounting Principles Board
     Opinion No. 25,  "Accounting  for Stock  Issued to  Employees"  and related
     interpretations  in accounting for its employee  stock  options.  Pro forma
     information  regarding net income (loss) and net income (loss) per share is
     disclosed  as required  by  Statement  of  Financial  Accounting  Standards
     ("SFAS") No. 123, "Accounting for Stock-Based Compensation".

     Earnings  (loss)  per  share -  Earnings  (loss)  per share is based on the
     weighted  average  number of shares of common stock and dilutive  potential
     common stock  outstanding.  Dilutive  potential  common stock  results from
     dilutive stock options.  The effect of such dilutive potential common stock
     on net income per share is computed  using the treasury  stock method.  All
     potentially  dilutive securities were excluded from the computation in loss
     period as their inclusion would have been anti-dilutive.

     Comprehensive  income (loss) - Other comprehensive  income (loss) refers to
     revenues,   expenses,  gains  and  losses  that  under  generally  accepted
     accounting  principles are included in comprehensive  income (loss) but are
     excluded from net income  (loss) as these amounts are recorded  directly as
     an adjustment to stockholders'  equity.  The Company's other  comprehensive
     income (loss) represented foreign currency translation adjustments.

     Use of estimates - The  preparation  of financial  statements in conformity
     with  accounting  principles  generally  accepted  in the United  States of
     America  requires  management to make estimates and assumptions that affect
     reported amounts of certain assets,  liabilities,  revenues and expenses as
     of and for the  reporting  periods.  Actual  results  may differ  from such
     estimates. Differences from those estimates are recorded in the period they
     become known.


                                      F-9

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     New  Accounting  Pronouncement  - In June 1998,  the  Financial  Accounting
     Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments
     and  Hedging  Activities".   This  statement  established   accounting  and
     reporting   standards  for  derivative   instruments,   including   certain
     derivative  instruments  embedded  in  other  contracts,  and  for  hedging
     activities.  SFAS 133 requires all  companies to recognize  derivatives  as
     either assets or  liabilities  in the  statement of financial  position and
     measure those  instruments  at fair value.  This statement is effective for
     fiscal  years  beginning  after June 15, 2000.  In June 2000,  SFAS 133 was
     amended by SFAS 138, which amended or modified  certain issues discussed in
     SFAS 133.  SFAS 138 is also  effective  for all fiscal  quarters  of fiscal
     years  beginning after June 15, 2000. The Company does not expect that SFAS
     133 and SFAS 138 will have a material impact on its consolidated  financial
     statements as the Company currently does not hold any derivative  financial
     instruments.

     Reclassifications  -  Certain  reclassifications  have  been  made to prior
     period amounts to conform to the current year's presentation.

3.   INVENTORIES

     Inventories by major categories are summarized as follows:

                          December 31,       December 31,
                              2000               1999
                         ---------------    ----------------

     Raw materials              $ 2,643             $ 5,397
     Work in progress             3,138               5,166
     Finished goods               8,190              14,062
                         ---------------    ----------------
                               $ 13,971            $ 24,625
                         ===============    ================


4.   INVESTMENT

     In 1997, the Company  purchased  approximately  35% of the capital stock of
     Sharegate, Inc, a private company incorporated in Nevada, the United States
     of America,  ("Sharegate")  for one million  dollars in cash.  In addition,
     following  Sharegate's  refinancing in 1998 and 1999, the Company  invested
     two  million  dollars in  Sharegate.  The  Company  has  accounted  for its
     investment in Sharegate under the equity method of accounting.  As a result
     of losses incurred at Sharegate,  the Company  recognized charges for share
     of losses of affiliated company in its consolidated  financial  statements.
     As of December 31, 1999, the balance in the investment  associated with the
     share of losses totaled approximately $0.


                                      F-10

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

4.   INVESTMENT (Continued)

     Sharegate has raised various  amounts of venture  financing  through bridge
     loan.  Pursuant  to the  terms of the  financing,  the  bridge  loans  were
     converted to capital  stock in 2000. As a result,  the Company's  ownership
     interest  was diluted to  approximately  20%.  And the Company is no longer
     able to exercise  significant  influence  over the operations of Sharegate.
     The Company's  investment in Sharegate that previously was accounted for by
     the equity method has become  qualified  for use of the cost method.  As of
     December 31, 2000, the balance in the investment was zero.

5.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following:

                                         December 31,       December 31,
                                             2000               1999
                                        ---------------    ----------------

     Land and buildings                       $ 12,296            $ 12,261
     Plant and machinery                         6,853               7,385
     Furniture and equipment                     7,328               6,124
     Leasehold improvements                      2,727               2,562
     Construction in progress                    1,079                   -
                                        ---------------    ----------------
       Total                                  $ 30,283            $ 28,332
     Less: Accumulated depreciation
          and amortization                     (12,308)            (10,809)
                                        ---------------    ----------------
       Total                                  $ 17,975            $ 17,523
                                        ===============    ================



