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

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1999

[ ] 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 0-26374

PLAY BY PLAY TOYS & NOVELTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Texas 74-2623760
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

4400 Tejasco
San Antonio, Texas 78218-0267
(Address of principal executive offices and zip code)

(210) 829-4666
(Registrant's telephone number, including area code)

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 [ ].

The aggregate number of the Registrant's shares outstanding on March 10,
1999 was 7,315,000 shares of Common Stock, no par value.

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PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements:

Consolidated Balance Sheets as of January 31, 1999 (unaudited)
and July 31, 1998 .............................................. 3

Consolidated Statements of Operations (unaudited) for the
Three Months and Six Months Ended January 31, 1999 and 1998 .... 4

Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended January 31, 1999 and 1998 ..................... 5

Notes to Consolidated Financial Statements (unaudited) ........... 6

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ...................................... 9

Item 3. Quantitative and Qualitative Disclosures About Market Risk ....... 14

PART II. OTHER INFORMATION

Item 3. Defaults Upon Senior Securities .................................. 16

Item 6. Exhibits and reports on Form 8-K ................................. 17

SIGNATURES ............................................................... 20

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS
AS OF
--------------------------------------
JANUARY 31, 1999 JULY 31, 1998
---------------- -------------
CURRENT ASSETS: (UNAUDITED)

Cash and cash equivalents ..................................................... $ 1,790,376 $ 3,024,028
Accounts and notes receivable, less allowance for
doubtful accounts of $6,002,885 and $5,262,053 ........................... 40,695,233 48,950,055
Inventories ................................................................... 71,219,771 72,613,130
Prepaid royalties ............................................................. 6,988,312 4,677,331
Deferred income taxes ......................................................... 224,728 224,728
Prepaids ...................................................................... 3,508,921 4,018,712
------------- -------------
Total current assets ..................................................... 124,427,341 133,507,984
Property and equipment, net ................................................... 21,602,111 17,914,998
Goodwill, less accumulated amortization of $951,863 and $754,179 .............. 13,870,537 14,043,748
Other assets .................................................................. 2,250,315 2,417,166
------------- -------------
Total assets ............................................................. $ 162,150,304 $ 167,883,896
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks and others ............................................. $ 19,248,175 $ 14,760,950
Convertible subordinated debentures ........................................... 15,000,000 --
Current maturities of long-term debt .......................................... 7,068,034 3,393,149
Current obligations under capital leases ...................................... 1,117,200 1,142,687
Accounts payable, trade ....................................................... 20,537,467 28,070,980
Other accrued liabilities ..................................................... 4,850,646 5,312,081
Income taxes payable .......................................................... 3,287,490 4,374,249
------------- -------------
Total current liabilities ................................................ 71,109,012 57,054,096
------------- -------------
Long-term liabilities:
Long-term debt, net of current maturities ..................................... -- 4,860,247
Convertible subordinated debentures ........................................... -- 15,000,000
Obligations under capital leases .............................................. 917,779 1,102,135
Deferred income tax payable ................................................... 911,858 878,787
------------- -------------
Total liabilities ........................................................ 72,938,649 78,895,265
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred stock - no par value; 10,000,000 shares
authorized; no shares issued ............................................. -- --
Common stock - no par value; 20,000,000 shares
authorized; 7,315,000 shares issued ..................................... 1,000 1,000
Additional paid-in capital .................................................... 70,986,820 70,986,820
Deferred compensation ......................................................... (408,333) (478,333)
Accumulated other comprehensive income ........................................ (909,597) (1,548,381)
Retained earnings ............................................................. 19,541,765 20,027,525
------------- -------------
Total shareholders' equity ............................................... 89,211,655 88,988,631
------------- -------------
Total liabilities & shareholders' equity ................................. $ 162,150,304 $ 167,883,896
============= =============

The accompanying notes are an integral part of the consolidated
financial statements.

PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
--------------------------------- ---------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------

Net sales ...................................... $ 28,431,797 $ 30,866,868 $ 84,158,783 $ 89,284,424
Cost of sales .................................. 19,412,876 20,226,491 58,366,174 58,296,218
------------ ------------ ------------ ------------
GROSS PROFIT .............................. 9,018,921 10,640,377 25,792,609 30,988,206

Selling, general and administrative
expenses ..................................... 11,382,133 9,728,447 24,745,660 23,571,305
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) ................... (2,363,212) 911,930 1,046,949 7,416,901

Interest expense ............................... (866,929) (1,153,544) (2,221,709) (2,451,874)
Interest income ................................ 239,303 199,673 296,711 264,149
Other income ................................... 49,429 105,434 130,726 153,252
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAX ........... (2,941,409) 63,493 (747,323) 5,382,428
Income tax benefit (provision) ................. 1,029,422 (22,459) 261,563 (1,884,085)
------------ ------------ ------------ ------------
NET INCOME (LOSS) ......................... $ (1,911,987) $ 41,034 $ (485,760) $ 3,498,343
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE:
Basic ........................................ $ (0.26) $ 0.01 $ (0.07) $ 0.62
------------ ------------ ------------ ------------
Diluted ...................................... $ (0.26) $ 0.01 $ (0.07) $ 0.55
------------ ------------ ------------ ------------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ........................................ 7,315,000 6,439,982 7,315,000 5,667,337
------------ ------------ ------------ ------------
Diluted ...................................... 7,315,650 6,843,023 7,336,512 7,045,516
------------ ------------ ------------ ------------

The accompanying notes are an integral part of the consolidated
financial statements.

PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

SIX MONTHS ENDED JANUARY 31,
-----------------------------------
1999 1998
----------- ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................................. $ (485,760) $ 3,498,343
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization .................................................. 1,357,201 1,128,091
Provision for doubtful accounts receivable ..................................... 752,833 1,279,299
Deferred income tax provision (benefit) ........................................ 33,071 (154,231)
Amortization of deferred compensation .......................................... 70,000 70,000
Loss on sale of property and equipment ......................................... 50,859 --
Change in operating assets and liabilities:
Accounts and notes receivable ................................................ 7,501,989 8,420,167
Inventories .................................................................. 1,393,359 (19,282,622)
Prepaids and other assets .................................................... (1,656,891) (3,423,175)
Accounts payable and accrued liabilities ..................................... (7,994,948) (5,966,829)
Income taxes payable ......................................................... (1,086,759) (324,817)
----------- ------------
Net cash used in operating activities ..................................... (65,046) (14,755,774)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................................................ (4,657,174) (894,763)
Proceeds from the sale of property and equipment .................................. 52,898 --
Payments for intangible assets .................................................... -- (37,010)
----------- ------------
Net cash used in investing activities ..................................... (4,604,276) (931,773)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under Revolving Credit Agreement ...................... 4,487,225 (21,284,321)
Proceeds from public offering ..................................................... -- 34,192,088
Repayment of long-term debt ....................................................... (1,185,362) (1,336,272)
Repayment of capital lease obligations ............................................ (504,977) (388,398)
Increase in bank overdraft ........................................................ -- 3,638,017
Proceeds from exercise of stock options ........................................... -- 559,753
----------- ------------
Net cash provided by financing activities ................................. 2,796,886 15,380,867
----------- ------------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATES ........................................... 638,784 (545,822)
----------- ------------
Decrease in cash and cash equivalents ............................................... (1,233,652) (852,502)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................................... 3,024,028 4,960,612
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................................... $ 1,790,376 $ 4,108,110
=========== ============
Non-cash financing and investing-activity: capital leases incurred .................. $ 295,134 $ 847,251
=========== ============

The accompanying notes are an integral part of the consolidated
financial statements.

PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements and
related disclosures have been prepared in accordance with generally accepted
accounting principles applicable to interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The year-end balance
sheet data was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation of the financial position and interim results of Play-By-Play Toys
& Novelties, Inc. and Subsidiaries (the "Company") as of and for the periods
presented have been included. Certain amounts in the financial statements for
the prior period have been reclassified to conform to the current year
presentation. Because the Company's business is seasonal, results for interim
periods are not necessarily indicative of those which may be expected for a full
year.

The financial information included herein should be read in conjunction
with the Company's consolidated financial statements and related notes in its
Annual Report on Form 10-K for the fiscal year ended July 31, 1998, which is on
file with the United States Securities and Exchange Commission.

