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

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

                                       OR

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


For the Transition period from    November 1, 1998   to   December 31, 1998
                                 ------------------      -------------------
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                             18,896,694

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

     Yes __X__      No _____

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

         Item 17 _____    Item 18  __X__


<PAGE>


                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

         Not Applicable

ITEM 2.   DESCRIPTION OF PROPERTIES

         Not Applicable

ITEM 3.   LEGAL PROCEEDINGS

         The Company does not have any pending material legal proceedings.

ITEM 4.   CONTROL OF REGISTRANT

         Not Applicable

ITEM 5.   NATURE OF TRADING MARKET

         Not Applicable

ITEM 6.   EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

         Not Applicable

ITEM 7.   TAXATION

         Not Applicable

ITEM 8.   SELECTED FINANCIAL DATA

         Not Applicable


                                       -2-

<PAGE>


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

RESULTS OF OPERATIONS

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

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


                                            Two months ended December 31,
                                           -------------------------------
                                             1998              1997
                                           --------          --------
Net revenues                                 100.0%            00.0%
Cost of sale                                  50.9%            45.4%

Gross margin                                  49.1%            54.6%
Selling, general and administrative           17.3%            17.4%
Research and development                       3.5%             1.8%
Depreciation and amortization                  2.9%             1.7%

Operating income                              25.4%            33.7%
Other income                                   2.2%             0.9%
Share of loss of affiliated company            0.6%             0.2%
Interest income, net                           1.4%             1.3%

Income before income taxes                    28.4%            35.7%
Provision for income taxes                     0.8%             0.4%

Net income                                    27.6%            35.3%

         Net  sales for the two  months  ended  December  31,  1998  were  $21.1
million, increasing 22% from $17.3 million for the prior year.


                                       -3-


<PAGE>


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

<TABLE>
<CAPTION>
                                                                     TWO MONTHS ENDED DECEMBER 31,
                                         ---------------------------------------------------------------------------------------
                                                            1998                                           1997
                                         ------------------------------------------       --------------------------------------
                                         % OF NET                            NO. OF       % OF NET                        NO. OF
PRODUCT LINES                             SALES          UNITS SOLD          MODELS         SALES         UNITS SOLD      MODELS
-------------                            --------        ----------          ------       --------        ----------      ------
<S>                                       <C>            <C>                 <C>          <C>             <C>             <C>
Fishing games                              25.0%            462,004              6           53.9%           828,158          5

Combat games                                5.4%             77,728              4            7.2%            97,413          2

Sport games                                18.2%            258,672             11            6.1%            88,822          6

Casino games
- Handheld                                  8.1%            414,964             27           11.1%           457,273         52
- Tabletop                                  1.4%             36,937             12            1.1%            22,140         11

Heritage games                              7.0%            171,339             14            8.7%           124,200         13

Extreme games                               6.8%             92,862              3            0.0%                 -          -

Girl Tech games                             0.7%             11,324              2            0.0%                 -          -

ODM products                               27.4%            909,456             18           11.9%           429,124         11
                                         --------        ----------          ------       --------        ----------      ------
Total                                     100.0%          2,435,286             97          100.0%         2,047,130        100
                                         ========        ==========          ======       ========        ==========      ======
</TABLE>

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(TM) and Monte Carlo games 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.  Seven new models were sold  during the period.  The Company
intends to introduce approximately 25 new models in 1999.

         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.


                                       -4-


<PAGE>


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


                                                Two months ended December 31,
                                               --------------------------------
                                                   1998                 1999
                                               -----------          -----------
                                                   (dollars in thousands)
Commissions                                    $       791          $     553
Indirect salaries and wages                          1,236                730
Advertising and promotion expenses                     421                732
Research and development expenses                      730                320

         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 U.S.  subsidiary  being used up resulting in the
U.S. 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.

