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, 1999.

                                       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                             17,639,594

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 1

ITEM 1.  DESCRIPTION OF BUSINESS

         Radica Games Limited ("the Company") 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  Company  is a  leading  seller of these  electronic  entertainment
devices  worldwide.  The Company  began its  business  with Casino  handheld and
tabletop  game  products and then  diversified  its  business to other  handheld
electronic game categories including sports,  heritage and action games. In 1999
it has the second 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,  Leda Media Products,  Ltd ("LMP")
has  the  largest  market  share  of the  video  game  controller  market  among
third-party manufacturers according to industry data source, Chart Track.

         The Company's  principal products include a range of Fishing,  Hunting,
Action,  Sports, Casino and Heritage games as well as a line of voice-controlled
electronic  games.  The  Company  expects to  produce  new  electronic  handheld
entertainment  devices in 2000 (see New  Product  Introduction).  The  Company's
products  are based on  familiar  games or sports  that  have  been  played  for
generations  and are  designed to be played with little or no  instruction.  The
Company  currently  offers over 80 models with retail prices  ranging from $5 to
$50.

         In June 1999,  the Company  acquired all of the business and  operating
assets of LMP,  the  leading  supplier of video game  controllers  in the United
Kingdom with a strong position in France and Germany.  LMP brought Radica into a
new market that is closely aligned with handheld  games.  The Company intends to
bring the product line to the United  States and Canada in 2000 and to move most
of the  manufacturing of controllers into its factory in China over the next two
years.

         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) as well as a line of Star
Wars  electronics  games  introduced  in 1999.  During 2000 the Company is under
contract  to  undertake  ODM  for  Konami  Japan,  producing  the  "Beat  Mania"
controller,  Mattel,  producing  Othello  handheld  games in the US  market  and
Tsukuda, producing Othello handheld games for the Japanese market.

         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, DEPENDENCE
ON MAJOR  CUSTOMERS,  COMPETITION AND THE OTHER RISK FACTORS WHICH ARE DESCRIBED
HEREIN UNDER "ITEM 1. DESCRIPTION OF BUSINESS -- RISK FACTORS".


                                       2
<PAGE>


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  December  1985 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 approximately 70% of its sales through Radica USA in fiscal 1999 (excluding
ODM sales).

         In December 1993,  Radica Games 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 LMP, the 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. This will give a total employee maximum
of 8,000 and will  allow for a peak  production  of over one  million  games per
week.

BUSINESS STRATEGY

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


                                       3
<PAGE>


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 LMP 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) and Destiny(R)  names outside the
United States and are expected to be packaged under the Radica brand name in the
United States in 2000.

         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  Radica  UK were  established  in 1995 to  distribute
products  in these  markets.  Upon the  acquisition  of LMP in June of 1999,  UK
distribution  responsibility  was assumed by LMP. 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.

PRODUCTS

         At the end of fiscal year 1999,  Radica's principal products by product
line were as follows:

<TABLE>
<CAPTION>
FISHING                                     HUNTING                                   ACTION
-------                                     -------                                   ------
<S>                                         <C>                                       <C>
Ultimate Bass Fishin'(TM)                   Buckmaster(R)Deer Huntin'(TM)             Night Vision(TM)Sub Assault(TM)
Sport Bass Fishin'(TM)                      Buckmaster(R)Elk Huntin'(TM)              Night Vision(TM)Tank Assault(R)
Fish or Man(R)                                                                        Alien Intruder(TM)
Deep Sea Fishin'(TM)                                                                  Stealth Assault(TM)
Lunker Bass Fishin'(TM)                                                               Trail Burner(TM)
Monte Carlo Lunker Bass Fishin'(TM)                                                   Radica Rider(TM)
Fly Fishin'(TM)                                                                       Enduro Racer(TM)
Jr. Bass Fishin'(TM)                                                                  Tracer Ace(TM)
Bass Fishin'(TM)                                                                      Virtual Snowboard VSB(TM)


                                       4
<PAGE>


SPORTS                                      HERITAGE                                  CASINO
------                                      --------                                  ------
Nascar(R)Racer(TM)                          Travel Solitaire(TM)                      Pocket Poker(R)
Nascar(R)Speedzone(TM)                      Solitaire Lite(TM)                        Pocket Blackjack 21(R)
Tiger Woods Ultimate Golf(TM)               Crossword Challenger(TM)                  Pocket Slot(TM)
Tiger Woods Tournament Golf(TM)             Travel Checkers(TM)                       Player's Choice Poker(TM)
Virtual Lanes(TM)Bowling                    Solitaire                                 Player's Choice Blackjack(TM)
EA Madden Football(TM)                      2-in-1 Solitaire(TM)                      Poker/Blackjack Lite(TM)
EA No Hitter(TM)Baseball                    Travel Tic-Tac-Toe(TM)                    Draw Poker and Blackjack(TM)
Pro World Class Golf(TM)                    Touch Screen Solitaire(TM)                Draw Poker(TM)
                                            Yahtzee(TM)

GIRL TECH(R)                                ODM                                       PERIPHERALS (PLAYSTATION)
------------                                ---                                       -------------------------
Password Journal(R),                        Connect Four(TM)                          Playstation Controller
Bug 'Em(TM)                                 Battleship(TM)                            Dual Force Controller
Keep Safe Box(TM)                           Yahtzee(TM)                               Dual Force Steering Wheel
Password Door Pass(TM)                      Hangman(TM)                               Evolution Joypad
Beam It(TM)                                 Sorry(TM)                                 Evolution Control System
Friend Frame(R)                             Perfection(TM)                            Assorted Color Memory Cards
Laser Chat(TM)                              Trivial Pursuit(TM)
                                            Monopoly(TM)
                                            Star Wars line of electronic products

PERIPHERALS (NINTENDO 64)                   PERIPHERALS (PC)                          PERIPHERALS (HANDHELD)
-------------------------                   ----------------                          ----------------------
N64 Steering Wheel with Rumble              Evolution Joypad                          Gameboy Powerpack
Evolution Control System                    Evolution Control System                  Gameboy Light Magnifier
N64 Tremor Pak + 1MB Memory                 Dual Force Steering Wheel                 Gameboy Link Lead
                                            Dual Force Controller                     Gameboy Memory Card
                                            4-Button Joypad                           Gameboy Tremor Pak
                                            6-Button Joypad                           Gameboy Essentials
                                            8-Button Joypad
</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  intends  to  introduce
approximately  114 new models in 2000  (including 78 peripherals  products).  In
fiscal 1999, the Company's products had retail prices ranging from $5 to $50.

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


                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                     ---------------------------------------------------------------------------------------------------------------
                                               1996                                                     1997
                     ------------------------------------------------------    -----------------------------------------------------
                       % 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)                             (in thousands)  (in thousands)
<S>                 <C>              <C>            <C>         <C>           <C>              <C>           <C>             <C>

Fishing games              12.8%           6,497         591           1             45.3%         43,622           3,963         5

Action games                   -               -           -           -              3.7%          3,603             306         2

Sports games                8.6%           4,328         382           6              8.2%          7,880             702         7

Casino games               36.5%          18,466       5,324         103             13.0%         12,521           3,209       102

Heritage games             16.4%           8,311         723           8             11.6%         11,170           1,016        16

ODM products               25.6%          12,968       2,476           7             18.2%         17,487           3,643        12
                    ------------     -----------    ----------  --------      ------------     ----------    ------------    -------

Total                     100.0%          50,570       9,496         125            100.0%         96,283          12,840        144
                    ============     ===========    ==========  ========      ============     ==========    ============    =======
</TABLE>

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                     ---------------------------------------------------------------------------------------------------------------
                                               1996                                                     1997
                     ------------------------------------------------------    -----------------------------------------------------
                       % 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)                             (in thousands)  (in thousands)
<S>                   <C>            <C>            <C>           <C>          <C>              <C>            <C>            <C>

Fishing games              40.4%          64,454         5,233          6            19.0%           25,370        2,239           9

Hunting games                 -               -             -           -             8.1%           10,822          651           4

Action games                9.8%          15,540         1,089          7             8.7%           11,678          803          12

Sports games               11.5%          18,355         1,316         12            12.1%           16,159        1,027          17

Casino games                8.2%          13,040         3,181         66             7.6%           10,170        2,395          38

Heritage games              7.2%          11,513         1,084         19            10.2%           13,576        1,552          20

Girl Tech games             0.1%             145            11          2             5.6%            7,444          594           6

ODM products               22.8%          36,322         6,144         20            20.9%           27,897        6,109          22

Peripherals                   -               -             -           -             7.8%           10,406        1,871         139
                      ----------     -----------    -----------   -------      -----------      -----------    ---------      ------

Total                     100.0%         159,369        18,058        132           100.0%          133,522       17,241         267
                      ==========     ===========    ==========    =======      ===========      ===========    =========      ======
</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


                                       6
<PAGE>


fishing, hunting, golf and snowboarding;  casino games, such as blackjack, poker
and slots; and popular heritage games such as solitaire,  checkers and crossword
puzzles.  Radica's  Deer Huntin' game was the second  highest  selling  handheld
electronic game in the United States in 1999, according to the NPD Group.

         During  1999,  Radica  introduced  its  Girl  Tech  line of  electronic
products.  The Girl Tech 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).

         In June of 1999,  the Company  acquired LMP, which expanded its product
portfolio to include game peripherals such as steering wheels,  joypads,  memory
cards and video game accessories for Playstation,  Nintendo 64, Nintendo Gameboy
and PC Platforms.  In 1999,  the Company  introduced the  Gamester(R)  Evolution
line,  which  eliminates  the need for  direction  keys on a controller  through
motion sensors located either in a keypad controller or inside a glove that fits
over the user's hand.

NEW PRODUCT INTRODUCTION

         In  fiscal  2000,  Radica  intends  to  expand  its  line of  games  by
introducing approximately 114 new games/accessories in the following categories:
Radica Fishing (2 games);  Radica Sports (10 games); Radica Heritage (12 games);
Radica Action (2 game); Radica Hunting (2 games);  Radica Casino (2 games); Girl
Tech(R) (6 games) and Peripherals (78 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 three internet  related items
in 2000 (Sports  Nut(TM),  Girl Tech(R) Pocket  Com(TM) and Surfer  Girl(TM) Web
Explorer Kit) and its new Radica Play TV(TM) games,  which utilize the Xavix(TM)
technology, for which Radica is the exclusive US licensee.

           1999 vs. 2000 Line List (by category)
           -------------------------------------

                                          1999               2000
                                          ----               ----
           Casino                          8                  11
           Heritage                        9                  17
           Action                          9                   5
           Sports                          8                  16
           Fishing                         9                   9
           Hunting                         2                   4
           Girl Tech                       6                  10
           Xavix                           0                   4
           Peripherals                     22                 78
                                           --                 --
           TOTAL                           73                 154

         The Company  anticipates that new product  introductions in fiscal 2000
will be  concentrated  in the second and third quarters of that year. By the end
of fiscal 2000,  the Company  expects its product line to include  approximately
154 models, of which 78 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  2000 will be
delayed, which could delay or prevent certain anticipated product introductions.


                                       7
<PAGE>


LICENSING

         During fiscal 1999, 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)  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), Buckmaster(R)
Elk Huntin'(TM),  Buckmaster(R) Bow Huntin'(TM)), and Hank Parker (Ultimate Bass
Fishin'(TM) and Fish or Man(R)).

         The Company intends to incorporate these licenses into its 2000 product
line and will pursue new licenses in instances  where  management  feels it will
enhance the value and marketability of a particular product.

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 1999 the Company  assembled all of the Radica and Girl Tech lines of
products  in order to  control  its  costs,  quality,  production  and  delivery
schedules.   Peripherals  for  LMP's  markets  were  assembled  by  third  party
manufacturers during 1999, but the Company intends to bring the majority of this
assembly in-house over the course of the next two years.

         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 their ISO 9001 quality  certification
from  Underwriters  Laboratory on March 15, 1999. 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.