                                      F-11
<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

6.   ACQUISITION

     On June 24, 1999,  the Company  acquired Leda Media Products  Limited,  now
     called Radica U.K.  Limited  ("Radica UK"),  the leading  supplier of third
     party video game controllers in the United Kingdom.  The Company  purchased
     Radica UK for  approximately  $15,970.  The acquisition  price consisted of
     cash  payment  of  approximately  $2,510,   assumption  of  Radica  UK  net
     indebtedness of approximately  for $1,115 and issuance of notes payable for
     $12,345.  During the quarter  ended June 30, 2000,  upon  claiming  certain
     breaches of warranty at Radica UK, the Company and the  ex-shareholders  of
     Radica UK  mutually  agreed  to cancel  certain  loan  notes  such that the
     purchase  price was  reduced by  $1,399.  The  Company  has  recorded  this
     transaction as an adjustment to the purchase  price.  The  acquisition  has
     been accounted for using the purchase  method.  The purchase price has been
     allocated to the assets acquired and liabilities assumed based on estimates
     of fair values as of the acquisition date. The Company recorded goodwill of
     approximately  $12,100 resulting in the adjusted  aggregate purchase price.
     The  goodwill is being  amortized on a  straight-line  basis over a fifteen
     year fiscal period.

     The pro forma  results of  operation  have not been  presented  because the
     effect of the  acquisition  was not material to the Company's  consolidated
     financial statements.

7.   INTANGIBLE ASSETS

     As of December 31, 2000,  intangible assets primarily related to the excess
     of purchase price over the estimated  fair value of net assets  acquisition
     of  Radica  UK.  See  Note 6 of the  Notes  to the  Consolidated  Financial
     Statements.  During the year of 2000, the Company  entered into a licensing
     agreement  with  Shinsedai  Co.,  Ltd.  ("SSD") for the rights to use their
     patented  XaviX(R)  technology.  As part of its  agreement  with  SSD,  the
     Company became an exclusive  sublicensing agent for the XaviX(R) technology
     in the North American  market for use in  entertainment  applications.  The
     fair value of the exclusive  sublicensing right of $1,260 has been recorded
     as an intangible asset,  which is being amortized on a straight-line  basis
     over a three year fiscal period.

     During the year of 1999, warrants on 375,000 shares of the Company's common
     stock were  granted to  Electronic  Arts ("EA") upon signing of a worldwide
     licensing  agreement.  A total of $667 was recorded as an intangible  asset
     based on the fair value of the  warrant.  As of  December  31,  2000,  upon
     estimated  future cash flows that the asset is expected  to  generate,  the
     Company  recognized an impairment and revised the estimated useful lives of
     this intangible asset. The effect of this change resulted in an increase in
     the current year amortization expense of $167. As of December 31, 2000, the
     asset of $166 remained to be amortized in 2001.

     Amortization expenses of intangible assets totaled $2,826, $2,567, $250 and
     $1,500 for the years ended December 31, 2000 and 1999, the two months ended
     December 31, 1999 and the year ended October 31, 1998, respectively.


                                      F-12

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

8.   SHORT-TERM BORROWINGS

     As of December 31, 2000,  the Company had  line-of-credit  agreements  with
     various banks that provided for borrowings of up to  approximately  $8,000,
     including amounts available for uncommitted credit facilities, the issuance
     of letters of credit and foreign currency exchange activity.  Substantially
     all of the short-term borrowings outstanding as of December 31, 2000 and as
     of December 31, 1999  represent  borrowings  made under,  or supported  by,
     these  lines  of  credit.   The  weighted  average  interest  rate  of  the
     outstanding  borrowing  was  approximately  six  percent for the year ended
     December 31, 2000.

9.   OTHER ACCRUED LIABILITIES

     Other accrued liabilities consist of the following:

                                        December 31,       December 31,
                                            2000               1999
                                       ---------------    ----------------

     Accrued advertising expenses             $ 1,384             $ 1,203
     Accrued license and royalties              2,397               1,100
     Accrued sales expenses                     2,833                 856
     Commissions payable                          497                 464
     Other accrued expenses                     2,723               3,991
                                       ---------------    ----------------
          Total                               $ 9,834             $ 7,614
                                       ===============    ================



                                      F-13

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)


10.  INCOME TAXES

     The components of (loss) income before income taxes are as follows:

                       Year ended     Year ended   Two months ended  Year ended
                       December 31,   December 31,   December 31,    October 31,
                           2000          1999            1998            1998
                       ------------   ------------ ----------------  -----------

     United States       $(20,240)       $ (1,349)       $    827       $ 11,579
     International          1,240          18,553           5,168         39,411
                       ------------   ------------ ----------------  -----------
                         $(19,000)       $ 17,204        $  5,995       $ 50,990
                       ============   ============ ================  ===========


     As the Company's  subsidiary in the People's Republic of China ("PRC") is a
     sino-foreign joint venture enterprise, it is eligible for an exemption from
     income  tax for two  years  starting  from  the  first  profitable  year of
     operations  and  thereafter  a 50 percent  relief  from  income tax for the
     following  three years under the Income Tax Law of the PRC. That subsidiary
     had its first  profitable year of operations in the year ended December 31,
     1997 and the 2000  effective  tax rate was  12%.  In  addition,  under  the
     existing  processing  arrangement  and in  accordance  with the current tax
     regulations in the PRC,  manufacturing  income  generated in the PRC is not
     subject to PRC income taxes.