CAPITAL RESOURCES AND LIQUIDITY

         Cash and cash  equivalents  totaled $47.5 million at December 31, 1998,
an increase of $14.4 million from October 31, 1998.  Working capital at December
31, 1998 was $65.8  million,  a $5.9 million  increase  from working  capital of
$59.9  million at October  31,  1998.  The  increase  in working  capital is due
primarily to an increase in net income.  The ratio of current  assets to current
liabilities  increased to 3.9 at December 31, 1998 from 2.8 at October 31, 1998.
This increase in the current ratio is also due to the increase in net income.

         There were no  short-term  borrowings  at  December  31 and October 31,
1998.

         The Company  believes that its existing cash and cash  equivalents  and
cash generated from operations are sufficient to satisfy the current anticipated
working capital needs of its core business.

FISCAL 1998 COMPARED TO FISCAL 1997, AND FISCAL 1997 COMPARED TO FISCAL 1996

         See the Company's  Annual Report on Form 20-F for the fiscal year ended
October 31, 1998, as filed with the Securities and Exchange Commission.


                                       -5-

<PAGE>


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

         Not Applicable

ITEM 11.  COMPENSATION OF DIRECTORS AND OFFICERS

         Not Applicable

ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

         Not Applicable

ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

         Not Applicable


                                       -6-


<PAGE>


                                     PART II

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

      Consolidated Balance Sheets                            F-1

      Consolidated Statements of Operations                  F-2

      Consolidated Statements of Shareholders' Equity        F-3

      Consolidated Statements of Cash Flows                  F-4

      Notes to Consolidated Financial Statements             F-5


                                       -7-


<PAGE>


ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

(a)  Financial Statements

     Not Applicable

(b)  Exhibits

     99.1     Consolidated  Balance Sheets at December 31, 1997, March 31, 1998,
              June 30, 1998 and September 30, 1998.

     99.2     Consolidated Income Statements for three months ended December 31,
              1997,  March 31, 1998,  June 30, 1998 and September 30, 1998;  for
              two months  ended  December  31, 1997 and for twelve  months ended
              December 31, 1997.

     99.3     Consolidated Cashflow Statements for respective periods ended
              March 31, 1998, June 30, 1998, September 30, 1998 and for twelve
              months ended December 31, 1997.

     99.4     Sales  Analyses of Units by Model for three months ended  December
              31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998.


                                       -8-


<PAGE>


                              RADICA GAMES LIMITED
                        CONSOLIDATED FINANCIAL STATEMENTS


                                                                         Page
Consolidated Balance Sheets........................................       F-1
Consolidated Statements of Operations..............................       F-2
Consolidated Statements of Shareholders' Equity....................       F-3
Consolidated Statements of Cash Flows..............................       F-4
Notes to the Consolidated Financial Statements.....................       F-5


<PAGE>


                              RADICA GAMES LIMITED
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
<TABLE>
<CAPTION>
                                                                                    December 31,            October 31,
                                                                                    ------------            -----------
(US Dollars in thousands, except share data)                                            1998                   1998
                                                                                    ------------            -----------
                                                                                     (unaudited)
<S>                                                                                  <C>                    <C>
Current Assets:
Cash and cash equivalents                                                           $     47,527            $    33,141
Accounts receivable, net of allowances for doubtful accounts
  of $446 ($466 at Oct. 31, 1998) and estimated customer returns                          14,860                 33,249
  of $1,077 ($1,375 at Oct. 31, 1998)
Inventories, net of provision of $2,437 ($2,414 at  Oct. 31, 1998) (Note 3)               20,294                 21,534
Prepaid expenses and other current assets                                                  1,796                  1,126
                                                                                           3,754                  4,545
Deferred income taxes (Note 6)                                                      ------------            -----------
                                                                                          88,231                 93,595
        Total current assets                                                        ------------            -----------

                                                                                             703                    823
Investment in affiliated company                                                    ------------            -----------

                                                                                          16,500                 16,093
Property, plant and equipment, net (Note 4)                                         ------------            -----------

                                                                                           2,750                  3,000
Intangible assets, net (Note 5)                                                     ------------            -----------