                                       8
<PAGE>


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.
The unit  capacity of the  Factory  depends on the  product  mix  produced.  The
Company  believes that the extension will give a total employee maximum of 8,000
and will  allow  for a peak  production  of over one  million  games  per  week,
depending  on the  product  mix.  However,  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 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.  In  preparation  for Y2K,  Radica  stockpiled  some
materials to ensure  meeting  customer  demand in the first quarter of 2000. 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  1999  included  Epson  Hong  Kong  Limited
(semiconductor chips), Gillette Hong Kong Limited (batteries), GPI International
Limited  (batteries),  Leader Printed  Circuit Boards  Limited  (PCBs),  Lik Sun
Printing Co. Limited  (printing),  Meise Label Printing Fty (printing),  Onpress
Printed Circuit


                                       9
<PAGE>


Boards Limited (PCBs),  Wintek  Corporation  (LCDs),  Senmax Limited  (keypads),
Sunplus  Technology  Co.,  Limited  (semiconductor  chips)  and  United  Radiant
Technology (HK) Limited (LCDs).

         The Company's  major  suppliers of  peripherals in fiscal 1999 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 over 30 countries, with the United States
accounting  for over 70% of net sales in fiscal 1999  (excluding  ODM business).
The Company  sells its  products  directly to over 433 active  retailers  in the
United  States and to  approximately  23  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 1999,  the largest  customer of the Company,  Wal-Mart,  accounted for
18.2% of net sales;  in addition ODM work for the Hasbro  Games Group  accounted
for 20.9% of net sales. The top five customers  (excluding ODM business) were as
follows:

                                                             % OF SALES
    CUSTOMER NAME                                        FOR THE FISCAL YEAR
    -------------                                        -------------------

                                                         1998            1999
                                                         ----            ----
    1.  Wal-Mart (USA)                                      25.4%      18.2%
    2.  Target (USA)                                        10.7%       7.7%
    3.  K-Mart (USA)                                         3.9%       5.4%
    4.  Toys 'R' Us (worldwide)                              6.9%       4.5%
    5.  Kohl's (USA)                                         3.4%       4.2%

         The following table sets forth certain of the Company's major customers
in 1999, 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
</TABLE>


                                       10
<PAGE>


<TABLE>
<CAPTION>

                                                                           CONSUMER                    GROCERY &
MAIL ORDER RETAILERS               SPECIALTY GIFT SHOP 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                           Frey's                      M.W. Kasch
                                   Zany Braining                           KF Group (Tempo)            Tesco
                                                                           Radio Shack                 W.H. Smith
                                                                                                       Westfair Super Stores
</TABLE>


<TABLE>
<CAPTION>
TOY RETAILERS           SPORTING GOODS STORES           INTERNET RETAILERS         DISTRIBUTORS (RADICA)
-------------           ---------------------           ------------------         ---------------------

<S>                     <C>                             <C>                        <C>
Hamleys                 Sports Authority                e-Toys.com                 Agerex (Finland)
Kay Bee                 Bass Pro Shops                  Amazon.com                 Al Kawther (Egypt)
Toys'R'Us                                                                          Bandai (Japan)

                                                                                   Ban Kee Trading (Philippines)
                                                                                   Chryssos Soft Toy (Greece)
                                                                                   Concentra (Portugal)
                                                                                   Creative Computers (Israel)
                                                                                   Europlay Toys (Germany)
                                                                                   Income Express (Hong Kong)
                                                                                   Lansay (France)
                                                                                   Playcorp (Australia and New Zealand)
                                                                                   Popular de Juguetes (Spain)
                                                                                   Sheng Tai Toys (Singapore)
                                                                                   TCL Marketing (UK)
                                                                                   The Oriental Trading Co.(Hong Kong)
                                                                                   Universal Electronics (Lebanon)
                                                                                   Waldmeier (Switzerland)
</TABLE>

<TABLE>
<CAPTION>
DISTRIBUTORS (PERIPHERALS)
--------------------------

<S>                                               <C>                                       <C>
Beckman (Norway)                                  Infogrames (France)                       Quality Goods (Ireland)
Bonnier (Bulgaria)                                Livewire (Australia)                      Toptronics (Finland)
De Vos (Belgium)                                  Manta (Poland)                            Vidis Electronics (Germany)
Halifax (Italy)                                   Microbyte (Argentina)                     Yes (Denmark)
</TABLE>

         The Company has  improved  the quality of its  distribution  network by
adding new distributors in fiscal 1999, in Japan and France.  The acquisition of
LMP 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



                                       11
<PAGE>


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 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 170
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 Tai Ping Factory.  The Company
has a formalized product  development  process that includes semiannual meetings
of its worldwide product development and sales departments. In fiscal 1997, 1998
and 1999, the Company spent approximately $2,120,000, $4,120,000 and $6,036,000,
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.

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 Monte Carlo (now called 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 product  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 67 design patents,  3 utility  patents,  65
trademarks and has 7 copyrights over its artwork. It also has 41 design patents,
12 utility patents, 189 trademarks and 10


                                       12
<PAGE>


copyright  applications  in  process  and will  continue  to obtain  copyrights,
trademarks,  design and utility  patents for new products.  In April 1998 at the
Port of Los Angeles, US Marshals seized quantities of Bass Fishin'(TM) knockoffs
imported by Exactly for Smart People,  Inc. of Culver City, CA from Techno Power
Technology  Limited,  of Hong Kong.  In August  1998,  the Company  successfully
obtained a final  settlement  from a large  Australian toy and games retailer in
the form of cash,  receipt  of all  stocks of  infringing  product  and  written
undertakings  from the retailer  confirming  Radica's  exclusive  rights in Bass
Fishin'(TM)  and agreeing  not to sell any further  copies of  counterfeit  Bass
Fishin'(TM)  games.  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  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 Tiger  Electronics,  Inc.  ("Tiger")  which was  purchased by the
Hasbro Games Group during 1998.  Tiger 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,  LMP was the fourth largest  distributor of
peripherals in the UK in 1999 according to Chart Track.  The peripherals  market
share is spread primarily amongst ten companies owning 60% of the overall market
share. The Company does not expect to begin  distributing  peripherals in the US
market  until Fall of 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.


                                       13
<PAGE>


         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%.

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

EMPLOYEES

         As of December 31, 1999 the  Company's  workforce  was comprised of the
following:

-------------------------------------------------------------------------------
         Production Sales and     R&D     Finance      Operations      Total by
                    Marketing                           & Admin        location
-------------------------------------------------------------------------------
Asia        3852          7       128        25           197            4209
-------------------------------------------------------------------------------
USA            7         22        35        10            12              86
-------------------------------------------------------------------------------
Europe        12          9         5         3            6               35
-------------------------------------------------------------------------------
Total       3871         38       168        38          215             4330
-------------------------------------------------------------------------------

         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.

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.


                                       14
<PAGE>


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 Adminstrative 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. China currently enjoys NTR status under US tariff laws, which provides a
favorable  category of US import  duties.  As a result of  opposition to certain
policies of the Chinese  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.


                                       15
<PAGE>


         Chinese Taxation.

         The Company paid  $240,000 in profits tax on the Joint Venture in China
in 1999,  the first 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.

         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


                                       16
<PAGE>


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.

         During  1997 and  1998,  Fishing-related  games  made up a  significant
portion of the  Company's  overall  sales  (45.3% and 40.4%,  respectively).  In
response to the heavy concentration of sales within one line and in anticipation
of the  normal  decline in the sales  level of any  successful  product  after a
period  of  time,   Radica  has  worked  to   diversify   its   product   lines.
Fishing-related games accounted for 19% of sales in 1999.

         Much of the Company's  expected 2000 peripherals  revenues are based on
steering  wheels  and  controllers  developed  for  the  PlayStation  2  ("PS2")
platform,  expected  to be released in Japan in Spring of 2000 and in the US and
Europe in Fall of 2000.  Delays in Sony's  introduction  of the PS2 system could
have a significant impact on the Company's peripherals revenue in 2000. There is
also no guarantee  that the Company will be able to create  peripheral  products
that work with the new platform in time to meet the market.

         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 and net income.  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,  game  peripherals,  internet  accessories  and ODM games. In
addition, the Company plans to introduce its new Play TV(TM) line of products in
the Fall of 2000. The Play TV(TM) games utilize the Xavix(TM)  technology  which
allows users to plug games directly into their television set for display of the
game content on the screen  without  requiring  connection  through a video game
system.

DEPENDENCE ON MAJOR CUSTOMERS

         Historically,  a significant  portion of the  Company's  sales has been
concentrated  in a  few  large  retail  customers.  See  Note  15  of  Notes  to
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



                                       17
<PAGE>

         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
peripherals.  While the Company  intends to move the majority of this production
into its own Factory, manufacturer delays or shut downs could have a significant
impact on sales of peripherals in 2000.

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  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 is also  currently
manufacturing  Othello product for both Mattel and Tsukuda of Japan. 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 has  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



                                       18
<PAGE>

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 Note 21 of
Notes to Consolidated Financial Statements 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  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.

INTERNET RISK

         In 2000,  the Company  plans on  introducing  several  internet-related
products.  The market for internet products is highly competitive.  There are no
substantial  barriers  to entry in this  market  and the  Company  expects  that
competition will continue to intensify.

         The  market  for   internet   products   is   characterized   by  rapid
technological  developments,  evolving industry  standards and customer demands,
ongoing product  enhancements and new product  introductions.  As a result,  the
Company  may need to make  significant  changes to the design and content of its
internet  product  in  order  to  compete  effectively.  Failure  to do so could
adversely effect its business,  operating results and financial  conditions.  In
addition,  internet  products tend to be higher cost, so failure of a product to
sell will create higher inventory exposure than with other products.

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.

CHANGING CONSUMER PREFERENCES

         The  electronic  games and  peripherals  markets are  characterized  by
changing  consumer  preferences  and  frequent new product  introductions  which
reduce the length of product life cycles.  There can be no



                                       19
<PAGE>

assurance  that any of the Company's  current  products or product lines will be
popular  with  consumers  for any  period  of  time.  Furthermore,  sales of the
Company's existing products are expected to decline over time and may decline at
rates  faster  than  expected.  The  Company's  success  is  dependent  upon the
Company's ability to enhance existing product lines and develop new products and
product lines. Historically,  a significant portion of the gross sales each year
was  derived  from new  products.  Failure  of the  Company's  existing  and new
products  and  product  lines to achieve and sustain  market  acceptance  and to
produce  acceptable  margins  could  have an  adverse  effect  on the  Company's
financial condition and results of operations.

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.  The taxes paid by the Company in China
increased during 1999. See "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 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  4.  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



                                       20
<PAGE>

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, 1999, the Company had 17,639,594 shares of Common Stock
outstanding.  The Company estimates that  approximately half 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 "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.

ITEM 2.  DESCRIPTION OF PROPERTIES

         See Item 1 "Manufacturing  Facilities." 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. The extension
is  expected to be  completed  in August of 2000.  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 San Rafael, California.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is not subject to any pending material legal proceedings.

ITEM 4.  CONTROL OF REGISTRANT

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



                                       21
<PAGE>

(b)      The following  table is based on  information  available to the Company
         and  identifies  the  owners  of more  than  ten  percent  (10%) 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, 2000:

                  Identity of
Title of Class  Person or Group                   Amount Owned  Percent of Class
--------------  ---------------                   ------------  ----------------

Common stock    Robert E. Davids                    2,785,800      15.8%
Common stock    Dito Devcar Corporation et al       5,878,218      33.3%
Common stock    Officers & Directors as a Group     3,258,721      18.5%

         In  addition  to the  foregoing,  the  Company  is aware  of two  other
         significant shareholders who are believed to own approximately 9.9% and
         5% of the  Company's  common  stock.  These are RAD  Partners  1999 LLC
         (including shares owned by other related persons) and The John and Mary
         Hansen 1989 Trust (the "Hansen Trust") (including shares owned by other
         Hansen family trusts or individuals), 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.


                                       22
<PAGE>




                                     PART II

ITEM 5.  NATURE OF TRADING MARKET

         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 1999, fiscal 1998 and fiscal 1997.