2. INVENTORIES

Inventories are comprised of the following:

JANUARY 31, 1999 JULY 31, 1998
---------------- -------------
Purchased for resale $70,596,501 $72,325,886
Operating supplies 623,270 287,244
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Total $71,219,771 $72,613,130
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3. EARNINGS (LOSS) PER SHARE

Basic earnings per common share were computed by dividing net income by
the weighted average number of common shares outstanding during the period.
Diluted earnings per share differs from basic earnings per share due to the
assumed exercises and conversions of dilutive options, warrants and convertible
debt that were outstanding during the period. The calculations of basic and
diluted earnings per share for the three and six month periods ended January 31,
1999 and 1998 are as follows:

THREE MONTHS ENDED JANUARY 31,
-----------------------------------------------------------------------------------
1999 1998
----------------------------------------- -----------------------------------
Common Per Common Per
Income (Loss) Shares Shares Income Shares Shares
----------------------------------------- -----------------------------------

BASIC EPS:
As reported .............................. $(1,911,987) 7,315,000 $(0.26) $41,034 6,439,982 $0.01

EFFECT OF DILUTIVE SECURITIES:
Options .................................. -- -- -- 374,180
Warrants ................................. -- -- -- 28,861
----------- --------- ------ ------- --------- -----
DILUTED EPS: ............................. $(1,911,987) 7,315,000 $(0.26) $41,034 6,843,023 $0.01
=========== ========= ====== ======= ========= =====

SIX MONTHS ENDED JANUARY 31,
-----------------------------------------------------------------------------------
1999 1998
---------------------------------------- -------------------------------------
Common Per Common Per
Income (Loss) Shares Shares Income Shares Shares
---------------------------------------- -------------------------------------
BASIC EPS:
As reported ............................. $(485,760) 7,315,000 $(0.07) $3,498,343 5,667,337 $0.62

EFFECT OF DILUTIVE SECURITIES:
Options ................................. -- -- -- 409,222
Warrants ................................ -- -- -- 31,457
8% Convertible Debentures ............... -- -- 393,205 937,500
--------- --------- ------ ---------- --------- -----
DILUTED EPS: ............................ $(485,760) 7,315,000 $(0.07) $3,891,548 7,045,516 $0.55
========= ========= ====== ========== ========= =====

The 937,500 shares issuable upon conversion of the 8% convertible
debentures were not included in the calculation of diluted earnings per share
for the quarters ended January 31, 1999 and 1998 and for the six months ended
January 31, 1999, because the effect of adding the shares and the related
interest would have been anti-dilutive. During the three months ended and the
six months ended January 31, 1999, the Company had 2,057,200 and 2,062,200,
respectively, of common stock options and warrants outstanding which were not
included in the diluted earnings per share calculation because the options and
warrants would have been anti-dilutive. In addition, during the three months
ended January 31, 1998, the Company had 959,000 common stock options and
warrants outstanding which were not included in the diluted earnings per share
calculation because the options and warrants would have been anti-dilutive.

4. SUBSEQUENT EVENT

The Company has signed a letter of intent to acquire Caribe Marketing
and Sales Co., Inc. ("Caribe") for a purchase price of $2.5 million consisting
of cash and 80,000 shares of the Company's common stock. Caribe is the Company's
largest Latin American distributor and is based in Puerto Rico. For the nine
month period ended December 31 1998, Caribe's net sales were approximately $8.3
million.

5. COMPREHENSIVE INCOME

In fiscal year 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Comprehensive Income" which establishes
new rules for the reporting and presentation of comprehensive income and its
components in a full set of financial statements. The Company's comprehensive
income is comprised of net income and foreign currency translation adjustments.
Prior to the adoption of SFAS No. 130, foreign currency translation adjustments
were reported separately in the statement of shareholders' equity.

The components of comprehensive income, net of related tax, are as
follows:

THREE MONTHS ENDED JANUARY 31, SIX MONTHS ENDED JANUARY 31,
------------------------------ ------------------------------
1999 1998 1999 1998
----------- -------- --------- -----------

Net income (loss) .................................... $(1,911,987) $ 41,034 $(485,760) $ 3,498,343
Foreign currency
translation adjustment, net of tax ................. (929,853) 417,051 638,784 (545,822)
----------- -------- --------- -----------
Comprehensive income (loss) .......................... $(2,841,840) $458,085 $ 153,024 $ 2,952,521
=========== ======== ========= ===========

6. NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standard Board ("FASB") issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Restated
Information," which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. SFAS 131 need not be applied to interim
financial statements in the initial year of application; however, comparative
information for interim periods in the initial year of application are required
to be reported in financial statements for interim periods in the second year of
application. Management is currently determining the impact that SFAS 131 will
have on its financial statement disclosures.