     The (credit) provisions for income taxes consist of the following:

<TABLE>
<CAPTION>
                                                    Year ended        Year ended       Two months ended      Year ended
                                                   December 31,       December 31,       December 31,        October 31,
                                                       2000               1999               1998               1998
                                                  ---------------    ----------------   ---------------    ---------------
<S>                                                   <C>                 <C>               <C>                 <C>
Current:
         US federal and state                         $(3,236)            $   145           $  (623)            $ 4,307
         International                                   (206)                (78)                4                  61
                                                  ---------------    ----------------   ---------------    ---------------
       Total current income tax (credit)
       provision                                      $(3,442)            $    67           $  (619)            $ 4,368
                                                  ---------------    ----------------   ---------------    ---------------

     Deferred:
         US federal                                   $ 3,375             $    39           $   795             $(4,634)
         International                                   (834)                 43              --                  --
                                                  ---------------    ----------------   ---------------    ---------------
       Total deferred income tax (credit)
       provision                                      $ 2,541             $    82           $   795             $(4,634)
                                                  ---------------    ----------------   ---------------    ---------------

     Total income taxes (credit) provision            $  (901)            $   149           $   176             $  (266)
                                                  ===============    ================   ===============    ===============
</TABLE>


                                      F-14

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

10.  INCOME TAXES (Continued)

     A  reconciliation   between  income  tax  (benefit)   expense  and  amounts
     calculated using the US statutory rate of 34 percent is as follows:

<TABLE>
<CAPTION>
                                                    Year ended         Year ended      Two months ended     Year ended
                                                   December 31,       December 31,       December 31,        October 31,
                                                       2000               1999               1998                1998
                                                  ---------------    ----------------   ----------------    ---------------
<S>                                                 <C>                  <C>                  <C>                <C>
     Tax (benefit) expense at the US
       statutory rate                               $ (6,460)            $  5,849             $  2,038           $ 17,337
     State tax                                             9                    8                   38                133
     International tax effect, net                    (1,646)              (6,016)                (683)           (15,369)
     Accounting losses (gains) for which
       deferred income tax cannot be
       recognized                                       --                    212               (1,029)             1,991
     Change in valuation allowance                     7,052                  226                 --               (4,406)
     Other, net                                          144                 (130)                (188)                48
                                                  ---------------    ----------------   ----------------    ---------------
     Income tax (benefit) expense                   $   (901)            $    149             $    176           $   (266)
                                                  ===============    ================   ================    ===============
</TABLE>


     As of December 31, 2000, the Company's US subsidiary had net operating loss
     carryforwards of  approximately  $12,000 that begin to expire from 2019 and
     2020. In addition, as of December 31, 2000, the Company's UK subsidiary had
     approximately   $2,600  net  operating   loss   carryforwards   which  will
     carryforward indefinitely.


                                      F-15

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

10.  INCOME TAXES (Continued)

     Deferred  income taxes reflect the net tax effect of temporary  differences
     between  the  amounts of assets  and  liabilities  for income tax  purposes
     compared  with the  respective  recorded  amounts for  financial  statement
     purposes. Significant components of the Company's deferred taxes assets and
     liabilities are as follows:

                                                December 31,    December 31,
                                                    2000            1999
                                               -------------    ------------
     Deferred tax assets (liabilities):
     Excess of tax over financial
       reporting depreciation                     $   (79)        $   (79)
     Net operating loss                             4,852           1,841
     Bad debt allowance                               561             132
     Advertising allowances                           435             409
     Inventory obsolescence reserve                   903             355
     Accrued sales adjustments and returns            967             519
     Other                                            776             727
                                               -------------    ------------
                                                    8,415           3,904
     Valuation allowance                           (7,278)           (226)
                                               -------------    ------------
                                                  $ 1,137         $ 3,678
                                               =============    ============



                                      F-16

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

11.  LONG-TERM DEBT

     On June 24,  1999,  the  Company  entered  into a $12,345  guaranteed  loan
     agreement  with  the  vendors  as  part  of  financing  of  the  Radica  UK
     acquisition.  Interest  on the loan notes was based on US$ LIBOR  minus 130
     basis points. In June 2000, the Company entered a new agreement with one of
     its banks.  The new agreement  provided for converting the guaranteed  loan
     into a three-year  term loan,  and used the proceeds to retire and pay back
     the  outstanding  guaranteed  loan notes in full.  The Company has borrowed
     $9,121 under the new loan  agreement  as of December 31, 2000,  which bears
     interest at the three month Singapore Interbank Offered Rate ("SIBOR") plus
     2% (8.45% at December 31, 2000). The agreement requires quarterly principal
     and  interest  payments,  which  matures  in June 2003.  Additionally,  the
     Company has a revolving loan with the bank, which permits  borrowings of up
     to $2,000. This revolving loan bears interest at the three month SIBOR plus
     2.5%. At December 31, 2000,  no amount was  outstanding  on this  revolving
     loan.

     The term loan and revolving  loan are secured by properties and deposits of
     the Company.  The agreement  contains  covenants that,  among other things,
     require  the  Company to  maintain a minimum  tangible  net worth,  gearing
     ratio, and other financial ratios.