<TABLE>
<CAPTION>
                          FISCAL YEAR ENDED  FISCAL YEAR ENDED   STUB PERIOD ENDED    FISCAL YEAR ENDED
                          -----------------  -----------------   -----------------    -----------------
                          OCTOBER 31, 1997   OCTOBER 31, 1998    DECEMBER 31, 1998    DECEMBER 31, 1999
                          ----------------   ----------------    -----------------    -----------------
                          HIGH       LOW      HIGH    LOW         HIGH      LOW       HIGH      LOW
                          ----       ---      ----    ---         ----      ---       ----      ---

                          $          $        $        $          $         $         $         $
<S>                       <C>        <C>      <C>      <C>        <C>       <C>       <C>       <C>
Stud Period ..........     -         -         -        -         17 1/2    13 5/8     -         -

First Quarter ........     3 1/4     1 1/16   19       12 7/8      -         -        16 5/16   12 3/8

Second Quarter .......     4 1/8     2 3/8    20 5/8   14 3/4      -         -        13 5/8     9

Third Quarter.........     7 7/8     2 7/8    22 1/4   16 1/8      -         -        11 1/8     8 1/4

Fourth Quarter .......    15 3/8     7 1/2    16 5/8    9 3/4      -         -        11 11/16   7
</TABLE>

         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 7. Taxation.)

         As of December  31,  1999,  the Company  had  approximately  110 record
holders of its Common Stock, and  approximately 80% of such stock was held by US
holders.

ITEM 6. 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



                                       23
<PAGE>

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
authorised 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.

ITEM 7.  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



                                       24
<PAGE>



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.

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.



                                       25
<PAGE>

         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 1999.
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
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).



                                       26
<PAGE>

         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 1999.  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,  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.

ITEM 8.  SELECTED FINANCIAL DATA

         Set forth below is the selected income statement and balance sheet data
for each of the four years in the period ended  October 31, 1998,  of two months
in the  period  ended  December  31,  1998 and of the year in the  period  ended
December 31, 1999. This summary should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operation" and the
combined  financial  statements  and notes  thereto  included  elsewhere in this
document.


                                       27
<PAGE>

<TABLE>
<CAPTION>
                                                                                                         TWO MONTHS     TWO MONTHS
                                                                                                         ENDED          ENDED
                                                                   YEAR ENDED OCTOBER 31,                DECEMBER 31,   DECEMBER 31,
                                                      1995        1996        1997         1998          1998           1999
                                                    --------------------------------------------------------------------------------
                                                               (IN  THOUSANDS,  EXCEPT  PER SHARE DATA AND MARGINS)
<S>                                                 <C>          <C>          <C>          <C>           <C>           <C>
INCOME STATEMENT DATA:
Net sales                                           $ 52,650     $ 47,535     $ 87,760     $ 155,618     $  21,071     $ 133,522
Cost of sales                                         34,640       30,696       40,888        70,576        10,717        78,229
                                                    --------     --------     --------      --------     ---------     ---------

Gross profit                                          18,010       16,839       46,872        85,042        10,354        55,293
                                                    --------     --------     --------      --------     ---------     ---------
Operating expenses:
Selling, general and administrative                   21,105       11,752       14,403        27,788         3,657        28,049
Research and development                               2,084        1,699        2,099         3,710           730         6,036
Write down of assets                                  15,318          -            -             -             -             -
Acquired research and development                        -            -            -           1,500           -             -
Depreciation and amortization                          1,591        1,594        2,278         3,423           612         4,956
                                                    --------     --------     --------      --------     ---------     ---------
Total operating expenses                            $ 40,098     $ 15,045     $ 18,780     $  36,421     $   4,999     $  39,041
                                                    --------     --------     --------      --------     ---------     ---------

Operating (loss) income from continuing operations   (22,088)       1,794       28,092        48,621         5,355        16,252
Other income                                             329          748          915           807           471         1,231
Share of loss of affiliated company                      -            -           (141)         (334)         (120)       (1,748)
Net interest (expenses) income                          (628)        (165)         913         1,896           289         1,469
                                                    --------     --------     --------      --------     ---------     ---------
(Loss) Income from continuing operations before
income taxes and unusual item                        (22,387)       2,377       29,779        50,990         5,995        17,204
Unusual item                                             -            709          -             -             -             -
                                                    --------     --------     --------      --------     ---------     ---------
(Loss) Income from continuing operations

before income taxes                                  (22,387)       3,086       29,779        50,990         5,995        17,204

Credit (Provision) for income taxes                      897          120         (193)          226          (176)         (149)
                                                    --------     --------     --------      --------     ---------     ---------
(Loss) Income from continuing operations

after income taxes                                  $(21,490)    $  3,206     $ 29,586     $  51,256     $   5,819     $  17,055

Discontinued Operations:
Loss from operation of pub poker business               (233)      (1,712)         -             -             -             -
                                                    --------     --------     --------      --------     ---------     ---------
Net (loss) income                                   $(21,723)    $  1,494     $ 29,586     $  51,256     $   5,819     $  17,055
                                                    ========     ========     ========     =========     =========     =========

Net (loss) earnings per share from continuing       $  (0.94)    $   0.15     $   1.43     $    2.53     $    0.31     $    0.94
 operations
Effect of discontinued operations                      (0.01)        (0.08)          -          -
                                                    --------     --------     --------      --------     ---------     ---------

Net (loss) earnings per share - basic               $  (0.95)    $   0.07     $    1.43     $    2.53     $    0.31     $    0.94
                                                    ========     ========     ========     =========     =========     =========

Average number of shares outstanding                  22,780       21,439       20,761        20,240        18,883        18,144

Net (loss) earnings per share - assuming dilution   $  (0.95)    $   0.07     $    1.37     $    2.39     $    0.29     $    0.90
                                                    ========     ========     ========     =========     =========     =========
Average number of shares outstanding                  22,780       21,439       21,636        21,488        20,094        18,979
</TABLE>

                                  (continued)

                                       28
<PAGE>


<TABLE>
<CAPTION>
                                                                                                         TWO MONTHS     TWO MONTHS
                                                                                                         ENDED          ENDED
                                                                   YEAR ENDED OCTOBER 31,                DECEMBER 31,   DECEMBER 31,
                                                      1995        1996        1997         1998          1998           1999
                                                    -----------------------------------------------------------------------------
                                                               (IN  THOUSANDS,  EXCEPT  PER SHARE DATA AND MARGINS)

<S>                                                 <C>          <C>          <C>          <C>           <C>           <C>
STATISTICAL DATA:

Gross margin                                           34.2%        35.4%        53.4%         54.6%         49.1%        41.4%
Operating margin                                         N/A         3.8%        32.0%         31.2%         25.4%        12.2%
Dividends per share                                      -            -            -             -             -              -

BALANCE SHEET DATA (AT PERIOD END):

Working capital                                     $ 15,878     $ 18,847     $ 48,860     $  59,913     $  65,776     $  65,123
Total assets                                          54,054       42,725       79,449       113,521       108,190       122,095
Long-term debt                                            99          -            -             -             -          10,946
Total debt                                            14,440           99          -             -             -          10,946
Shareholders' equity                                  30,297       31,813       61,593        79,839        85,735        86,062
</TABLE>


ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS

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 year ended December 31, 1999 to
the unaudited twelve months ended December 31, 1998, followed by a comparison of
the  unaudited two months ended  December 31, 1998 to two months ended  December
31, 1997, a comparison  of the fiscal year ended  October 31, 1998 to the fiscal
year ended  October 31, 1997 and a comparison  of the fiscal year ended  October
31,  1997 to the  fiscal  year ended  October  31,  1996.  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.

         On June 24, 1999 the Company acquired all of the business and operating
assets  of  LMP  for  total   transaction   costs  of  $16   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 LMP  from  the  date of  Acquisition  (see  Note 7 of the  Notes  to
Consolidated Financial Statements).


                                       29
<PAGE>


FISCAL 1999 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1998

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

<TABLE>
<CAPTION>

                                                                         Year ended December 31,
                                                        -----------------------------------------
                                                              1998                    1999
                                                        -----------------       -----------------

<S>                                                               <C>                     <C>
Net revenues                                                      100.0%                  100.0%
Cost of sales                                                      46.1%                   58.6%

Gross margin                                                       53.9%                   41.4%
Selling, general and administrative expenses                       17.8%                   21.0%
Research and development                                            2.6%                    4.5%
Acquired research and development                                   0.9%                       -
Depreciation and amortization                                       2.4%                    3.7%

Operating income                                                   30.2%                   12.2%
Other income                                                        0.7%                    0.9%
Share of loss of affiliated company                                 0.3%                    1.3%
Interest income, net                                                1.2%                    1.1%

Income before income taxes                                         31.9%                   12.9%
(Provision) credit for income taxes                                 0.1%                   (0.1%)

Net income                                                         32.0%                   12.8%
</TABLE>

         Net sales for the year ended  December  31, 1999 were  $133.5  million,
decreasing 16.2% from $159.4 million for the prior year.


                                       30
<PAGE>


         The following  table sets out the  percentages  of sales  achieved from
each category of products:

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,

                   -----------------------------------------------------------------------------------------------------------------
                                         1998                                                      1999
                   --------------------------------------------------------   ------------------------------------------------------
                       % 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)                            (in thousands)  (in thousands)

<S>                      <C>           <C>              <C>          <C>           <C>           <C>              <C>           <C>
Fishing games            40.4%         $ 64,454         5,233        6             19.0%         $ 25,370         2,239          9

Hunting games                -                -             -        -              8.1%           10,822           651          4

Action games              9.8%           15,540         1,089        7              8.7%           11,678           803         12

Sports games             11.5%           18,355         1,316       12             12.1%           16,159         1,027         17

Casino games              8.2%           13,040         3,181       66              7.6%           10,170         2,395         38

Heritage games            7.2%           11,513         1,084       19             10.2%           13,576         1,552         20

Girl Tech games           0.1%              145            11        2              5.6%            7,444           594          6

ODM products             22.8%           36,322         6,144       20             20.9%           27,897         6,109         22

Peripherals                  -                -             -        -              7.8%           10,406         1,871        139
                    ----------- ------------------------------ --------       ----------- ------------------------------ -----------

Total                   100.0%        $ 159,369        18,058      132            100.0%        $ 133,522        17,241        267
                    =========== ============================== ========       =========== ============================== ===========
</TABLE>

         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%.  Of the 267 models of Radica,  Radica Gold and LMP games and
peripherals  sold during the period a number of models are  discontinued  lines,
which  unless the market  warrants  reintroduction,  the Company only intends to
continue selling so long as inventories exist. Twenty-seven new models were sold
during 1999 (See "New Products Introduction").  The Company intends to introduce
approximately 114 new models in 2000.

         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  LMP, 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 LMP.


                                       31
<PAGE>


         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

         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 LMP  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.

CAPITAL RESOURCES AND LIQUIDITY

         Cash and cash equivalents totaled $32.2 million at December 31, 1999, a
drop of $15.4  million from December 31, 1998.  Working  capital at December 31,
1999 was $65.1 million,  a $0.7 million  decrease from working  capital of $65.8
million at December 31, 1998.  The decrease in working  capital is due primarily
to a decrease in net income offset by an increase in  receivables  and inventory
resulting  from the  acquisition  of LMP, Y2K related  issues and Radica  shares
repurchased  throughout  the  year.  The  ratio of  current  assets  to  current
liabilities decreased to 3.6 at December 31, 1999 from 3.9 at December 31, 1998.
This decrease in the current ratio is due mainly to the decrease in cash.

         Short-term  borrowings  totaled $2.9  million at December 31, 1999,  an
increase of $1.4 million from December 31, 1998.  $1.4 million at the short-term
borrowings  were notes held in escrow as a result of the LMP  purchase  and will
mature in December of 2000. The remaining $1.5 million is the outstanding amount
of an LMP credit facility.

         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.

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


                                       32
<PAGE>


         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 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 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.