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

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ARE FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING,
WITHOUT LIMITATION, RELATIONSHIPS WITH LICENSORS AND CUSTOMERS, REALIZATION OF
ROYALTY ADVANCES, NEW PRODUCT INTRODUCTION, ABILITY TO MANAGE GROWTH, ABILITY TO
SOURCE PRODUCTS, CONCENTRATION OF CREDIT RISK, INTERNATIONAL TRADE RELATIONS AND
MANAGEMENT OF QUARTER TO QUARTER RESULTS, AND OTHER RISKS DETAILED FROM TIME TO
TIME IN THE COMPANY'S SEC REPORTS, INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED JULY 31, 1998 (SEE "RISK FACTORS" IN SUCH FORM
10-K). UPDATED INFORMATION WILL BE PERIODICALLY PROVIDED BY THE COMPANY AS
REQUIRED BY THE SECURITIES EXCHANGE ACT OF 1934.

RESULTS OF OPERATIONS

The following unaudited table sets forth the Company's results of
operations as a percentage of net sales for the periods indicated below:

THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JANUARY 31, JANUARY 31,
------------------------ ------------------------
1999 1998 1999 1998
------ ------ ------ ------

Net sales .................................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales .............................................. 68.3 65.5 69.4 65.3
------ ------ ------ ------
Gross profit ............................................... 31.7 34.5 30.6 34.7
Selling, general and administrative expenses ............... 40.0 31.5 29.4 26.4
------ ------ ------ ------
Operating income ........................................... (8.3) 3.0 1.2 8.3
Interest expense ........................................... (3.0) (3.7) (2.6) (2.7)
Interest income ............................................ 0.8 0.6 0.4 0.3
Other income ............................................... 0.2 0.3 0.2 0.2
Income tax benefit (provision) ............................. 3.6 (0.1) 0.3 (2.2)
------ ------ ------ ------
Net income (loss) .......................................... (6.7)% 0.1% (0.5)% 3.9%
====== ====== ====== ======

THREE MONTHS ENDED JANUARY 31, 1999 AND 1998

NET SALES. Net sales for the three months ended January 31, 1999 were
$28.4 million, a decrease of 7.9%, or $2.4 million, from $30.8 million in the
comparable period in fiscal 1998. The decrease in net sales was primarily
attributable to a decrease in retail net sales of 31.5%, or $3.1 million, to
$6.8 million offset by an increase in amusement net sales of 3.7%, or $740,000,
to $20.9 million over the comparable period in fiscal 1998. Retail sales were
negatively impacted by a weak retail environment for traditional toys in the
U.S., Europe and Latin America caused by several factors, including the closing
of several Toys 'R' Us locations in the U.S. and Europe, shrinking toy
inventories by retailers, and the recent turmoil and currency devaluation in
Latin America. Domestic net toy sales for the second quarter of fiscal 1999
compared to the comparable period of fiscal 1998 decreased 19.4%, or $4.5
million, to $18.8 million, and international net toy sales increased 30.7%, or
$2.1 million, to $9.0 million.

Net sales of licensed products for the second quarter of fiscal 1999
were $19.4 million, an increase of 16.9%, or $2.8 million, from $16.6 million in
the comparable period of fiscal 1998. The increase in licensed product sales was
primarily attributable to growth of sales of the Company's licensed plush toys
of 17.1%, or $2.4 million, to $16.4 million, from $14.0 million in the
comparable period of fiscal 1998. Net sales of the Talkin' Tunes accounted for
$1.5 million, or 5.2%, of the Company's net toy sales for the second quarter of

fiscal 1999. Within licensed products, sales of Looney Tunes' characters were
$15.8 million, an increase of 36.8%, or $4.2 million, for the second quarter of
fiscal 1999 from $11.6 million in the comparable period of fiscal 1998. The
increase in licensed product sales was offset by a decrease in sales of
PLAY-FACES(R) of approximately $1.6 million. Net sales of non-licensed products
for the second quarter of fiscal 1999 and 1998 accounted for 29.2%, or $8.3
million, and 43.8%, or $13.5 million, respectively, of the Company's net sales.