                                                                                               6                     10
Deferred income taxes, noncurrent (Note 6)                                          ------------            -----------
                                                                                    $    108,190            $   113,521
        Total assets                                                                ============            ===========

                                           LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable                                                                    $      6,911            $    11,694
Accrued warranty expenses                                                                  2,500                  2,470
Accrued payroll and employee benefits                                                      2,688                  3,510
Accrued advertising expenses                                                               1,308                  6,178
Accrued sales expenses                                                                     3,598                  3,316
Commissions payable                                                                          764                  1,444
Accrued other expenses                                                                     2,534                  3,005
Income taxes payable                                                                       2,152                  2,065
                                                                                    ------------            -----------
                                                                                          22,455                 33,682
        Total current liabilities                                                   ------------            -----------

Shareholders' equity:
Common stock
  par value $0.01 each, 100,000,000 shares authorized,
  18,896,694 shares outstanding (18,864,294 at Oct. 31, 1998)                                189                    189
Additional paid-in capital                                                                 9,382                  9,298
Retained earnings                                                                         76,215                 70,396
                                                                                             (51)                   (44)
Cumulative translation adjustment                                                   ------------            -----------
                                                                                          85,735                 79,839
       Total shareholders' equity                                                   ------------            -----------

                                                                                    $    108,190            $   113,521
       Total liabilities and shareholders' equity                                   ============            ===========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-1

<PAGE>


                              RADICA GAMES LIMITED

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
(US Dollars in thousands, except per share data)                Two months ended December 31,
                                                              ---------------------------------
                                                                    1998                1997
                                                              -----------------    --------------
                                                                 (unaudited)        (unaudited)
<S>                                                           <C>                       <C>
REVENUES:
Net sales                                                     $         21,071      $      17,320
Cost of sales                                                          (10,717)            (7,855)
                                                              -----------------     --------------
Gross profit                                                            10,354              9,465
                                                              -----------------     --------------

OPERATING EXPENSES:
Selling, general and administrative expenses                            (3,657)            (3,013)
Research and development                                                  (730)              (320)
Depreciation and amortization                                             (612)              (287)
                                                              -----------------     --------------
Total operating expenses                                                (4,999)            (3,620)
                                                              -----------------     --------------

OPERATING INCOME                                                         5,355              5,845

OTHER INCOME                                                               471                163

SHARE OF LOSS OF AFFILIATED COMPANY                                       (120)               (33)

NET INTEREST                                                               289                220
                                                              -----------------     --------------

INCOME BEFORE INCOME TAXES                                               5,995              6,195

PROVISION FOR INCOME TAXES (Note 6)                                       (176)               (74)
                                                              -----------------     --------------

NET INCOME                                                    $          5,819    $         6,121
                                                              =================     ==============

EARNINGS PER SHARE - BASIC: (Note 7)
Net earnings per share                                        $           0.31   $           0.29
                                                              =================     ==============

Average number of shares outstanding                                18,883,455         20,892,061
                                                              =================     ==============

EARNINGS PER SHARE - ASSUMING DILUTION: (Note 7)
Net earnings per share and dilutive potential common stock    $           0.29   $           0.27
                                                              =================     ==============

Average number of shares and
  dilutive potential common stock outstanding                       20,094,489         22,353,638
                                                              =================     ==============
</TABLE>


                                       F-2

<PAGE>


                              RADICA GAMES LIMITED

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        (unaudited)
                                                 (US dollars in thousands)
                                                 Common stock           Additional                     Cumulative        Total
                                            Number                        paid-in       Retained       translation   shareholders'
                                          of shares        Amount         capital       earnings       adjustment       equity
                                        --------------  -------------  -------------  -------------   -------------  -------------
<S>                                     <C>             <C>            <C>            <C>             <C>            <C>

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
                                        ==============  =============  =============  =============   =============  =============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>