                                               Two months ended December 31,
                                    --------------------------------------------
                                           1997                     1998
                                    -------------------      -------------------
                                              (US dollars in thousands)
Commissions                                 $ 553                    $ 791
Indirect salaries and wages                   730                    1,236
Advertising and promotion expenses            732                      421
Research and development expenses             320                      730


         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,


                                       33
<PAGE>


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 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.

FISCAL 1997 COMPARED TO FISCAL 1996

         Net sales for the year  ended  October  31,  1997 were  $87.8  million,
increasing 84.8% from $47.5 million for the prior year.  Approximately  50.6% of
sales related to Sports games,  12.4% to Heritage  games,  2.7% to Action games,
15.7% to Casino  games and 18.6% to ODM sales in fiscal  1997 in  comparison  to
18.1%,  17.3%, 0%, 40.5% and 24.1% in fiscal 1996. During 1997, the Company sold
156  different  models of games,  totaling 12.4 million  units,  compared to 139
models  totaling  9.0 million  units in 1996,  an increase of 37.8%.  Of the 147
models of Radica and Monte Carlo (now called  Radica Gold) games sold during the
period 122 models were  discontinued  lines,  which unless the market  warranted
reintroduction,  the  Company  only  intended  to  continue  selling  so long as
inventories exist. Ten new models were sold during 1997.

         The gross  profit for fiscal  year 1997 was $46.9  million  compared to
$16.8 million for fiscal 1996,  an increase of 179.2%.  The gross margin for the
year was 53.4%  compared  to 35.4% for fiscal year 1996.  The  increase in gross
margin was due to higher  sales  volume of current  and new  product at historic
margin  levels  relative  to sales of low  margin  promotional  product  and ODM
production.  In  addition,  approximately  3.6% of the year end  margin  or $3.2
million was as a result of sales of product  which had  previously  been written
off.


                                       34
<PAGE>


         Operating  profit for fiscal year 1997 was $28.1  million,  an increase
from $1.8 million from fiscal 1996.  Operating expenses increased 25.3% to $18.8
million from $15 million in 1996.  Commissions  increased  113% to $2.45 million
from $1.15 million in fiscal 1996;  indirect  salaries and wages increased 36.8%
to $4.72  million from $3.45 million in fiscal 1996;  advertising  and promotion
expenses  increased 11.1% to $0.8 million from $0.72 million in fiscal 1996; and
research and  development  expenses  increased 23.5% to $2.10 million from $1.70
million in fiscal 1996.

         The effective blended tax rate for the year ended October 1997 was 0.6%
on continuing  operations compared to a credit of 3.9% for fiscal 1996. This was
due to the effective  USA tax rate of 34% combined with the 16.5%  effective tax
rate  of  the  operations  in  Hong  Kong  and  0%  effective  tax  rate  of the
manufacturing   operation  in  China  conducted  by  a  British  Virgin  Islands
subsidiary.  It should be noted that the US subsidiary had significant  releases
of inventory provisions which were not taxable during the year, so that although
it was profitable there was no tax charge.

         Net  profit for  fiscal  year 1997 of $29.6  million or $1.43 per share
compared to $1.5 million or $0.07 per share in fiscal 1996.

ITEM 9A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company does not engage in  transactions  in the ordinary course of
its business to hedge itself against exposure to currency risks.

ITEM 10.  DIRECTORS AND OFFICERS OF REGISTRANT

         The following table sets forth the directors and executive  officers of
the Company in fiscal 1999.

<TABLE>
<CAPTION>
                                            Term
Name                                        Expires    Residency   Position
----                                        -------    ---------   --------
<S>                                         <C>        <C>         <C>
Patrick S. Feely                            2000        USA        President, Chief Executive Officer,
Chief Operating Officer and Director

Jon N. Bengtson                             2000        USA        Chairman of the Board and Director

Robert E. Davids (3)                        2000        Hong Kong  Vice-Chairman of the Board and Director

David C.W. Howell                           2000        Hong Kong  President Asia Operations,
                                                                   Chief Financial Officer and Director

Siu Wing Lam                                2000        USA        Executive Vice President, Engineering and Director

James O'Toole (1)(2)(3)                     2000        USA        Director

Millens W. Taft (1)(2)(3)                   2000        USA        Director

Peter L. Thigpen (1)(2)(3)                  2000        USA        Director

Henry Hai-Lin Hu (1)(2)(3)                  2000        Australia  Director

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




                                       35
<PAGE>



<TABLE>
<CAPTION>
<S>                                         <C>        <C>         <C>
Eugene A. Murtha                            N/A         USA        President, Radica USA

Neil Doughty                                N/A         UK         Managing Director, Leda Media Products Ltd

John Doughty                                N/A         UK         Head of Sales, Leda Media Products Ltd

Alan R. Champion                            N/A         UK         Head of Marketing, Leda Media Products Ltd

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

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

Samuel C.W. Kwok                            N/A         Hong Kong  Plant Administration Director

Ben Hui                                     N/A         Hong Kong  Materials Director

You Liang Wang                              N/A         China      Quality Director

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

<FN>
(1)      Member of the Audit Committee.

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

(3)      Member of the Executive Committee.
</FN>
</TABLE>

         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 US 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  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.


                                       36
<PAGE>


         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,  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 19 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 Organization 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


                                       37
<PAGE>


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 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.

         Eugene A. Murtha has been the  President  of Radica USA since  December
1998. A 23-year veteran of the Toy and Game Industry, Mr. Murtha recently served
as Mattel's  Senior Vice President of Marketing with worldwide  responsibilities
for the Matchbox line of products.  He has previously held senior  marketing and
R&D jobs with game  companies  such as Milton  Bradley and Coleco,  where he had
responsibility  for  such  classic  brands  as  Scrabble,  Trivial  Pursuit  and
Parcheesi.

         Neil  Doughty has been  Managing  Director of Leda Media  Products  Ltd
("LMP") since their  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 LMP's introduction to the video game
peripherals  market place in 1991, which is now LMP's primary source of revenue.
He is one of the  main  pioneers  of the  European  peripherals  market  and was
responsible for the establishment of LMP'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 Head of Sales  with LMP since May 1999,  having
previously held the position of UK Sales Manager since March 1998. He personally
manages LMP's major European Accounts,  and also oversees all other European and
UK Accounts  through the LMP Sales Team. Mr. Doughty has had 13 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.

         Alan R.  Champion has been Head of Marketing at LMP since  January 2000
having  previously held the position of General Manager since May 1997. Prior to
joining LMP, Mr.  Champion  worked for 5 years in Sales and Marketing  positions
with TDK UK Ltd and  earlier  lived and  worked  in  Germany  for Kraft  Suchard
confectionery.  Mr.  Champion has a BA (Hons) degree in  International  Business
Management and (Diplom  Betriebswirt) German International  Business degree from
the University of Stuttgart, Germany.


                                       38
<PAGE>


         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.

         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.

         Samuel  C.W.  Kwok has been the  Plant  Administration  Director  since
February  1998.  Mr. Kwok has over 10 years  working  experience  in Finance and
Administration  in  multinational  companies and is responsible  for the general
administration  in  the  China  factory.  He  has  an  MBA  and  is a  certified
accountant.

         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.

         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.

         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.

ITEM 11.  COMPENSATION OF OFFICERS AND DIRECTORS

COMPENSATION

         In  fiscal  1999,  the  aggregate  amount of  compensation  paid to all
executive  officers and directors as a group for services in all  capacities was
approximately $2.31 million.

         Commencing  in  April  1997,  each  outside  (i.e.,   non-employee  and
non-affiliated) director of the Company received a fee of $600 for attendance at
each meeting of the Board of Directors and a fee of $600 for  attendance at each
Committee meeting. Directors who are employees or affiliates of the Company will
not be paid any fees or  additional  remuneration  for service as members of the
Board of Directors or its Committees.


                                       39
<PAGE>


         Prior  to  April  1997,  each  outside  director  of the  Company  also
received,  in  addition  to the above,  a $10,000  annual fee paid in  quarterly
installments.  The Company proposes to resume payment of this fee effective from
the May 2000 annual shareholders meeting. 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.

         Prior to fiscal year 1996, each outside director received non-qualified
stock  options to purchase  30,000  shares of Common  Stock of the Company  upon
initial  election to the Board of  Directors  at an exercise  price equal to the
public  offering  price  ($11.00 per share) of the  Company's  Common  Stock and
exercisable after one year from the date of grant. In January 1997, the board of
directors  resolved to reprice  30,000 stock options  ($11.00 per share) each of
two outside  directors to market price as of the date of such meeting ($1.75 per
share) and the change was ratified in the board meeting on April 9, 1997. In the
same  board   meeting,   one  outside   director  was   appointed  and  received
non-qualified  stock  options to purchase  30,000  shares of Common Stock of the
Company at an exercise price equal to the average of bid and asked closing price
($3.125)  on  such  date.  In  1998,  each  of two  outside  directors  received
non-qualified  stock  options to purchase  30,000  shares of Common Stock of the
Company  upon  initial  election  at  exercise  prices of $17.25 and $16.375 per
share, respectively.

         Upon each re-election to the Board of Directors, starting in 1995, each
outside director received  non-qualified  stock options to purchase 5,000 shares
in 1995 and 1996,  and 15,000 shares in 1997,  1998 and 1999, of Common Stock of
the Company at the then current  market  price of the  Company's  Common  Stock,
which at the past five re-election dates were $3.66, $1.50,  $3.125,  $18.75 and
$12.625 per share,  respectively.  Upon re-election to the Board of Directors in
2000 and  thereafter,  each outside  director will receive  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.  These  subsequent  options are also
exercisable after one year from the date of grant.

EMPLOYMENT AGREEMENTS

         Messrs. Feely, Howell, Lam, Murtha, 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 December 1998 for Messrs.  Feely,  Howell,  Lam, and Bengtson,
from November 30, 1998 for Mr. Murtha,  and from June 24, 1999 for Mr.  Doughty.
Each employment agreement is terminable by the Company for cause. Messrs. Feely,
Howell, Lam, Murtha, Bengtson and Doughty shall each receive minimum annual base
salaries of  $282,600,  $182,000,  $160,000,  $200,000,  $43,200  and  $171,720,
respectively. The agreement with Mr. Bengtson, in operation since December 1995,
is for part-time services.  The employment agreements for Messrs. Feely, Howell,
Lam,  Murtha 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,  and  another  60,000  stock
options  at  $14.125  per  share in  November  1998,  subject  to the  terms and
conditions of the agreement and the 1994 Stock Option Plan. Additionally, in May
of 2000 and 2001,  Mr. Feely will be granted 60,000 stock options (up to 120,000
shares in the aggregate) at market price provided he achieves certain conditions
as stated in the  agreement.  In the  agreement for Mr.  Murtha,  he was granted
300,000 stock options of the Company common stock at $11.00


                                       40
<PAGE>


per share subject to the terms and conditions of the agreement and the 1994
Stock Option Plan. Additionally, in May of 2000, 2001 and 2002, Mr. Murtha will
be granted 25,000 stock options (up to 75,000 shares in the aggregate) at market
price provided certain conditions are achieved as stated in the agreement. In
the agreements for Mr. Howell and Mr. Lam, in May of 2000, 2001 and 2002, Mr.
Howell and Mr. Lam will be granted 25,000 stock options (up to 75,000 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 subject to the terms and conditions of the agreement and the 1994 Stock
Option Plan. Additionally, in May of 2000, 2001 and 2002, Mr. Doughty will be
granted 25,000 stock options (up to 75,000 shares in the aggregate) at market
price provided certain conditions are achieved as stated in the agreement.

ITEM 12. 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 2.86 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  years  1994 and 1995,  an  aggregate  of  1,181,000  options
(exclusive of the outside directors' options referred to above, and net of stock
options  that were both  issued and  canceled  in such  years)  were  granted to
directors,  officers and other employees under the Stock Option Plan to purchase
the Company's  shares at exercise  prices ranging from $8.50 to $8.53 per share.
In addition, Mr. Bengtson was granted options under his employment agreement, as
amended,  to purchase 75,200 shares of the Company's Common Stock at an exercise
price of $0.57 per share, which options are now fully vested.