     Long-term debts are as follows:

                                December 31,     December 31,
                                   2000              1999
                                ------------     ------------

     Term loan payable            $  9,121         $   --
     Guaranteed loan notes            --             12,345
                                ------------     ------------
                                  $  9,121         $ 12,345
     Less: Current portion          (3,648)          (1,399)
                                ------------     ------------
                                  $  5,473         $ 10,946
                                ============     ============


     The annual principal maturities of the long-term debts are as follows:

                                        December 31,
                                            2000
                                        ------------

     2001                                   $ 3,648
     2002                                     3,648
     2003                                     1,825
                                        ------------
                                            $ 9,121
                                        ============


                                      F-17

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                  (US dollars in thousands, except share data)

12.  COMMON STOCK

     Pursuant  to  the  Company's  stock  repurchase  programs  approved  by the
     Company's Board of Directors, the Company had repurchased 156,055 shares at
     an  average  price of $4.11 per share and  1,538,500  shares at an  average
     price of $11.66 per share for the years ended  December  31, 2000 and 1999,
     respectively.  All repurchased  shares were  cancelled.  As of December 31,
     2000,  approximately  0.7 million shares remained  available for repurchase
     under the repurchase programs.

13.  RESTRUCTURING CHARGE

     During 2000,  the Company  recorded a  restructuring  charge of $1,190 as a
     result of the  Company's  plan to change its  business  strategy to address
     changes in the market for handheld games and to allow the Company to adjust
     the overall cost structure given current revenue levels.  Specific  actions
     taken included reducing the Company's workforce,  consolidating facilities,
     and closing one office. The employee  separations  related to approximately
     150 employees worldwide, predominantly occurring in Asia and North America.
     Total  restructuring  costs  were  approximately   composed  of  $1,100  in
     connection with severance and benefits and $90 for the write-off of certain
     assets  associated with closing one office.  Total remaining  restructuring
     expenses  accrued at December 31, 2000 was  approximately  $200,  primarily
     related to the remaining amount of termination benefits payments.

14.  NON-MONETARY TRANSACTIONS

     In December 2000, the Company entered into an agreement to exchange $200 of
     inventory for the  development and operation of a  Radica-branded  Internet
     game arcade. The cost of inventory will be amortized over related period of
     services.



                                      F-18
<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
           (US dollars in thousands, except share and per share data)

15.  EARNINGS PER SHARE

     The following  information shows the numbers used in computing earnings per
     share and the effect on income and the weighted average number of shares of
     dilutive potential common stock:

<TABLE>
<CAPTION>
                                                Year ended          Year ended      Two months ended        Year ended
                                                December 31,        December 31,       December 31,         October 31,
                                                   2000                1999                1998                 1998
                                               -------------        ------------       ------------         -----------

<S>                                            <C>                  <C>                 <C>                 <C>
     Numerator for basic and diluted
       (loss) earnings per share:
       Net (loss) income                       $    (18,099)        $     17,055        $      5,819        $     51,256
                                               =============        ============       =============        ============

     Denominator:
       Denominator for basic
          earnings per share                     17,608,167           18,144,179          18,883,455          20,239,790
       Effect of dilutive options                      --                835,170           1,211,034           1,248,574
                                               -------------        ------------       ------------         -----------
       Denominator for diluted
          earnings per share                     17,608,167           18,979,349          20,094,489          21,488,364
                                               =============        ============       =============        ============

     Basic (loss) earnings per share:          $      (1.03)        $       0.94        $       0.31        $       2.53
                                               =============        ============       =============        ============

     Diluted (loss) earnings per share:        $      (1.03)        $       0.90        $       0.29        $       2.39
                                               =============        ============       =============        ============
</TABLE>


     Options and warrants on 2,728,800, 1,286,000, 252,000 and 197,000 shares of
     common stock for the years ended December 31, 2000 and 1999, the two months
     ended  December  31,  1998 and the fiscal  year  ended  October  31,  1998,
     respectively  were not  included in  computing  diluted  earnings per share
     since their effects were antidilutive.



                                      F-19

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
           (US dollars in thousands, except share and per share data)

16.  STOCK OPTIONS

     The  Company's  1994  Stock  Option  Plan  of  employees  and  non-employee
     directors (the "Stock Option Plan")  provided for options to be granted for
     the purchase of an  aggregate  of  1,600,000  shares of common stock at per
     share  prices  not less than 100% of the fair  market  value at the date of
     grant  as  determined  by  the  Compensation  Committee  of  the  Board  of
     Directors.  Following approval at the annual shareholders meetings in April
     1997,  1998,  the  meeting of the Board of  Directors  in June 1999 and the
     annual shareholders meeting in May 2000, the Stock Option Plan's aggregated
     common   stock   increased  by  400,000,   800,000,   60,000  and  840,000,
     respectively.  In total,  the Stock Option  Plan's  aggregate  common stock
     increased to 3,700,000 shares  available for options.  Options to employees
     are generally  exercisable  over three to five years from the date of grant
     unless otherwise provided.  Options granted to employees under stock option
     plans must be exercised no later than ten years from the date of grant. The
     Company  also  maintains  plans  under  which it offers  stock  options  to
     non-employee  directors.  Pursuant  to the terms of the plans  under  which
     directors are eligible to receive options,  each  non-employee  director is
     entitled to receive options to purchase common stock upon initial  election
     to the Board and at each subsequent  quarterly  Board meeting.  Options are
     exercisable during the period beginning one year after the date of grant.