                              RADICA GAMES LIMITED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (US dollars in thousands)
<TABLE>
<CAPTION>
                                                                              Two months ended December 31,
                                                                        ----------------------------------------
                                                                               1998                  1997
                                                                        ------------------    ------------------
                                                                            (unaudited)           (unaudited)
<S>                                                                     <C>                   <C>

Cash flow from operating activities:
Net income                                                               $           5,819     $           6,121
Adjustments to reconcile net income to net cash
  provided by operating activities:
      Deferred income taxes                                                            795                     -
      Depreciation                                                                     362                   287
      Amortization                                                                     250                     -
      Share of loss of affiliated company                                              120                    33
      Loss (gain) on disposal and write off of
         property, plant and equipment                                                   1                    (3)
      Changes in assets and liabilities:
        Accounts receivable                                                          18,382                9,178
        Inventories                                                                   1,240               (1,082)
        Prepaid expenses and other current assets                                      (670)                (642)
        Accounts payable                                                             (4,783)              (1,674)
        Accrued payroll and employee benefits                                          (822)                 388
        Commissions payable                                                            (680)                (626)
        Accrued advertising expenses                                                 (4,870)                 488
        Accrued sales expenses                                                          282                  309
        Accrued warranty expenses                                                        30                  223
        Accrued other expenses                                                         (471)              (1,013)
        Income taxes payable                                                             87                   28
                                                                         ------------------    ------------------

Net cash provided by operating activities                                            15,072                12,015
                                                                         ------------------    ------------------

Cash flow from investing activities:
Increase in short-term investments                                                        -                (2,962)
Proceeds from sale of property, plant and equipment                                      35                    24
Purchase of property, plant and equipment                                              (805)                 (152)
                                                                         ------------------    ------------------

Net cash used in investing activities                                                  (770)               (3,090)
                                                                         ------------------    ------------------

Cash flow from financing activities:
Repurchase of common stock                                                               -                  (496)
Funds from stock options exercised                                                      84                    44
                                                                        ------------------    ------------------

Net cash provided by (used in) financing activities                                     84                  (452)
                                                                        ------------------    ------------------

Net increase in cash and cash equivalents                                $          14,386    $            8,473

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

      End of period                                                      $          47,527    $           41,977
                                                                        ==================    ==================

Supplementary disclosures of cash flow information: 
Cash paid during the period:
      Interest                                                           $              -     $              61

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

                                       F-4

<PAGE>

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

1.   ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS

     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 Company  designs,  develops,  manufactures and distributes a variety of
     electronic handheld and mechanical games.

     The accompanying financial statements have been prepared in accordance with
     accounting  principles  generally  accepted in the United States of America
     and are  presented in US dollars as the Company's  sales are  predominantly
     denominated in US dollars.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

     Intangible assets - Intangible assets primarily represent the excess of the
     purchase  price of acquisition of a business over the fair value of the net
     assets acquired.  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 40 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.
     The Company policy is to charge a full year of  amortization in the year of
     acquisition.

                                       F-5

<PAGE>

                              RADICA GAMES LIMITED

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

     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  benefits  are  recorded  to  reflect  the tax
     consequences in future years of differences between the tax basis of assets
     and  liabilities  and the financial  reporting  amounts at each year end. A
     valuation  allowance is  recognized if it is more likely than not that some
     portion of, or all of, a deferred tax asset will not be realized.

     Advertising  - The  production  costs of  advertising  are  expensed by the
     Company  the first time the  advertising  takes  place.  Advertising  costs
     associated  with  customer  benefit  programs  are  accrued as the  related
     revenues are recognized.  Advertising expense was $415 and $712 for the two
     months ended December 31, 1998 and 1997, respectively.

     Foreign currency translation - Assets and liabilities of foreign operations
     are translated  using  year-end  exchange  rates.  Revenues and expenses of
     foreign operations are translated using average monthly exchange rates. The
     impact  of  exchange  rate  changes  is  shown as  "Cumulative  Translation
     Adjustment"  in  shareholders'  equity.  Net losses from  foreign  exchange
     transactions  of $18 and $40 for the two months ended December 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.