         On January 4, 1996,  the Company's  Board of Directors  authorized  the
officers of the Company to make offers to holders of options under the Company's
Stock  Option  Plan  (excluding  the  option  plan  for  the  Company's  outside
directors),  in which each holder was offered  the right to  surrender  existing
options for  cancellation,  and receive new stock options for the same number of
shares at a new exercise  price  (equal to $1.38 per share,  the market price on
January 4, 1996), and subject to the  commencement of a new vesting period.  The
term of the new  options  will not  extend  beyond  the  ten-year  period of the
original options surrendered.  The effect of this authorization was that holders
of options who elected to surrender their previous  options received new options
at a lower exercise price subject to starting a new vesting period.  The holders
of 916,000  options  previously  granted  accepted  such offers.  As referred to
above,  in January 1997 the Board of Directors  approved a similar  repricing of
certain outside directors' options.


                                       41
<PAGE>


         In fiscal year 1996, an aggregate of 30,000  options  (exclusive of the
outside directors' options and the options issued in exchange for prior options,
as  referred  to above,  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 an exercise
price of $1.38 per share.

         In fiscal year 1997, an aggregate of 779,000 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 $1.09 to $12.25 per share.

         In fiscal year 1998, an aggregate of 549,000 options  (exclusive of the
outside  directors'  options and net of stock  options that were both issued and
canceled  in the  previous)  were  granted  to  directors,  officers  and  other
employees  under the Stock  Option  Plan to  purchase  the  Company's  shares at
exercise prices ranging from $10.875 to $19.75 per share.

         In the two months  ended  December  31,  1998,  an aggregate of 135,000
options  (exclusive of the outside  directors'  options and net of stock options
that were both issued and  canceled in the period)  were  granted to  directors,
officers  and other  employees  under  the Stock  Option  Plan to  purchase  the
Company's shares at exercise prices ranging from $14.13 to $16.38 per share.

         In fiscal year 1999, an aggregate of 307,000 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.

         As a result of the  foregoing,  at the end of fiscal  year 1999,  after
giving effect to all prior exercises and cancellations of options,  an aggregate
of  1,824,800  options  (exclusive  of  the  outside  directors'  options)  were
outstanding at exercise  prices  ranging from $1.38 to $19.63 per share,  and of
such amount a total of 1,146,600  options were held by directors  and  executive
officers  of the  Company as a group.  Also,  an  aggregate  of 175,000  outside
director's  options were  outstanding  at exercise  prices ranging from $1.50 to
$18.75 per share.  During 1999,  a total of 281,400  shares were issued upon the
exercise of options,  at exercise  prices ranging from $1.09 to $6.78 per share.
Prior to 1999,  a total of 604,600  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 14 of the  Notes to  Consolidated  Financial  Statements  included  in this
filing.

ITEM 13.  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


                                       42
<PAGE>


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 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 in further negotiation for Mr. Davids that
covered 2,815,800 shares.

         Additional  information on management  transactions  is contained under
Items 11 and 12 above.

ITEM 14.  DESCRIPTION OF SECURITIES TO BE REGISTERED

         Not Applicable

                                    PART III

ITEM 15.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 16.  CHANGES IN SECURITIES,  CHANGES IN SECURITY FOR REGISTERED  SECURITIES
          AND USE OF PROCEEDS
          ----------------------------------------------------------------------

         None or Not Applicable

                                     PART IV

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


                                       43

<PAGE>


         Notes to Consolidated Financial Statements                         F-7

ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

(a)      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 Consolidated Financial Statements                F-7

 (b)     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

            @ 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.

            * 10.6      Form  of  Employment  Agreement,  between  Radica  Games
                        Limited and Robert E. Davids



                                       44
<PAGE>



            # 10.6(a)   April 1996 Amendment to such Employment Agreement.

            ~ 10.6(b)   December 1997 Amendment to such Employment Agreement.

            * 10.7      Employment  Agreement,  dated as of  October  23,  1998,
                        among Radica USA, Radica Games and Eugene A. Murtha

            * 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

            ~ 10.10     1994  Stock  Option  Plan,  as  amended in April 1997 to
                        increase options

           ** 10.10(a)  1994  Stock  Option  Plan,  as  amended in April 1998 to
                        increase options

            ~ 10.11     Employment  Agreement,  dated as of May 16, 1997,  among
                        Radica USA, Radica Games Limited and Patrick Feely

            ~ 10.11(a)  December 1997 Amendment to such Employment Agreement.

            ~ 10.12     Consulting  Agreement,  dated  November 1, 1997  between
                        Radica China Limited and Millens W. Taft

              10.13     Employment  Agreement  dated  as of  December  15,  1998
                        between  Radica  Games  Limited  and David  C.W.  Howell
                        (incorporated  by  reference to Form 6-K dated March 29,
                        1999)

              10.14     Employment  Agreement  dated  as of  December  15,  1998
                        between   Radica   Games   Limited   and  Siu  Wing  Lam
                        (incorporated  by  reference to Form 6-K dated March 29,
                        1999)

              10.15     Employment  Agreement  dated as of June 24, 1999 between
                        Radica Games Limited and Neil Doughty

              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.

              11.1      Statement re Computation of Per Share Earnings

              21.1      List of subsidiaries



                                       45
<PAGE>

              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.

<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, 1999 and 1998,  and as of
October  31,  1998,  and the  related  consolidated  statements  of  operations,
shareholders'  equity and cash flows for the year ended  December 31, 1999,  the
two months ended December 31, 1998 and each of the years in the two-year  period
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, 1999 and 1998,  and as of October 31, 1998, and
the results of their operations and their cash flows for the year ended December
31, 1999,  the two months  ended  December 31, 1998 and each of the years in the
two-year period ended October 31, 1998, in conformity with accounting principles
generally accepted in the United States of America.


/S/ Deloitte Touche Tohmatsu

HONG KONG
February 10, 2000


                                      F-1

<PAGE>

                              RADICA GAMES LIMITED

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                        Assets

                                                                        December 31,     December 31,    October 31,
(US Dollars in thousands, except share data)                                1999             1998           1998
<S>                                                                     <C>              <C>             <C>
Current assets:
Cash and cash equivalents                                               $     32,159     $    47,527     $    33,141
Accounts receivable, net of allowances for doubtful accounts
  of $389 ($446 at Dec. 31, 1998 and $466 at Oct. 31, 1998) and
  estimated customer returns of $624 ($1,077 at Dec. 31, 1998
  and $1,375 at Oct. 31, 1998)                                                23,750          14,860          33,249
Inventories, net of provision of $2,339 ($2,437 at Dec. 31,
  1998 and 2,414 at Oct. 31, 1998)                                            24,625          20,294          21,534
Prepaid expenses and other current assets                                      4,752           1,041           1,126
Income taxes receivable                                                        1,257             755               -
Deferred income taxes                                                          3,667           3,754           4,545
                                                                             -------         -------         -------
    Total current assets                                                      90,210          88,231          93,595
                                                                             -------         -------         -------
Investment in affiliated company                                                   -             703             823
                                                                             -------         -------         -------
Property, plant and equipment, net                                            17,523          16,500          16,093
                                                                             -------         -------         -------
Intangible assets, net                                                        14,351           2,750           3,000
                                                                             -------         -------         -------
Deferred income taxes, noncurrent                                                 11               6              10
                                                                             -------         -------         -------
    Total assets                                                        $    122,095     $   108,190     $   113,521
                                                                             =======         =======         =======

                                        Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings                                                   $      1,464     $         -     $         -
Accounts payable                                                              10,929           6,911          11,694
Accrued warranty expenses                                                      1,100           2,500           2,470
Notes payable due within one year                                              1,399               -               -
Accrued payroll and employee benefits                                          2,511           2,688           3,510
Accrued advertising expenses                                                   1,203           1,308           6,178
Accrued sales expenses                                                           856           3,598           3,316
Commissions payable                                                              464             764           1,444
Accrued other expenses                                                         5,091           2,534           3,005
Income taxes payable                                                              70           2,152           2,065

    Total current liabilities                                                 25,087          22,455          33,682
                                                                             -------         -------         -------
Notes payable due after one year                                              10,946               -               -
                                                                             -------         -------         -------
Shareholders' equity:
Common stock
  par value $0.01 each, 100,000,000 shares authorized, 17,639,594
  shares outstanding (18,896,694 at Dec. 31, 1998 and 18,864,294
  at Oct. 31, 1998)                                                              176             189             189
Additional paid-in capital                                                     1,757           9,382           9,298
Retained earnings                                                             84,100          76,215          70,396
Accumulated other comprehensive income (loss)                                     29             (51)            (44)
                                                                             -------         -------         -------
    Total shareholders' equity                                                86,062          85,735          79,839
                                                                             -------         -------         -------
    Total liabilities and shareholders' equity                          $    122,095     $   108,190     $   113,521
                                                                             =======         =======         =======
</TABLE>

        See accompanying notes to the consolidated financial statements.


                                       F-2

<PAGE>

                              RADICA GAMES LIMITED

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
(US Dollars in thousands,                                 Year ended        Two months ended      Year ended           Year ended
 except per share data)                                  December 31,          December 31,       October 31,          October 31,
                                                             1999                1998                1998                 1997
                                                         -------------      ----------------     -------------        ------------
<S>                                                       <C>                <C>                  <C>                  <C>
Revenues:
Net sales                                                   $  133,522          $   21,071          $  155,618          $   87,760
Cost of sales                                                  (78,229)            (10,717)            (70,576)            (40,888)
                                                          ------------       -------------       -------------        ------------
Gross profit                                                    55,293              10,354              85,042              46,872
                                                          ------------       -------------       -------------        ------------
Operating expenses:
Selling, general and administrative expenses                   (28,049)             (3,657)            (27,788)            (14,403)
Research and development                                        (6,036)               (730)             (3,710)             (2,099)
Depreciation and amortization                                   (4,956)               (612)             (3,423)             (2,278)
Acquired research and development                                    -                   -              (1,500)                  -
                                                          ------------       -------------       -------------        ------------
Total operating expenses                                       (39,041)             (4,999)            (36,421)            (18,780)
                                                          ------------       -------------       -------------        ------------
Operating income                                                16,252               5,355              48,621              28,092

Other income                                                     1,231                 471                 807                 915

Share of loss of affiliated company                             (1,748)               (120)               (334)               (141)

Net interest income                                              1,469                 289               1,896                 913
                                                          ------------       -------------       -------------        ------------
Income before income taxes                                      17,204               5,995              50,990              29,779

Provision for income taxes                                        (149)               (176)                266                (193)
                                                          ------------       -------------       -------------        ------------
Net income                                                  $   17,055            $  5,819          $   51,256          $   29,586
                                                          ============       =============       =============        ============
Earnings per share - basic:

Net earnings per share                                      $     0.94            $   0.31           $    2.53           $    1.43
                                                          ============       =============       =============       =============

Average number of shares outstanding                        18,144,179          18,883,455          20,239,790          20,761,020
                                                          ============       =============       =============       =============
Earnings per share - diluted:

Net earnings per share and
  dilutive potential common stock                           $     0.90            $   0.29           $    2.39           $    1.37
                                                          ============       =============       =============       =============

Average number of shares and dilutive
   potential common stock outstanding                       18,979,349          20,094,489          21,488,364          21,635,926
                                                          ============       =============       =============       =============

</TABLE>

        See accompanying notes to the consolidated financial statements.


                                       F-3


<PAGE>

                              RADICA GAMES LIMITED

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            (US dollars in thousands)
<TABLE>
<CAPTION>
                                               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, 1996               20,680,000       $   207      $  28,371       $  3,214        $     21      $  31,813
Stock options exercised                      180,200             2            218              -               -            220
Net income                                         -             -              -         29,586               -         29,586
Foreign currency translation                       -             -              -              -            (26)           (26)
                                        -------------  -------------  -------------  -------------  ---------------  -------------

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

</TABLE>

Accumulated other comprehensive income (loss) represents foreign currency
translation adjustments.  The comprehensive income of the Company was $17,135,
$5,812, $51,217 and $29,560 for the year ended December 31, 1999, the two
months ended December 31, 1998 and the fiscal years ended Octobe 31, 1998 and
1997, respectively.