                                      F-20

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                (US dollars in thousands, except per share data)

16.  STOCK OPTIONS (Continued)

     Option  activity for each of the periods ended December 31, 2000,  1999 and
     1998 and October 31, 1998 are as follows:-

                                                                Weighted average
                                                  Number         exercise price
                                                of shares           per share
                                                ---------           ---------
                                              (in thousands)

     Outstanding at October 31, 1997                   1,756           $ 2.31
     Options granted                                     649            13.97
     Options cancelled                                   (43)           14.63
     Options exercised                                  (424)            2.39
                                              ---------------
     Outstanding at October 31, 1998                   1,938           $ 5.92
     Options granted                                     135            15.05
     Options cancelled                                   -                -
     Options exercised                                   (32)            2.59
                                              ---------------
     Outstanding at December 31, 1998                  2,041           $ 6.58
     Options granted                                     307            11.48
     Options cancelled                                   (66)            8.27
     Options exercised                                  (282)            1.89
                                              ---------------
     Outstanding at December 31, 1999                  2,000           $ 7.93
     Options granted                                     853             2.79
     Options cancelled                                  (427)           10.43
     Options exercised                                   (72)            1.41
                                              ---------------
     Outstanding at December 31, 2000                  2,354           $ 5.81
                                              ===============

     Exercisable at December 31, 2000                    910           $ 7.52



                                      F-21

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                (US dollars in thousands, except per share data)

16.  STOCK OPTIONS (Continued)

     The following is additional  information relating to options outstanding as
     of December 31, 2000:

<TABLE>
<CAPTION>
                                                Options outstanding                           Options exercisable
                           -----------------------------------------------------------  -------------------------------
                                                                   Weighted average
                                              Weighted average       remaining                         Weighted average
      Exercise                  Number         exercise price         contractual          Number        exercise price
      price range              of shares          per share          life (years)         of shares        per share
      -----------              ---------          ---------          ------------        ----------        ---------
                            (in thousands)                                             (in thousands)
<S>                                <C>               <C>                  <C>                <C>             <C>
    $ 1.090 to 2.000                 661             $ 1.41               6.29               307             $ 1.29
    $ 2.001 to 4.000                 958               3.14               8.36               168               3.48
    $ 4.001 to 6.000                   3               5.00               6.33                 1               5.00
    $ 6.001 to 8.000                  36               6.81               6.61                19               6.79
    $ 8.001 to 10.000                 56               9.55               8.29                13               9.54
    $ 10.001 to 12.000               190              10.89               7.98               138              10.96
    $ 12.001 to 14.000               173              12.73               7.96                93              12.68
    $ 14.001 to 16.000                79              14.46               7.71                38              14.63
    $ 16.001 to 18.000               116              17.02               7.43                82              17.01
    $ 18.001 to 20.000                82              19.02               7.29                51              18.86
                           --------------                                             ------------
                                   2,354             $ 5.81               7.58               910             $ 7.52
                           ==============                                             ============
</TABLE>


     Pro forma  information  regarding  net  income  and  earnings  per share is
     required by SFAS No.  123,  and has been  determined  as if the Company had
     accounted  for its employee  stock  options  under the fair value method of
     SFAS No. 123. The weighted  average fair value of stock  options at date of
     grant of $1.57,  $4.54,  $7.79 and $7.23  per  option  for the years  ended
     December 31, 2000 and 1999, the two months ended December 31, 1998, and the
     fiscal year ended October 31, 1998, respectively,  were estimated using the
     Black-Scholes  option  pricing  model with the following  weighted  average
     assumptions:

<TABLE>
<CAPTION>
                                                      Year ended       Year ended     Two months ended    Year ended
                                                      December 31,     December 31,      December 31,     October 31,
                                                         2000              1999              1998            1998
                                                      ------------    -------------   -----------------   -----------

<S>                                                     <C>              <C>                <C>            <C>
     Expected life of options                           5 years          5 years            5 years        5 years
     Risk-free interest rate                             6.0%              5.1%               6.5%           6.5%
     Expected volatility of underlying stock              58%               35%                50%            50%
     Dividends                                             0%                0%                 0%             0%
</TABLE>


     The  Black-Scholes  option  pricing  models  require  the  input of  highly
     subjective  assumptions,  including the expected volatility of stock price.
     Because changes in subjective input  assumptions can materially  affect the
     fair value estimate,  in management's  opinion, the existing model does not
     necessarily  provide a  reliable  single  measure  of the fair value of the
     stock options.


                                      F-22

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                (US dollars in thousands, except per share data)

16.  STOCK OPTIONS (Continued)

     If the  Company  had  accounted  for its stock  option  plans by  recording
     compensation expenses based on the fair value at grant date for such awards
     consistent with the method of SFAS No. 123, the Company's net (loss) income
     and (loss)  earnings  per share  would have been  adjusted to the pro forma
     amounts as follows:

<TABLE>
<CAPTION>
                                                Year ended         Year ended    Two months ended     Year ended
                                               December 31,       December 31,      December 31,      October 31,
                                                    2000              1999              1998              1998
                                               ------------       ------------      ------------      -----------

<S>                                             <C>                <C>               <C>              <C>
     Pro forma net (loss) income                $  (19,306)        $   15,719        $   5,633        $   50,548
     Pro forma (loss) earnings per share
       Basic                                         (1.10)              0.87             0.30              2.50
       Diluted                                       (1.10)              0.83             0.28              2.35
</TABLE>


17.  WARRANTS

     During  the  year  of  1999,  in  connection  with EA  worldwide  licensing
     agreement,  the Company issued  warrants to purchase  375,000 shares of the
     Company's common stock at various exercise prices.  The warrants  generally
     begin to expire  from 2001 and 2002,  or upon  termination  of the  related
     agreement.   As  of  December  31,  2000,  all  of  these  warrants  remain
     outstanding of which 250,000 shares were fully vested.