                                       F-6

<PAGE>


                              RADICA GAMES LIMITED

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

     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 (loss) and earnings  (loss)
     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 8.

     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  the  use  of
     estimates. Actual results could differ from those estimates.

     Comprehensive   income  and  segment  information  -  Comprehensive  income
     includes  both net  income and other  comprehensive  loss  (income).  Other
     comprehensive  loss for the two months ended  December 31, 1998 and 1997 of
     $7  and  $4,   represented   foreign  currency   translation   adjustments.
     Accumulated other comprehensive loss included in the accompanying condensed
     consolidated  balance  sheets as of December  31, 1998 and October 31, 1998
     was $51 and $44, consisting of the accumulated foreign currency translation
     adjustment.  Further,  as the Company has only one operating  segment,  the
     adoption of SFAS No. 131,  "Disclosure  about Segments of an Enterprise and
     Related  Information",  did not result in any  restatement  of  comparative
     information.

     New accounting  standards adopted - In June 1998, the Financial  Accounting
     Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments
     and  Hedging  Activities",   which  establishes  accounting  and  reporting
     standards for derivative instruments and hedging activities.  Generally, it
     requires that an entity  recognizes  all  derivatives as either an asset or
     liability  and  measures  those  instruments  at  fair  value,  as  well as
     identifying the conditions for which a derivative may be specially designed
     as a hedge. The Company does not have any derivative instruments.


                                       F-7

<PAGE>


                              RADICA GAMES LIMITED

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

3.   INVENTORIES

     Inventories by major categories are summarized as follows:


                                   December 31,         October 31,
                                       1998                1998
                                ----------------     ----------------
     Raw materials              $          4,580     $          4,650
     Work in progress                      6,731                5,733
     Finished goods                        8,983               11,151
                                ----------------     ----------------
                                $         20,294     $         21,534
                                ================     ================

4.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                         December 31,           October 31,
                                                            1998                   1998
                                                       ---------------        --------------
<S>                                                    <C>                    <C>

     Land and buildings                                $        11,958        $       11,950
     Plant and machinery                                         5,777                 5,549
     Furniture and equipment                                     4,191                 4,003
     Leasehold improvements                                      2,192                 1,866
                                                       ---------------        --------------
              Total                                    $        24,118        $       23,368
     Less: Accumulated depreciation and amortization            (7,618)               (7,275)
                                                       ---------------        --------------
              Total                                    $        16,500        $       16,093
                                                       ===============        ==============
</TABLE>


5.   INTANGIBLE ASSETS

     The  intangible  assets of $2,750 on the balance sheet at December 31, 1998
     represent a portion of the  acquisition  price  allocated to brand name and
     goodwill  with  regards to the assets and business of  KidActive,  LLC, dba
     Girl Tech(TM) acquired during the quarter ended April 30, 1998.  KidActive,
     LLC,  dba Girl  Tech(TM) was a  development  stage  enterprise  and had not
     traded  prior  to the  Company's  acquisition  of its  asset.  The  Company
     purchased the assets and business of KidActive,  LLC, dba Girl Tech(TM) for
     $2,400 in cash plus 190,094 shares,  a total of $6,000.  Of this $4,500 was
     capitalised  as  goodwill  and  brand  name  and  $1,500  was  written  off
     immediately  as purchased  research  and  development.  It is  management's
     opinion that the amounts  capitalized  of $4,500  represent  the fair value
     assigned to the intangible  assets  acquired.  This cost is being amortized
     over

                                       F-8


<PAGE>


                              RADICA GAMES LIMITED

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

5.   INTANGIBLE ASSETS (continued)

     a  three  year  fiscal  period  on  a  straight-line   basis.   Accumulated
     amortization  was $1,750 and $1,500 at  December  31,  1998 and October 31,
     1998, respectively.