        See accompanying notes to the consolidated financial statements.


                                       F-4

<PAGE>

                              RADICA GAMES LIMITED

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (US dollars in thousands)

<TABLE>
<CAPTION>
                                                                 Year ended      Two months ended     Year ended       Year ended
                                                                December 31,       December 31,       October 31,      October 31,
                                                                    1999               1998              1998             1997
                                                               ---------------   ----------------    -------------    -------------
<S>                                                           <C>                <C>                <C>              <C>
Cash flow from operating activities:
Net income                                                          $   17,055          $   5,819         $ 51,256         $ 29,586
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Deferred income taxes                                                    82                795           (4,634)             108
   Depreciation                                                          2,389                362            1,923            1,613
   Amortization                                                          2,567                250            1,500              665
   Share of loss of affiliated company                                   1,748                120              334              141
   Acquired research and development                                         -                  -            1,500                -
   Loss (gain) on disposal and write off of
      property, plant and equipment                                         62                  1               22              (21)
   Changes in assets and liabilities, net of effect from
     purchase of Leda Media Products Limited ("LMP"):
     Accounts receivable                                                (7,521)            18,382          (14,548)          (9,142)
     Inventories                                                        (2,986)             1,240           (9,793)            (757)
     Prepaid expenses and other current assets                          (3,572)                85             (445)            (134)
     Accounts payable                                                    3,365             (4,783)           3,485            2,674
     Accrued payroll and employee benefits                                (177)              (822)           2,261              563
     Commissions payable                                                  (300)              (680)             529              439
     Accrued advertising expenses                                         (105)            (4,870)           5,460              461
     Accrued sales expenses                                             (2,742)               282            2,062             (573)
     Accrued warranty expenses                                          (1,400)                30              309              607
     Accrued other expenses                                              2,394               (471)             (53)           2,625
     Income taxes                                                       (2,286)              (668)           1,852              168
                                                               ---------------   ----------------    -------------    -------------
Net cash provided by operating activities                                8,573             15,072           43,020           29,023
                                                               ---------------   ----------------    -------------    -------------
Cash flow from investing activities:
Decrease (increase) in short-term investments                                -                  -            2,050           (1,973)
Proceeds from sale of property, plant and equipment                         47                 35               33               61
Purchase of property, plant and equipment                               (3,306)              (805)          (5,532)          (1,255)
Purchase of LMP, net of cash acquired                                   (2,511)                 -                -                -
Purchase of Girl Tech assets                                                 -                  -           (2,400)                -
Investment in affiliated company                                        (1,045)                 -             (963)          (1,000)
                                                               ---------------   ----------------    -------------    -------------
Net cash used in investing activities                                   (6,815)              (770)          (6,812)          (4,167)
                                                               ---------------   ----------------    -------------    -------------
</TABLE>

                                      F-5

<PAGE>


                              RADICA GAMES LIMITED

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (US dollars in thousands)

<TABLE>
<CAPTION>
                                                                 Year ended      Two months ended     Year ended       Year ended
                                                                December 31,       December 31,       October 31,      October 31,
                                                                    1999               1998              1998             1997
                                                               ---------------   ----------------    -------------    -------------
<S>                                                           <C>                <C>                <C>              <C>
Cash flow from financing activities:
Repurchase of common stock                                         $  (18,007)        $        -       $  (37,587)        $      -
Funds from stock options exercised                                        532                 84            1,016               220
Increase in short-term borrowings                                         349                  -                -                -
Repayment of long-term debt                                                 -                  -                -               (99)
                                                               ---------------   ----------------    -------------    -------------

Net cash (used in) provided by financing activities                   (17,126)                 84         (36,571)              121
                                                               ---------------   ----------------    -------------    -------------

Net (decrease) increase in cash and cash equivalents                  (15,368)             14,386            (363)           24,977

Cash and cash equivalents:
   Beginning of period                                                 47,527              33,141           33,504            8,527
                                                               ---------------   ----------------    -------------    -------------

   End of period                                                   $   32,159         $    47,527      $    33,141        $  33,504
                                                               ===============   ================    =============    =============

Supplementary disclosures of cash flow information:
Cash paid during the period:
   Interest                                                        $      331         $        -       $        61        $      12
   Income taxes                                                         1,983                  -             2,381                -

Non-cash investing and financing activities:
   Loan notes for purchase of LMP                                  $   12,345         $        -       $        -         $       -
   Grant of warrants                                                      667                  -                -                 -

</TABLE>

        See accompanying notes to the consolidated financial statements.


                                      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 market a diverse line of
     electronic products 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 all subsidiaries. Investments in affiliates, owned more than 20 percent
     but not in excess of 50 percent,  are recorded using the equity method. All
     significant  intra-group  transactions and balances have been eliminated on
     consolidation.

     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.   CHANGE OF FISCAL YEAR

     The Company had a change in its fiscal year end from October 31 to December
     31 in accordance  with industry  practices.  Accordingly,  the current year
     ended on December 31, 1999. The accompanying financial statements and notes
     included  results for the two-month  transition  period ended  December 31,
     1998, as required by the Securities and Exchange Commission.

3.   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.


                                      F-7

<PAGE>


                              RADICA GAMES LIMITED

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

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.  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.

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

     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.

     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 by the
     Company  the sooner of the first time the  advertising  takes  place or the
     invoice date for the media  purchase.  Advertising  costs  associated  with
     customer   benefit  programs  are  accrued  as  the  related  revenues  are
     recognized.  Advertising expense was $8,929,  $415, $9,121 and $735 for the
     year ended  December 31, 1999,  the two months ended December 31, 1998, and
     the fiscal years ended October 31, 1998 and 1997, respectively.


                                      F-8

<PAGE>


                              RADICA GAMES LIMITED

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

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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 monthly exchange rates during each
     reporting  period.  The impact of exchange  rate changes is dealt with as a
     separate  component of equity.  Net gains  (losses)  from foreign  exchange
     transactions of $308, $(18),  $(281) and $(122) for the year ended December
     31,  1999,  the two months ended  December  31, 1998,  and the fiscal years
     ended  October 31, 1998 and 1997,  respectively,  are  included in selling,
     general and administrative expenses.

     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 options - The Company continues to follow Accounting Principles Board
     Opinion No. 25,  "Accounting for Stock Issued to Employees",  in accounting
     for its  stock  options.  As a result,  no  compensation  expense  has been
     recognized as the exercise  price of the Company's  employee  stock options
     equals the market price of the underlying  stock at the date of grant.  Pro
     forma  disclosures of the effect on net income and earnings per share as if
     the Company had  accounted  for its employee  stock  options under the fair
     value method  prescribed  by Statement  of Financial  Accounting  Standards
     ("SFAS") No. 123, "Accounting for Stock-Based  Compensation",  are shown in
     note 14.

     Earnings per share - Earnings  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.

     Use of estimates - The  preparation  of financial  statements in conformity
     with generally accepted  accounting  principles 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 could differ from those  estimates.  Differences  from those
     estimates are reported in the period they become known.


                                      F-9

<PAGE>


                              RADICA GAMES LIMITED

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

3.   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".  SFAS No. 133 establishes accounting and reporting
     standards  for  derivative   instruments,   including  certain   derivative
     instruments  embedded in other contracts,  and for hedging activities.  The
     statement  requires  that an entity  recognize  all  derivatives  as either
     assets or  liabilities  in the statement of financial  position and measure
     those instruments at fair value. Implementation of SFAS No. 133 is required
     commencing  with the first quarter of 2001. The Company does not expect the
     adoption to have a material impact on the Company's  consolidated financial
     statements.

     Reclassifications  -  Certain  reclassifications  have  been  made to prior
     period amounts to conform with the 1999 presentation and to comply with new
     SFAS's.

4.   INVENTORIES

     Inventories by major categories are summarized as follows:

                                December 31,      December 31,    October 31,
                                  1999                1998           1998
                                ------------      -----------     -----------

     Raw materials                 $   5,397        $   4,580       $   4,650
     Work in progress                  5,166            6,731           5,733
     Finished goods                   14,062            8,983          11,151
                                ------------      -----------     -----------
                                   $  24,625        $  20,294       $  21,534
                                ============      ===========     ===========

5.   INVESTMENT IN AFFILIATED COMPANY

     In May 1997, the Company acquired approximately 35% of the capital stock of
     ShareGate,  Inc.  (formerly  known  as  U-Tel,  Inc.),  a  private  company
     incorporated  in  Nevada,  United  States of  America,  which is engaged in
     research and  development  of  telecommunication  equipment,  for $1,000 in
     cash.  ShareGate,  Inc. is in the early  stages of its product  development
     cycle and  accordingly the excess purchase price over fair value of the net
     assets  acquired  of $665,  was  charged to  operations  for the year ended
     October 31, 1997. In July 1998, following a refinancing of ShareGate, Inc.,
     the Company purchased  additional shares for $963 in cash. This allowed the
     Company to maintain its percentage  interest in ShareGate,  Inc. During the
     year of 1999, ShareGate,  Inc. raised a round of venture financing of which
     Radica granted a one million dollars bridge loan to ShareGate, Inc.


                                      F-10

<PAGE>


                              RADICA GAMES LIMITED

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

5.   INVESTMENT IN AFFILIATED COMPANY (Continued)

     As a result of losses  incurred and projected  ongoing losses at ShareGate,
     Inc.  in 2000,  the  Company  recognized  charges  for  share of  losses in
     ShareGate, Inc. associated with impairment of the bridge loan.

     The following is a summary of investment activities in ShareGate, Inc.:

<TABLE>
<CAPTION>
                                                                Amount due
                                               Shares        from affiliated
                                             investment          company             Total
                                            ------------     ---------------     --------------
<S>                                         <C>              <C>                 <C>
Investment                                     $   1,000          $     -          $   1,000
Amortization of goodwill                            (665)               -               (665)
Equity in net loss                                  (141)               -               (141)
                                            -------------    ---------------     --------------
Balance as October 31, 1997                    $     194          $     -          $     194
Additional investment                                963                -                963
Equity in net loss                                  (334)               -               (334)
                                            -------------    ---------------     --------------
Balance as October 31, 1998                    $     823          $     -          $     823
Equity in net loss                                  (120)               -               (120)
                                            -------------    ---------------     --------------
Balance as December 31, 1998                   $     703          $     -          $     703
Bridge loan and accrued interests                      -            1,045              1,045
Equity in net loss                                  (703)            (633)            (1,336)
Provision of impairment                                -            (412)               (412)
                                           ---------------   ---------------     --------------
Balance as December 31, 1999                   $       -         $     -           $       -
                                           ===============   ===============     ==============

</TABLE>

                                      F-11

<PAGE>


                              RADICA GAMES LIMITED

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

6.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                              December 31,     December 31,     October 31,
                                                  1999             1998            1998
                                              ------------     -----------      -----------
     <S>                                      <C>              <C>              <C>
     Land and buildings                          $  12,261       $  11,958        $  11,950
     Plant and machinery                             7,385           5,777            5,549
     Furniture and equipment                         6,124           4,191            4,003
     Leasehold improvements                          2,562           2,192            1,866
                                              ------------     -----------      -----------
        Total                                    $  28,332       $  24,118        $  23,368
     Less: Accumulated depreciation
           and amortization                        (10,809)         (7,618)          (7,275)
                                              ------------     -----------      -----------
        Total                                    $  17,523       $  16,500        $  16,093
                                              ============     ===========      ===========
</TABLE>


7.   ACQUISITION

     On June 24, 1999, the Company acquired Leda Media Products Limited ("LMP"),
     the leading  supplier of third party video game controllers in the U.K. The
     Company purchased LMP for approximately $16 million.  The acquisition price
     consisted of cash payment of approximately $2.6 million,  assumption of LMP
     net  indebtedness  of  approximately  $1.1  million  and  issuance of notes
     payable for $12.3 million. The transaction 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 $13.5 million which
     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.