18.  CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

     Accounts receivable of the Company are subject to a concentration of credit
     risk with customers in the retail  sector.  This risk is limited due to the
     large number of customers  composing the Company's  customer base and their
     geographic  dispersion,   though  the  Company's  games  business  had  two
     customers  which  accounted  for more than  seventeen  percent  and sixteen
     percent of net sales for the year ended  December 31, 2000,  two  customers
     which  accounted for more than twenty percent and eighteen  percent for the
     year ended December 31, 1999, two customers  which  accounted for more than
     thirty  percent  and  twenty-seven  percent  of net sales in the two months
     ended December 31, 1998 and three  customers  which accounted for more than
     twenty-five  percent,  twenty-one  percent  and ten percent of net sales in
     fiscal year 1998. The Company  performs  ongoing credit  evaluations of its
     customers' financial condition and, generally,  requires no collateral from
     its customers.


                                      F-23

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

19.  ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  estimated  fair value of financial  instruments  is made in accordance
     with the  requirements  of SFAS No. 107,  "Disclosures  about Fair Value of
     Financial  Instruments".   The  estimated  fair  value  amounts  have  been
     determined  by  the  Company,   using  available  market   information  and
     appropriate valuation methodologies. The estimates presented herein are not
     necessarily  indicative  of the amounts that the Company could realize in a
     current market exchange.

     The carrying  amounts of cash and cash  equivalents,  accounts  receivable,
     accounts payable,  bank borrowings and warrants are reasonable estimates of
     their fair value.

20.  COMMITMENTS, CONTINGENCIES AND PLEDGE OF ASSETS

     The Company leases certain warehouses and equipment under operating leases.
     Total expenses for the operating leases were  approximately  $1,113,  $534,
     $82 and $401 for the years ended December 31, 2000 and 1999, the two months
     ended  December  31,  1998 and the fiscal  year  ended  October  31,  1998,
     respectively.

     As of December 31, 2000, the Company was obligated under  operating  leases
     requiring future minimum lease payments as follows:

                                         Operating leases
                                          ---------------

     2001                                          $ 501
     2002                                            395
     2003                                            235
     2004                                            142
     2005                                            112
     Thereafter                                      298
                                          ---------------
     Total minimum lease payments                $ 1,683
                                          ===============


     At December 31, 2000,  the Company's loan  agreements  and general  banking
     facilities  including overdraft and trade facilities were collateralized by
     certain leasehold land and buildings, bank balances, and inventories with a
     net book value of approximately $11,664, $11,139 and $6,129, respectively.


                                      F-24

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

21.  RETIREMENT PLAN

     In Hong Kong,  the Company has both a mandatory  provident fund and defined
     contribution  retirement plans covering substantially all employees.  Under
     these  plans,   eligible  employees   contribute  amounts  through  payroll
     deductions  which  are 5% or more of  individual  salary,  supplemented  by
     employer  contributions  ranging  from  5%  to  10%  of  individual  salary
     depending on the years of service. The expenses related to these plans were
     $170,  $192,  $27 and $125 for the years ended  December 31, 2000 and 1999,
     the two months ended  December 31, 1998,  and the fiscal year ended October
     31, 1998, respectively.

22.  SEGMENT INFORMATION

     The Company  adopted the SFAS No. 131,  "Disclosures  about  Segments of an
     Enterprise and Related  Information".  The adoption of SFAS No. 131 did not
     affect  results of  operations  or financial  position,  but did affect the
     disclosure  of  segment  information.  As a result  of this  change,  prior
     periods'   presentations   are   restated   to  conform  to  current   year
     presentations.

     Prior to the acquisition of Radica UK, the Company historically operated in
     one principal industry segment:  the design,  development,  manufacture and
     distribution  of a  variety  of  electronic  and  mechanical  handheld  and
     tabletop  games.  On June 24, 1999, the Company  acquired Radica UK. Due to
     the  distinct  differences  between the core  products of Radica UK and the
     remainder of the Company,  the Company has decided to operate and report on
     these product lines as two different business segments:  Peripherals, which
     includes video game  controllers  and steering wheels and other video games
     accessories;  and Games, which includes  electronic and mechanical handheld
     and tabletop games.

     The  Company  evaluates  the  performance  of its  operating  segments  and
     allocates  resources based on segment  operating income before interest and
     income taxes, not including gains and losses  associated with the Company's
     investment portfolio.  The Company does not include inter-segment transfers
     for  management  reporting  purposes.  Certain  expenses  which are managed
     outside of the operating segments are excluded.  These consist primarily of
     corporate and unallocated shared expenses,  other income and expense items.
     Corporate and  unallocated  shared  expenses  consist  primarily of certain
     costs related to business  integration and other general and administrative
     expenses. Assets included in corporate and unallocated principally are cash
     and cash equivalents,  investment in affiliated  company and certain common
     raw materials.  The accounting  policies of the reportable segments are the
     same as those described in the summary of significant accounting policies.



                                      F-25

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

22.  SEGMENT INFORMATION (Continued)

     A summary of the Company's two business segments is set forth below.