     Intangible assets are as follows:

                                               December 31,       October 31,
                                                   1998               1998
                                               ------------      ------------
     At cost:
          Brand name                          $       1,000      $      1,000
          Goodwill                                    3,500             3,500
                                               ------------      ------------
              Total                                   4,500             4,500
     Less: Accumulated amortization                  (1,750)           (1,500)
                                              -------------      ------------
              Total                           $       2,750      $      3,000
                                              =============      ============

6.   INCOME TAXES

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


                                                   Two months ended December 31,
                                                  ------------------------------
                                                       1998             1997
                                                   ------------     ------------
     United States
     Foreign subsidiaries operating in:            $        827     $        435
           People's Republic of China                     5,139            5,655
             Hong Kong                                       29              105
              Total                                $      5,995     $      6,195
                                                   ============     ============

     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 is  expected  to be taxed at a 12% rate from  January 1, 1999.  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-9

<PAGE>


                              RADICA GAMES LIMITED

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

6.   INCOME TAXES (Continued)

     The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                           Two months ended December 31,
                                                         --------------------------------
                                                             1998                1997
                                                         -------------      -------------
<S>                                                      <C>                <C>
     Hong Kong
          Current income tax                             $           4      $          20

     United States
           State tax expense (benefit), net of
                 federal tax expense (benefit)                    (623)                54
     Change in deferred tax                                        795                  -
                                                         -------------      -------------
                                                         $         172      $          54
                                                         =============      =============
Income tax provision                                     $         176      $          54
                                                         =============      =============
</TABLE>

     A  reconciliation  between  the  provision  for income  taxes  computed  by
     applying the  statutory  tax rates in the United  States for the two months
     ended  December  31, 1998 and 1997 to income  before  income  taxes and the
     actual provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                              Two months ended December 31,
                                                           ----------------------------------
                                                                1998                 1997
                                                           --------------      --------------
<S>                                                         <C>                 <C>
     U.S. statutory rate                                              34%                 34%
                                                           --------------      --------------
     Provision for income taxes at
        statutory rate on income for the period            $        2,038      $        2,106
     State income taxes                                                38                  46
     International rate differences                                  (623)             (2,035)
     Accounting (gains) losses for which deferred
        income tax cannot be recognized                            (1,029)                102
     Decrease in valuation allowance                                    -                 (81)
              Other                                                  (188)                (64)
                                                           --------------      --------------
     Income tax provision                                  $          176      $           74
                                                           ==============      ==============
</TABLE>


                                      F-10

<PAGE>


                              RADICA GAMES LIMITED

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

6.   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 amounts for financial statement  purposes.  At
     December 31, 1998 and October 31, 1998 deferred income taxes comprised:

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

</TABLE>

7.   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>

                                                              Two months ended December 31,
                                                --------------------------------------------------------
                                                                                             Earnings
                                                    Numerator           Denominator          per share
                                                ---------------       ---------------      -------------
<S>                                             <C>                   <C>                   <C>
     Basic earning per share:
     Net income                                 $         5,819            18,883,455      $        0.31
                                                                                           =============
     Effective of dilutive options                                          1,211,034
                                                ---------------       ---------------

     Diluted earning per share:
     Net income, assuming all dilutive
        options exercised                       $         5,819            20,094,489      $        0.29
                                                ===============      ================      =============

</TABLE>

     Options on 322,000  shares of common  stock were not  included in computing
     diluted earnings per share since their effects were antidilutive.


                                      F-11

<PAGE>


                              RADICA GAMES LIMITED

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

8.   STOCK OPTIONS

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

     In January  1997,  60,000  stock  options  held by outside  directors at an
     exercise  price of $11.00 per share were  repriced to $1.72 per share,  the
     market  price on  January 3, 1997.  Upon each  re-election  to the Board of
     Directors in 1995 and 1996, each outside  director  received  non-qualified
     stock  options to purchase  5,000  shares of common stock of the Company at
     $3.66 per share and $1.50 per share, respectively (the closing market price
     on those  dates).  Upon  re-election  to the Board of Directors in 1997 and
     thereafter,  each outside director  received or will receive  non-qualified
     stock  options to purchase  15,000 shares of Common Stock of the Company at
     an exercise price equal to the closing market price on such date.