                                      F-12

<PAGE>


                              RADICA GAMES LIMITED

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

8.   INTANGIBLE ASSETS

     Intangible  assets  consist  of the  excess  of  purchase  price  over  the
     estimated fair value of net assets  acquired in acquisition of LMP and Girl
     Tech(R),  and  acquired  use in certain  cases of the  Electronic  Arts(TM)
     ("EA") brand name.

     During the year of 1999, the Company and EA announced a strategic  alliance
     for the  extension  of EA  brands  and  game  properties  in the  dedicated
     electronic  handheld game category.  As part of this alliance,  the Company
     entered  into a worldwide  licensing  agreement  with EA. In an  additional
     agreement,  the Company  granted EA warrants to purchase  375,000 shares of
     the Company  common stock during the term of the  agreement.  The agreement
     with EA runs  through  the end of 2002.  The fair value of the  warrants of
     $667 has been recorded as an intangible asset for the acquired license. The
     asset  is  being  amortized  on a  straight-line  basis  over  the  term of
     agreement.

     The Company  purchased the assets and business of KidActive,  LLC, dba Girl
     Tech(R) during the quarter ended April 30, 1998.  KidActive,  LLC, dba Girl
     Tech(R) was a development  stage enterprise and had not traded prior to the
     Company's  acquisition of its assets.  The Company purchased the assets and
     business of KidActive,  LLC, dba Girl Tech(R) for $2.4 million in cash plus
     190,094 shares, a total of $6 million. Of this $4.5 million was capitalized
     as goodwill and brand name, and $1.5 million was written off immediately as
     purchased  research  and  development.  Goodwill  and brand  name are being
     amortized over a three year fiscal period on a straight-line basis.

     Accumulated amortization was $4,317, $1,750 and $1,500 at December 31, 1999
     and 1998, and October 31, 1998, respectively.

9.   SHORT-TERM BORROWINGS

     Under line of credit  arrangements  for short-term debt with various banks,
     the Company  has  available  approximating  $9 million on such terms as the
     Company  and  the  banks  mutually  agree  upon.  Substantially  all of the
     short-term  borrowings  outstanding at the end of 1999 represent borrowings
     made under, or supported by, these lines of credit and the weighted average
     interest rate of the outstanding borrowings was approximately 6%.


                                      F-13

<PAGE>


                              RADICA GAMES LIMITED

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

10.  INCOME TAXES

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

<TABLE>
<CAPTION>
                                Year ended       Two months ended      Year ended        Year ended
                                December 31,        December 31,       October 31,       October 31,
                                    1999                1998               1998              1997
                                ------------     ----------------     -------------     -------------
     <S>                        <C>              <C>                  <C>               <C>
     United States                  $ (1,349)        $   827              $  11,579          $  2,167
     International                    18,553           5,168                 39,411            27,612
                                ------------     ----------------     -------------     -------------
                                    $ 17,204        $  5,995              $  50,990          $ 29,779
                                ============     ================     =============     =============
</TABLE>


     The  Company  incorporated  its  share  of loss of US  affiliated  company,
     ShareGate,  Inc., into the results of United States.  The share of loss was
     $1,748,  $120,  $334 and $141 for the year ended December 31, 1999, the two
     months ended December 31, 1998, and the fiscal years ended October 31, 1998
     and 1997, respectively.

     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 1999  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.


                                      F-14

<PAGE>


                              RADICA GAMES LIMITED

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

10.  INCOME TAXES (Continued)

     The provision (credit) for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                  Year ended        Two months ended      Year ended        Year ended
                                                   December 31,        December 31,       October 31,       October 31,
                                                       1999                1998              1998               1997
                                                  -------------     ----------------     -------------     -------------
      <S>                                         <C>               <C>                  <C>               <C>
      United States
         State tax expense (benefit), net of
           federal tax expense (benefit)              $   145           $   (623)            $  4,307          $   (38)
         Change in deferred tax                            39                795               (4,634)             108
                                                      $   184           $    172             $   (327)         $    70
                                                  -------------     ----------------     -------------     -------------
      International
         Current income tax                           $   (78)          $      4             $     61          $   123
         Change in deferred tax                            43                  -                    -                -
                                                  -------------     ----------------     -------------     -------------
                                                      $   (35)          $      4             $     61          $   123
                                                  -------------     ----------------     --------------    -------------
      Total provision (credit)
        for income tax                                $   149           $    176             $   (266)         $   193
                                                  =============     ================     ==============    =============
</TABLE>

                                      F-15

<PAGE>


                              RADICA GAMES LIMITED

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

10.  INCOME TAXES (Continued)

     A reconciliation  between the provision  (credit) for income taxes computed
     by applying the  statutory  tax rates in the United States to income before
     income  taxes and the actual  provision  (credit)  for  income  taxes is as
     follows:

<TABLE>
<CAPTION>
                                                   Year ended       Two months ended      Year ended        Year ended
                                                   December 31,        December 31,       October 31,       October 31,
                                                       1999                1998              1998               1997
                                                  -------------     ----------------     -------------     -------------
     <S>                                          <C>               <C>                  <C>               <C>

     US statutory rate                                     34%                  34%               34%               34%
                                                  -------------     ----------------     -------------     -------------
     Provision for income taxes at
       statutory rate on income                      $  5,849             $  2,038          $ 17,337           $ 10,125
     State income taxes                                     8                   38               133                  7
     International rate differences                    (6,016)                (683)          (15,369)            (9,807)
     Accounting losses (gains) for
       which deferred income tax
       cannot be recognized                               212               (1,029)            1,991                430
     Increase (decrease) in
       valuation allowance                                226                    -            (4,406)              (854)
     Other                                               (130)                (188)               48                292
                                                  -------------     ----------------     --------------     -------------
     Income tax provision (credit)                   $    149             $    176           $  (266)          $    193
                                                  =============     ================     ==============     =============

</TABLE>

                                      F-16


<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:

<TABLE>
<CAPTION>
                                                December 31,         December 31,       October 31,
                                                    1999                1998                 1998
                                                ------------         ------------       -----------
     <S>                                        <C>                  <C>                <C>
     Deferred tax assets (liabilities):
     Excess of tax over financial
       reporting depreciation                       $    67              $   (79)          $   (79)
     Tax losses                                       1,841                1,714                 -
     Bad debt allowance                                 132                  151               158
     Advertising allowances                             409                  445             2,100
     Inventory obsolescence reserve                     355                   44               749
     Accrued sales adjustments and returns              519                1,665             1,583
     Other                                              581                 (180)               44
                                                ------------         ------------       -----------
                                                      3,904                3,760             4,555
Valuation allowance                                    (226)                   -                 -
                                                ------------         ------------       -----------
                                                   $  3,678             $  3,760           $ 4,555
                                                ============         ============       ===========
</TABLE>

11.  NOTES PAYABLE

     On June 24, 1999, the Company entered into a $12.3 million  guaranteed loan
     agreement with the sellers as part of the financing of the LMP acquisition.
     Interest  on the loan  notes is based on US$ LIBOR  offered  rate minus 130
     basis points and is payable quarterly. The terms of the loan are subject to
     certain financial  covenants used for financing of this type. The aggregate
     principal  maturities  of the loan  notes  for the next  five  years are as
     follows:-


                                                       December 31,
                                                           1999

                                                       ------------

     2000                                               $    1,399
     2001 to 2003                                                -
     2004                                                   10,946
                                                       ------------
                                                        $   12,345
                                                       ============


                                      F-17

<PAGE>


                              RADICA GAMES LIMITED

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

12.  COMMON STOCK

     During the year ended December 31, 1999, the Company repurchased  1,538,500
     shares  at an  average  price of  $11.66  per  share  under  the  Company's
     authorized repurchase programs.  All repurchased shares were cancelled.  As
     of December 31, 1999, approximately 0.9 million shares remain available for
     repurchase under the repurchase programs.

     During the year ended October 31, 1998, the Company  repurchased  2,610,400
     shares at an average  price of $14.36 per share under these  programs.  All
     repurchased shares were cancelled.

     During the quarter ended April 30, 1998,  the Company issued 190,094 shares
     of newly  issued  common  stock at  $18.938  per share as a portion  of the
     acquisition  price for the assets and business of KidActive,  LLC, dba Girl
     Tech(R).

13.  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       Two months ended      Year ended        Year ended
                                                   December 31,        December 31,       October 31,       October 31,
                                                       1999                1998              1998               1997
                                                  -------------     ----------------     -------------     -------------
     <S>                                          <C>               <C>                  <C>               <C>
     Numerator for basic and diluted
      earnings per share:
      Net income                                     $  17,055          $     5,819         $  51,256         $  29,586
                                                  =============     ================     =============     =============
     Denominator:
      Denominator for basic
       earnings per share                           18,144,179           18,883,455        20,239,790        20,761,020
      Effect of dilutive options                       835,170            1,211,034         1,248,574           874,906
                                                  -------------     ----------------     -------------     -------------
     Denominator for diluted
       earnings per share                           18,979,349           20,094,489        21,488,364        21,635,926
                                                  =============     ================     =============     =============
     Basic earnings per share:                        $   0.94           $     0.31         $    2.53         $    1.43
                                                  =============     ================     =============     =============
     Diluted earnings per share:                      $   0.90           $     0.29         $    2.39         $    1.37
                                                  =============     =================    =============     =============
</TABLE>

     Options and warrants on 1,286,000  shares of common stock were not included
     in  computing   diluted   earnings  per  share  since  their  effects  were
     antidilutive.


                                      F-18

<PAGE>


                              RADICA GAMES LIMITED

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

14.  STOCK OPTIONS

     The Company's 1994 Stock Option Plan of employees and 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 and 1998, and the meeting of
     the Board of Directors in June 1999,  the Stock  Option  Plan's  aggregated
     common stock  increased by 400,000,  800,000 and 60,000,  respectively.  In
     total,  the  Stock  Option  Plan's  aggregate  common  stock  increased  to
     2,860,000  shares  available  for  options.  Options  under  this  plan are
     generally exercisable ratably over five years from the date of grant unless
     otherwise provided.

     Option  activity for each of the periods  ended  December 31, 1999 and 1998
     and October 31, 1998 and 1997:-
<TABLE>
<CAPTION>
                                                                         Weighted average
                                                       Number             exercise price
                                                     of shares              per share
                                                   --------------        ----------------
                                                   (in thousands)
     <S>                                           <C>                    <C>
     Outstanding at October 31, 1996                       1,166            $    2.09
     Options granted                                         856                 2.98
     Options cancelled                                       (86)                8.22
     Options exercised                                      (180)                1.22
                                                   -------------
     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
                                                   =============

     Exercisable at December 31, 1999                        492            $    8.26
</TABLE>


                                      F-19

<PAGE>


                              RADICA GAMES LIMITED

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

14.  STOCK OPTIONS (Continued)

     The following is additional  information relating to options outstanding as
     of December 31, 1999:

<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                602            $    1.31               6.24                157         $   1.29
     $ 2.001 to 4.000                316                 3.49               7.32                 94             3.45
     $ 4.001 to 6.000                  7                 5.00               7.43                  1             5.00
     $ 6.001 to 8.000                 42                 6.83               7.64                 12             7.00
     $ 8.001 to 10.000                62                 9.45               9.32                  2             8.50
     $ 10.001 to 12.000              421                10.91               8.96                 64            11.03
     $ 12.001 to 14.000              179                12.70               8.95                 10            13.10
     $ 14.001 to 16.000              135                14.84               8.72                 31            14.97
     $ 16.001 to 18.000              141                16.94               8.42                 78            16.92
     $ 18.001 to 20.000               95                19.05               8.31                 43            18.88
                               ---------                                                 ----------
                                   2,000            $    7.93               7.77                492          $  8.26
                               =========                                                 ==========
</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  $4.54,  $7.79,  $7.23 and $1.59  per  option  for the year  ended
     December 31, 1999,  the two months ended  December 31, 1998, and the fiscal
     years ended October 31, 1998 and 1997,  respectively,  were estimated using
     the Black-Scholes  option pricing model with the following weighted average
     assumptions:

<TABLE>
<CAPTION>
                                                    Year ended          Two months ended     Year ended           Year ended
                                                   December 31,        December 31,          October 31,          October 31,
                                                       1999                1998                 1998                 1997
                                                  ---------------     ----------------     ----------------     ----------------
     <S>                                          <C>                 <C>                  <C>                  <C>
     Expected life of options                          5 years             5 years              5 years              5 years
     Risk-free interest rate                              5.1%                6.5%                 6.5%                 6.5%
     Expected volatility of underlying stock               35%                 50%                  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-20

<PAGE>


                              RADICA GAMES LIMITED

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

14.  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 income and
     earnings  per share  would have been  reduced  to the pro forma  amounts as
     follows:

<TABLE>
<CAPTION>
                                        Year ended      Two months ended      Year ended        Year ended
                                       December 31,       December 31,        October 31,       October 31,
                                           1999               1998               1998              1997
                                       ------------     ----------------     -------------     -------------
     <S>                               <C>              <C>                  <C>               <C>
     Pro forma net income                $ 15,719             $ 5,633            $ 50,548          $ 29,154
     Pro forma earnings per share
       Basic                                 0.87                0.30                2.50              1.40
       Diluted                               0.83                0.28                2.35              1.35
</TABLE>


15.  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  has  two
     customers which accounted for more than twenty percent and eighteen percent
     of net sales 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  and  three  customers  which
     accounted for more than twenty percent, eighteen percent and ten percent of
     net  sales in  fiscal  year  1997.  The  Company  performs  ongoing  credit
     evaluations of its customers' financial condition and, generally,  requires
     no collateral from its customers.