Net toy sales to retail customers for the second quarter of fiscal 1999
and fiscal 1998 were $6.8 million and $9.9 million, which accounted for 24.1%
and 32.4%, respectively, of the Company's net sales. The $3.1 million decrease
in net sales to retail customers from the second quarter of fiscal 1998 to the
second quarter of fiscal 1999 is attributable to a decrease in sales of
non-licensed electronic toys of 96.9%, or $3.5 million, to $112,000, from $3.6
million, and a decrease in sales of PLAY-FACES(R) of 74.8%, or $1.6 million, to
$528,000, from $2.1 million, offset by an increase in licensed electronic toys
of 410.9%, or $2.0 million, to $2.5 million, from $483,000 in the comparable
period in fiscal 1998. Net sales of licensed electronic toys accounted for 8.7%,
or $2.5 million, of the Company's net sales.

Net toy sales to amusement customers for the second quarter of fiscal
1999 and fiscal 1998 were $20.9 million and $20.2 million, which accounted for
73.5% and 65.3%, respectively, of the Company's net sales. The increase of 3.7%,
or $737,000, is primarily attributable to increased sales of licensed plush of
23.7%, or $2.4 million, to $12.7 million, from $10.3 million, in the comparable
period in fiscal 1998. This increase was offset by a decrease in sales of
novelty items of 12.3%, or $303,000, and a decrease in sales of non-licensed
plush toys of 18.8%, or $1.4 million, in the comparable period of 1998.

GROSS PROFIT. Gross profit decreased 15.2%, or $1.6 million, to $9.0
million for the second quarter of fiscal 1999 from $10.6 million, in the
comparable period of fiscal 1998. This decrease was a result of lower sales and
higher discounting of prices in the retail sector for traditional toys in the
U.S., Europe and Latin America. As a result, gross profit as a percentage of net
sales decreased to 31.7% for the second quarter of fiscal 1999 from 34.5% in the
comparable period in fiscal 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased approximately 17.0%, or $1.6 million, to $11.3
million for the second quarter of fiscal 1999 from $9.7 million in the
comparable period in fiscal 1998. This increase is primarily attributable to
increased payroll costs of $751,000, advertising expenses of $297,000, cost
related to the start up of the Company's direct marketing catalog division and
increased expenses related to the expansions of distribution facilities in
Europe, Hong Kong and China. As a percentage of net sales, selling, general and
administrative expenses increased to 40.0% for the second quarter of fiscal 1999
from 31.5% in the comparable period in fiscal 1998.

INTEREST EXPENSE. Interest expense decreased $287,000, to $867,000, for
the second quarter of fiscal 1999 from $1.2 million, in the comparable period of
fiscal 1998. The decrease is attributable to lower interest rates on borrowings
outstanding under the Company's Credit Facility offset by increased borrowings
outstanding on the revolving line of credit under the Credit Facility.

INCOME TAX EXPENSE. The net loss for the second quarter of fiscal 1999
resulted in an income tax benefit compared to a tax expense in the second
quarter of fiscal 1998 which reflects an effective tax rate of approximately
35%.

SIX MONTHS ENDED JANUARY 31, 1999 AND 1998

NET SALES. Net sales for the six months ended January 31, 1999 were
$84.2 million, a decrease of 5.7%, or $5.1 million, from $89.3 million in the
comparable period of fiscal 1998. The decrease in net sales was primarily
attributable to a decrease in retail net sales of 30.5%, or $10.9 million,
offset by an increase in amusement net sales of 11.3%, or $5.9 million as a
result of a weak retail environment for traditional toys in

the U.S., Europe and Latin America, caused by several factors, including the
closing of several Toys 'R' Us locations in the U.S. and Europe, shrinking toy
inventories by retailers, and the recent turmoil and currency devaluation in
Latin America. Domestic net toy sales for the first half of fiscal 1999 compared
to the first half of fiscal 1998 decreased 12.7%, or $9.4 million, to $64.5
million from $73.9 million, and international net toy sales increased 31.5%, or
$4.4 million, to $18.3 million, from $13.9 million.