     Option activity for the two months ended December 31, 1998:

<TABLE>
<CAPTION>
                                                                         Weighted average
                                                     Number of            exercise price
                                                     of shares              per share
                                                   (in thousands)
<S>                                                 <C>                    <C>

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

      Exercisable at December 31, 1998                        237          $        2.69
</TABLE>



                                      F-12

<PAGE>


                              RADICA GAMES LIMITED

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

8.   STOCK OPTIONS (Continued)

     The following is additional  information relating to options outstanding as
     of December 31, 1998:

<TABLE>
<CAPTION>
                                                       Options Outstanding                               Options Exercisable
                                   ----------------------------------------------------------     ---------------------------------
                                                                             Weighted average                           Weighted
                                                        Weighted average         remaining                               average
 Exercise                                                exercise price         contractual            Number        exercise price
price range                        Number of shares         per share          life (years)          or shares          per share
--------------------               ----------------     ----------------     ----------------     --------------     --------------
                                    (in thousands)                                                (in thousands)
<S>                                <C>                  <C>                  <C>                     <C>             <C>

0.567 to 2.000                              837             $     1.32                  7.24              138          $     1.30
2.001 to 4.000                              392                   3.51                  8.33               88                3.50
4.001 to 6.000                                8                   5.00                  8.50                -                   -
6.001 to 8.000                               50                   6.72                  8.50                2                8.00
8.001 to 10.000                               5                   8.60                  8.60                1                9.00
10.001 to 12.000                            321                  10.99                  9.81                -                   -
12.001 to 14.000                             45                  12.87                  9.02                1               12.00
14.001 to 16.000                            131                  14.84                  9.70                5               15.60
16.001 to 18.000                            151                  16.89                  9.43                2               17.50
18.001 to 20.000                            101                  19.10                  9.31                -                   -
                                   ----------------                                               --------------
                                          2,041             $     6.58                  8.35               237         $     2.69
                                   ================                                               ==============

</TABLE>

     Pro forma  information  regarding net income (loss) and earnings (loss) 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 $7.79  and  $8.19  per  option  for the two  months  ended
     December  31,  1998  and  1997,  respectively,  were  estimated  using  the
     Black-Scholes  option  pricing  model with the following  weighted  average
     assumptions:


                                                  Two months ended December 31,
                                                  -----------------------------
                                                      1998             1997
                                                  -----------       ----------

     Expected life of options                        5 years         5 years
     Risk-free interest rate                           6.5%            6.5%
     Expected volatility of underlying stock            50%             50%
     Dividends                                           0%              0%

     The  Black-Scholes  option  pricing  model  requires  the  input of  highly
     subjective  assumptions,  including the expected volatility of stock price.
     Because changes in subjective input assumptions can materially affect

                                      F-13

<PAGE>


                              RADICA GAMES LIMITED

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

8.   STOCK OPTIONS (Continued)

     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.

     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:

                                           Two months ended December 31,
                                           -----------------------------
                                               1998              1998
                                           ----------         ----------
     Pro forma net income                  $  5,633            $ 6,047
     Pro forma earnings per share          $   0.30            $  0.29


9.   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 has 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 the year ended  October 31,  1998.  The Company  performs  ongoing
     credit evaluations of its customers'  financial  condition and,  generally,
     requires no collateral from its customers.

10.  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  short-term   investments,   accounts
     receivable  and  accounts  payable are  reasonable  estimates of their fair
     value.


                                      F-14

<PAGE>


                              RADICA GAMES LIMITED

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

11.  COMMITMENTS AND CONTINGENCIES

     The Company leases certain warehouses and equipment under operating leases.
     Total expense for the  operating  leases was $82 and $63 for the two months
     ended December 31, 1998 and 1997, respectively.