<TABLE>
<CAPTION>
                                                 Year ended        Year ended     Two months ended     Year ended
                                                 December 31,      December 31,     December 31,       October 31,
                                                     2000              1999             1998              1998
                                                 ------------      ------------     ------------       -----------

<S>                                                <C>               <C>               <C>               <C>
     Revenues from external customers
       Games                                       $  91,036         $ 123,116         $  21,071         $ 155,618
       Peripherals                                    12,345            10,406              --                --
                                                 ------------      ------------     ------------       -----------

     Total revenues from external customers        $ 103,381         $ 133,522         $  21,071         $ 155,618
                                                 ============      ============     ============       ===========

     Depreciation and amortization
       Games                                       $   4,449         $   3,981         $     612         $   3,423
       Peripherals                                       978               975              --                --
                                                 ------------      ------------     ------------       -----------

     Total depreciation and amortization           $   5,427         $   4,956         $     612         $   3,423
                                                 ============      ============     ============       ===========

     Segment (loss) income
       Games                                       $ (14,199)        $  18,547         $   5,826         $  49,428
       Peripherals                                    (5,465)           (1,064)             --                --
                                                 ------------      ------------     ------------       -----------

     Total segment (loss) income                   $ (19,664)        $  17,483         $   5,826         $  49,428

     Corporate and unallocated
       Interest income                                 1,472             1,800               289             1,957
       Interest expense                                 (808)             (331)             --                 (61)
       Equity in net loss of
          affiliated company                            --              (1,748)             (120)             (334)
                                                 ------------      ------------     ------------       -----------

     Total consolidated (loss) income
          before income taxes                      $ (19,000)        $  17,204         $   5,995         $  50,990
                                                 ============      ============     ============       ===========

     Segment assets
       Games                                       $  54,652         $  67,426         $  59,960         $  79,557
       Peripherals                                    20,973            22,589              --                --
       Corporate and unallocated                      23,769            32,159            48,230            33,964
                                                 ------------      ------------     ------------       -----------

     Total consolidated assets                     $  99,394         $ 122,174         $ 108,190         $ 113,521
                                                 ============      ============     ============       ===========

     Capital expenditures
       Games                                       $   2,920         $   3,177         $     805         $   5,532
       Peripherals                                       218               129              --                --
                                                 ------------      ------------     ------------       -----------

     Total capital expenditures                    $   3,138         $   3,306         $     805         $   5,532
                                                 ============      ============     ============       ===========
</TABLE>


                                      F-26

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                            (US dollars in thousands)

22.  SEGMENT INFORMATION (Continued)

     Revenues  from  external  customers by product  category are  summarized as
     follows:

<TABLE>
<CAPTION>
                             Year ended      Year ended    Two months ended   Year ended
                            December 31,     December 31,     December 31,    October 31,
                                2000            1999             1998            1998
                            ------------     ------------     ------------    -----------

<S>                            <C>             <C>             <C>             <C>
     Handheld                  $ 49,307        $ 87,775        $ 15,145        $123,008
     Play TV                      8,561            --              --              --
     Girl Tech                   13,897           7,444             147            --
     ODM                         19,271          27,897           5,779          32,610
     Peripherals                 12,345          10,406            --              --
                            ------------     ------------     ------------    -----------

     Total net revenues        $103,381        $133,522        $ 21,071        $155,618
                            ============     ============     ============    ===========
</TABLE>


     Information about the Company's operations in different geographic areas is
     set forth in the table below.  Net sales are attributed to countries  based
     on the location of customers, while long-lived assets are reported based on
     their location.  Long-lived assets principally include property,  plant and
     equipment, intangible assets and long-term investment:

<TABLE>
<CAPTION>
                                                 Year ended     Year ended   Two months ended   Year ended
                                                 December 31,   December 31,    December 31,    October 31,
                                                     2000           1999           1998            1998
                                                 ------------   ------------    ------------    -----------

<S>                                               <C>             <C>             <C>             <C>
     Net sales:
          United States and Canada                $ 84,504        $118,779        $ 20,556        $148,571
          Asia Pacific and other countries           3,492           1,557             131           5,934
          Europe                                    15,385          13,186             384           1,113
                                                 ------------   ------------    ------------    -----------
                                                  $103,381        $133,522        $ 21,071        $155,618
                                                 ============   ============    ============    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                 December 31,   December 31,    December 31,    October 31,
                                                     2000           1999           1998            1998
                                                 ------------   ------------    ------------    -----------

<S>                                               <C>             <C>             <C>             <C>
     Long-lived assets
          United States and Canada                $  2,689        $  2,944        $  3,612        $  3,644
          Asia Pacific and other countries          16,002          16,076          16,341          16,273
          Europe                                    10,637          12,854            --              --
                                                 ------------   ------------    ------------    -----------
                                                  $ 29,328        $ 31,874        $ 19,953        $ 19,917
                                                  ========        ========        ========        ========
</TABLE>



                                      F-27

<PAGE>



                              RADICA GAMES LIMITED

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                            (US dollars in thousands)

23.  VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                Balance at       Charged to                     Balance at
                                                beginning         cost and      Deductions /      end of
                                                of period         expenses       write-offs       period
                                                ---------         --------       ----------       ------