16.  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,  notes payable and warrants are reasonable  estimates of
     their fair value.


                                      F-21

<PAGE>


                              RADICA GAMES LIMITED

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

17.  COMMITMENTS, CONTINGENCIES AND PLEDGE OF ASSETS

     The Company leases certain warehouses and equipment under operating leases.
     Total expense for the operating leases was $534, $82, $401 and $358 for the
     year ended  December 31, 1999,  the two months ended  December 31, 1998 and
     the fiscal year ended October 31, 1998 and 1997, respectively.

     At December 31, 1999,  the Company was  obligated  under  operating  leases
     requiring future minimum lease payments as follows:

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

     2000                                                $     541
     2001                                                      276
     2002                                                      108
     2003                                                      107
     2004                                                      106
     Thereafter                                                461
                                                   ----------------------
     Total minimum lease payments                       $    1,599
                                                   ======================


     At December 31, 1999, the Company's  guaranteed 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  $4,762,  $12,044  and  $10,894,
     respectively.

18.  RETIREMENT PLAN

     In Hong  Kong,  the  Company  has  defined  contribution  retirement  plans
     covering substantially all employees. Under these plans, eligible employees
     may 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  $192,  $27,  $125 and $94 for the year ended
     December 31, 1999,  the two months ended  December 31, 1998, and the fiscal
     years ended October 31, 1998 and 1997, respectively.


                                      F-22

<PAGE>


                              RADICA GAMES LIMITED

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


19.  SEGMENT INFORMATION

     Effective  the  year of  1999,  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 LMP, 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  LMP. Due to the
     distinct  differences between the core products of LMP 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  performance and allocates  resources based on income
     or loss from  operations  before  interest and income taxes,  not including
     profits and losses on the Company's  investment  portfolio.  The accounting
     policies of the reportable  segments are the same as those described in the
     summary of significant accounting policies.


                                      F-23

<PAGE>


                              RADICA GAMES LIMITED

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

19.  SEGMENT INFORMATION (Continued)

     A summary of the  Company's two business  segments is set forth below.  The
     information of peripherals  included the period from June 24, 1999 (date of
     acquisition) through December 31, 1999.

<TABLE>
<CAPTION>
                                                   Year ended       Two months ended      Year ended        Year ended
                                                   December 31,        December 31,       October 31,       October 31,
                                                       1999                1998              1998               1997
                                                  -------------     ----------------     -------------     -------------
     <S>                                          <C>                  <C>               <C>               <C>
     Net sales
       Games                                         $ 123,116             $ 21,071         $ 155,618         $ 87,760
       Peripherals                                      10,406                    -                 -                -
                                                  -------------     ----------------     -------------     -------------
     Total net sales                                 $ 133,522             $ 21,071         $ 155,618         $ 87,760
                                                  =============     ================     =============     =============
     Depreciation and amortization
       Games                                          $  3,981              $   612         $   3,423         $  2,278
       Peripherals                                         975                    -                 -                -
                                                  -------------     ----------------     -------------     -------------
     Total depreciation and amortization              $  4,956              $   612         $   3,423         $  2,278
                                                  =============     ================     =============     =============
     Segment income (loss)
       Games                                          $ 18,547             $  5,826          $ 49,428         $ 29,007
       Peripherals                                      (1,064)                   -                 -                -
                                                  -------------     ----------------     -------------     -------------
     Total segment income                             $ 17,483             $  5,826          $ 49,428         $ 29,007

     Corporate and unallocated
       Interest income                                   1,800                  289             1,957              924
       Interest expense                                   (331)                   -               (61)             (11)
     Equity in net loss of
       affiliated company                               (1,748)                (120)             (334)            (141)
                                                  -------------     ----------------     -------------     -------------
     Total consolidated income
       before income taxes                            $ 17,204             $  5,995          $ 50,990         $ 29,779
                                                  =============     ================     =============     =============

     Segment assets
       Games                                          $ 67,347             $ 59,960          $ 79,557         $ 45,751
       Peripherals                                      22,589                    -                 -                -
       Corporate and unallocated                        32,159               48,230            33,964           33,698
                                                  -------------     ----------------     -------------     -------------
     Total consolidated assets                       $ 122,095            $ 108,190         $ 113,521         $ 79,449
                                                  =============     ================     =============     =============
     Capital expenditures
       Games                                          $  3,177              $   805          $  5,532         $  1,255
       Peripherals                                         129                    -                 -                -
                                                  -------------     ----------------     -------------     -------------
     Total capital expenditures                       $  3,306              $   805          $  5,532         $  1,255
                                                  =============     ================     =============     =============
</TABLE>

     Assets included in corporate and unallocated  principally are cash and cash
     equivalents,  investment  in  affiliated  company and  certain  unallocated
     property, plant and equipment.

                                      F-24

<PAGE>


                              RADICA GAMES LIMITED

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

19.  SEGMENT INFORMATION (Continued)

     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 identifiable assets are reported based
     on their location.

<TABLE>
<CAPTION>
                                                   Year ended       Two months ended      Year ended        Year ended
                                                   December 31,        December 31,       October 31,       October 31,
                                                       1999                1998              1998               1997
                                                  -------------     ----------------     -------------     -------------
     <S>                                          <C>                  <C>               <C>               <C>
     Net sales:
       United States and Canada                       $ 118,779             $ 20,556         $ 148,571          $ 74,957
       Asia Pacific and other countries                   1,557                  131             5,934            12,295
       Europe                                            13,186                  384             1,113               508
                                                  -------------     ----------------     -------------     -------------
                                                      $ 133,522             $ 21,071         $ 155,618          $ 87,760
                                                  ===============   ================     =============     =============
     Identifiable assets:
       United States and Canada                        $ 39,702             $ 35,212          $ 47,028          $ 25,568
       Asia Pacific and other countries                  55,908               72,449            65,836            53,445
       Europe                                            26,485                  529               657               436
                                                  -------------     ----------------     -------------     -------------
                                                      $ 122,095            $ 108,190         $ 113,521          $ 79,449
                                                  =============     ================     =============     =============

</TABLE>

                                      F-25

<PAGE>


                              RADICA GAMES LIMITED

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

20.  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, 1997
        Allowances for doubtful accounts             $    234             $    818            $   (144)           $   908
        Estimated customer returns                        817                1,995                (485)             2,327
        Provision for inventories                       8,419                    -              (4,940)             3,479
                                                    ---------           ----------          -----------         ----------
                                                     $  9,470             $  2,813            $ (5,569)           $  6,714
                                                    =========           ==========          ===========         ==========
     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
                                                    =========           ==========          ===========         ===========
</TABLE>


                                      F-26

<PAGE>


                              RADICA GAMES LIMITED

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

21.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                                             Quarter ended
                                           ---------------------------------------------------------------------
                                              Mar. 31           Jun. 30           Sep. 30           Dec. 31
                                           ---------------   ---------------   ---------------   ---------------
     <S>                                   <C>               <C>               <C>               <C>
     Year ended December 31, 1999
     ----------------------------
       Net sales                                 $17,906           $23,756           $47,388           $44,472
       Gross profit                                8,780            10,073            18,731            17,709
       Net income                                  3,154             2,205             8,817             2,879
       Basic earnings per share                     0.17              0.12              0.50              0.16
       Diluted earnings per share                   0.16              0.12              0.48              0.16

     Year ended December 31, 1998
     ----------------------------
      Net sales                                  $27,973           $34,265           $49,758           $47,373
      Gross profit                                15,821            19,474            26,746            23,890
      Net income                                   8,828            10,161            14,919            17,046
      Basic earnings per share                      0.43              0.50              0.75              0.90
      Diluted earnings per share                    0.41              0.47              0.71              0.85
</TABLE>

      Stock options exercised in conjunction with cancellation of repurchased
      common stock caused a significant change in the shares outstanding used
      in computing earnings per share between quarters. Due to this change in
      shares outstanding, the sum of quarterly earnings per share doe not equal
      year-to-date earnings per share.

  Common Share Price
                                                            High           Low
  1999 Quarter

    Fourth............................................. $  9 11/16    $ 7
    Third..............................................   11 1/8        8 1/4
    Second.............................................   13 5/8        9
    First..............................................   16 5/16       2 3/8

  1998 Quarter

    Two months stub period ending December 31, 1998.... $ 17 1/2      $13 5/8
    Fourth.............................................   16 5/8        9 3/4
    Third..............................................   22 1/4       16 1/8
    Second.............................................   20 5/8       14 3/4
    First..............................................   19           12 7/8

  1997 Quarter

    Fourth............................................. $ 15 3/8      $ 7 1/2
    Third..............................................    7 7/8        2 7/8
    Second.............................................    4 1/8        2 3/8
    First..............................................    3 1/4        1 1/16


                                      F-27
<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 26, 2000                     /S/ David C.W. Howell
      ------------------                 ---------------------
                                         David C.W. Howell
                                         President Asia Operations
                                         Chief Financial 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.

          *    10.6     Form  of  Employment  Agreement,  between  Radica  Games
                        Limited and Robert E. Davids

          #    10.6(a)  April 1996 Amendment to such Employment Agreement.

          ~    10.6(b)  December 1997 Amendment to such Employment Agreement.

          **   10.7     Employment  Agreement,  dated as of  October  23,  1998,
                        among Radica USA, Radica Games and Eugene A. Murtha

          *    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.


                                      I-2

<PAGE>


          *    10.9     1994 Stock Option Plan

          ~    10.10    1994  Stock  Option  Plan,  as  amended in April 1997 to
                        increase options

          **   10.10(a) 1994  Stock  Option  Plan,  as  amended in April 1998 to
                        increase options

          ~             10.11 Employment  Agreement,  dated as of May 16,
                        1997,  among Radica USA, Radica Games Limited and
                        Patrick Feely

          ~    10.11(a) December 1997 Amendment to such Employment Agreement.

          ~    10.12    Consulting  Agreement,  dated  November 1, 1997  between
                        Radica China Limited and Millens W. Taft

               10.13    Employment  Agreement  dated  as of  December  15,  1998
                        between  Radica  Games  Limited  and David  C.W.  Howell
                        (incorporated  by  reference to Form 6-K dated March 29,
                        1999)

               10.14    Employment  Agreement  dated as of  December  15,
                        1998 between  Radica  Games  Limited and Siu Wing
                        Lam  (incorporated by reference to Form 6-K dated
                        March 29, 1999)

               10.15    Employment  Agreement  dated as of June 24, 1999 between
                        Radica Games Limited and Neil Doughty

               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.

                11.1    Statement re Computation of Per Share Earnings

                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.


                                      I-3