     At December 31, 1998,  the Company was  obligated  under  operating  leases
     requiring future minimum lease payments as follows:

                                                   Operating leases

                1999                                $       253
                2000                                        249
                2001                                        134
                2002                                        108
                2003                                        106
                Thereafter                                  586
                                                   ------------
                Total minimum lease payments       $      1,436
                                                   ============


     At December 31, 1998,  certain leasehold land and buildings with a net book
     value of $4,869 and bank balances of $3,871 were pledged to secure  general
     banking facilities  including overdraft and trade facilities granted to the
     Company.

12.  RETIREMENT PLAN

     The  Company   has   defined   contribution   retirement   plans   covering
     substantially  all  employees  in Hong Kong.  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 $27 and $17 for the two months  ended
     December 31, 1998 and 1997, respectively.


                                      F-15

<PAGE>


                              RADICA GAMES LIMITED

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

13.  SEGMENT INFORMATION

     The  Company  operates  in one  principal  industry  segment:  the  design,
     development,  manufacture  and  distribution of a variety of electronic and
     mechanical handheld and tabletop games. Geographic financial information is
     as follows:



                                         Two months ended December 31,
                                 ------------------------------------------
                                       1998                       1997
                                 -----------------         ----------------
Net sales:
     United States               $          14,337         $         11,077
     PRC and Hong Kong                       5,878                    5,445
     Other                                     856                      798
                                 -----------------         ----------------
                                 $          21,071         $         17,320
                                 =================         ================

Operating income:
     United States               $             412         $            229
     PRC and Hong Kong                       4,784                    5,481
     Other                                     159                      135
                                 -----------------         ----------------
                                 $           5,355         $          5,845
                                 =================         ================


Identifiable assets are as follows:


                                       December 31,           October 31,
                                           1998                  1998
                                    ----------------        ---------------
     United States                  $         33,274        $        45,296
     PRC and Hong Kong                        73,153                 66,660
     Other                                     1,763                  1,565
                                    ----------------        ---------------
                                    $        108,190        $       113,521
                                    ================        ===============


A  significant  portion of PRC and Hong Kong net sales were export  sales to the
United States.


                                      F-16

<PAGE>


                              RADICA GAMES LIMITED

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

14.  VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                                          Allowance          Estimated           Provision
                                        for doubtful          customer              for
                                          accounts             returns          inventories
                                       --------------      --------------      -------------
<S>                                    <C>                 <C>                 <C>

Balance at October 31, 1997            $          908      $        2,327      $       3,479
Charged for the period                            213                 456              1,105
Deductions                                       (655)             (1,408)            (2,170)
                                       --------------      --------------      -------------
Balance at October 31, 1998                       466               1,375              2,414
Charged for the period                              -                   -                 23
Deductions                                        (20)               (298)                 -
                                       --------------      --------------      -------------
Balance at December 31, 1998           $          446      $        1,077      $       2,437
                                       ==============      ==============      =============
</TABLE>

                                      F-17

<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  transition  report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                        RADICA GAMES LIMITED



Date: February 5, 1999                  /s/ David C.W. Howell
      ----------------                  ---------------------
                                        David C.W. Howell
                                        Executive Vice President
                                        Chief Financial Officer




<PAGE>


                                  EXHIBIT INDEX


      99.1    Consolidated  Balance Sheets at December 31, 1997, March 31, 1998,
              June 30, 1998 and September 30, 1998.

      99.2    Consolidated Income Statements for three months ended December 31,
              1997,  March 31, 1998,  June 30, 1998 and September 30, 1998;  for
              two months  ended  December  31, 1997 and for twelve  months ended
              December 31, 1997.

      99.3    Consolidated  Cashflow  Statements  for  respective  periods ended
              March 31, 1998,  June 30, 1998,  September 30, 1998 and for twelve
              months ended December 31, 1997.

      99.4    Sales  Analyses of Units by Model for three months ended  December
              31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998.