<S>                                               <C>             <C>             <C>             <C>
     Year ended October 31, 1998
       Allowances for doubtful accounts           $    908        $    213        $   (655)       $    466
       Estimated customer returns                    2,327             456          (1,408)          1,375
       Provision for inventories                     3,479           1,105          (2,170)          2,414
                                                  --------        --------        --------        --------
                                                  $  6,714        $  1,774        $ (4,233)       $  4,255
                                                  ========        ========        ========        ========
     Two months ended December 31, 1998
       Allowances for doubtful accounts           $    466        $   --          $    (20)       $    446
       Estimated customer returns                    1,375            --              (298)          1,077
       Provision for inventories                     2,414              23            --             2,437
                                                  --------        --------        --------        --------
                                                  $  4,255        $     23        $   (318)       $  3,960
                                                  ========        ========        ========        ========

     Year ended December 31, 1999
       Allowances for doubtful accounts           $    446        $      3        $    (60)       $    389
       Estimated customer returns                    1,077             705          (1,158)            624
       Provision for inventories                     2,437             407            (505)          2,339
                                                  --------        --------        --------        --------
                                                  $  3,960        $  1,115        $ (1,723)       $  3,352
                                                  ========        ========        ========        ========

     Year ended December 31, 2000
       Allowances for doubtful accounts           $    389        $  2,648        $   (964)       $  2,073
       Estimated customer returns                      624           1,423            (553)          1,494
       Provision for inventories                     2,339           5,130          (1,681)          5,788
                                                  --------        --------        --------        --------
                                                  $  3,352        $  9,201        $ (3,198)       $  9,355
                                                  ========        ========        ========        ========

----------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-28

<PAGE>


         Pursuant to the  requirements of Section 12 of the Securities  Exchange
Act of 1934, the registrant  certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused  this annual  report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                             RADICA GAMES LIMITED




Date:       April 11, 2001                   /s/ Craig D. Storey
      ----------------------------           -----------------------------------
                                             Craig D. Storey
                                             Chief Accounting Officer





                                      I-1

<PAGE>


EXHIBIT INDEX

          *     3.1     Memorandum of Association

          *     3.2     Bye-Laws

          *     3.3     Certificate of Incorporation on Change of Name

          *     4.1     Specimen Certificate for the Shares of Common Stock

          *    10.1     Processing  Agreement,  dated December 4, 1991,  between
                        Radica HK and foreign Economic  Development Co. of Humen
                        Town, Dongguan, relating to the Tai Ping Factory

          *    10.2     Processing  Agreement,  dated December 27, 1993, between
                        Radica HK and Foreign Economic  Development Co. of Humen
                        Town, Dongguan

          @    10.3     Cooperative  Joint Venture Contract of D.G. Radica Games
                        Manufacturing  Co.,  Ltd.,  dated  June  24,  1994  (see
                        exhibit 10.16 to 20-F for year ended October 31, 1994)

          *    10.4     Shareholders  Agreement,  dated January 12, 1994,  among
                        the Company and the shareholders parties thereto

          *    10.5     Amendment  to  Shareholders   Agreement,   dated  as  of
                        February   16,   1994,   among  the   Company   and  the
                        shareholders party thereto.

          **   10.5(a)  Amendment  to  Shareholders   Agreement,   dated  as  of
                        September   5,   1997,   among  the   Company   and  the
                        shareholders party thereto.

          *    10.8     Employment  Agreement,  dated as of November  28,  1993,
                        among Radica HK, Radica USA and Jon N. Bengtson

          *    10.8(a)  Form of Amendment to Employment  Agreement  among Radica
                        Games  Limited,   Radica  HK,  Radica  USA  and  Jon  N.
                        Bengtson.

          #    10.8(b)  December 1995 Amendment to such Employment Agreement.

          ~    10.8(c)  December 1997 Amendment to such Employment Agreement.

               10.9     1994  Stock  Option  Plan,  as most  recently  amendment
                        restated in May 2000 to increase options

               10.11    Amendment and Restatement to Employment Agreement among
                        Radica USA, Radica Games Limited and Patrick Feely dated
                        September 27, 2000

               10.13    Amendment  and   Restatement  to  Employment   Agreement
                        between Radica Games Limited and David C.W. Howell dated
                        September 29, 2000


                                      I-2

<PAGE>


               10.14    Amendment  and   Restatement  to  Employment   Agreement
                        between  Radica  Games  Limited  and Siu Wing Lam  dated
                        October 4, 2000

               10.15    Amendment  and   Restatement  to  Employment   Agreement
                        between  Radica  Games  Limited and Neil  Doughty  dated
                        September 29, 2000

          ##   10.16    Share  Purchase  Agreement  dated as of June  24,  1999,
                        relating to the  acquisition  of the entire issued share
                        capital of Leda Media  Products  Limited  (now Radica UK
                        Limited).

               11.1     Statement re Computation of Per Share Earnings

               12.1     Statement re Selected Quarterly Financial Data

               21.1     List of subsidiaries

               23.1     Consent of Deloitte Touche Tohmatsu

*    Incorporated by reference to  Registration  Statement on Form F-1, File No.
     33-75794 filed by the Registrant.

@    Incorporated by reference to Form 20-F for the year ended October 31, 1994.

#    Incorporated by reference to Form 20-F for the year ended October 31, 1996.

~    Incorporated by reference to Form 20-F for the year ended October 31, 1997.

**   Incorporated by reference to Form 20-F for the year ended October 31, 1998.

##   Incorporated by reference to Form 20-F for the year ended October 31, 1999.

The other exhibits not footnoted are included as part of this filing.



                                      I-3