Net sales of licensed products for the first half of fiscal 1999 were
$56.4 million, an increase of 14.4%, or $7.1 million, from $49.3 million in the
comparable period of fiscal 1998. The increase in licensed product sales was
primarily attributable to the growth of sales of the Company's licensed products
to international customers, which accounted for $15.4 million, or 18.3%, of the
Company's net sales. Within licensed products, sales of Looney Tunes' characters
were $44.6 million, an increase of 15.6%, or $6.0 million, for the first half of
fiscal 1999 from $38.6 million in the comparable period of fiscal 1998. Net
sales of Tornado Taz(TM) accounted for $1.9 million, or 2.2%, of the Company's
net toy sales for the first half of fiscal 1999. Net sales of PLAY-FACES(R)
decreased 14.3%, or $731,000, to $4.4 million, from $5.1 million in the
comparable period of fiscal 1998. Net sales of non-licensed products for the
first half of fiscal 1999 decreased 31.4%, or $12.1 million, to $26.4 million
from $38.5 million in the comparable period of fiscal 1998. This decrease is
primarily attributable to a decrease in sales of Talkin' Tots(TM) of $10.8
million and a decrease in sales of non-licensed stuffed toys of $5.9 million,
offset by a $3.4 million increase in sales of novelty items and an increase in
sales of "Penny and Patches(TM)" of $1.3 million.

Net toy sales to retail customers for the first half of fiscal 1999 and
fiscal 1998 were $24.8 million, or 29.5%, and $35.7 million, or 40.0%,
respectively, of the Company's net sales. The 30.5%, or $10.9 million decrease
in sales to retail customers from the first half of fiscal 1998 to the first
half of fiscal 1999 reflects the decrease in sales of Talkin' Tots(TM) of $10.8
million, PLAY-FACES(R) of $731,000, Tornado Taz(TM) of $6.4 million and licensed
plush toys of $1.0 million, offset by sales of licensed electronic toys
including Talkin' Tunes(TM) of $4.6 million, Macarena Tweety(TM) of $744,000 and
Singin' and Swingin' Tweety(TM) of $1.5 millioN.

Net toy sales to amusement customers for the first half of fiscal 1999
and fiscal 1998 were $58.0 million, or 68.9%, and $52.1 million, or 58.3%,
respectively, of the Company's net sales. The 11.3%, or $5.9 million increase in
dollar volume is primarily attributable to the increase in domestic sales of
licensed plush toys to amusement customers which accounted for $28.2 million of
the Company's net sales, a 20.1% increase from the comparable period in fiscal
1998, and the strong European market, in which amusement sales totaled $9.2
million, a 18.0% increase from the comparable period in fiscal 1998.

GROSS PROFIT. Gross profit decreased 16.8% to $25.8 million for the
first half of fiscal 1999 from $30.9 million in the comparable period in fiscal
1998, due to lower sales and margins on products sold within the retail sector
due to higher discounting of prices and sales of certain older retail products,
contrasted by significantly higher margins in 1998 from sales of Talkin'
Tots(TM)", which were television advertised products. Gross profit as a
percentage of net sales decreased to 30.6% for the first half of fiscal 1999
from 34.7% in the comparable period in fiscal 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased approximately 5.0%, or $1.1 million, to $24.7
million for the first half of fiscal 1999 from $23.6 million in the comparable
period in fiscal 1998. This increase is primarily attributable to increased
payroll and related costs of $1.6 million, cost related to the start up of the
Company's direct marketing catalog division, product development costs and other
expenses associated with the increased sales volume. As a percentage of net
sales, selling, general and administrative expenses increased to 29.4% for the
first half of fiscal 1999 from 26.4% in the comparable period of fiscal 1998.

INTEREST EXPENSE. Interest expense decreased 9.4%, or approximately
$230,000, to $2.2 million for the first half of fiscal 1999 from $2.4 million in
the comparable period in fiscal 1998. The decrease is

attributable to lower interest rates on borrowings outstanding under the
Company's Credit Facility offset by increased borrowings outstanding on the
revolving line of credit under the Credit Facility.

INCOME TAX EXPENSE. The net loss for the first half of fiscal 1999
resulted in an income tax benefit compared to a tax expense in the first half of
fiscal 1998 which reflects an effective tax rate of approximately 35%.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 1999, the Company's working capital was $53.3 million
compared to $71.3 million at January 31, 1998. The decrease is attributable to
the classification of long term debt obligations to current term debt
obligations as a result of not being in compliance with a financial covenant
(see "Default Upon Senior Securities").

The Company satisfies its capital requirements and seasonal working
capital needs with cash flow primarily from borrowings and operations. The
Company's primary capital needs have consisted of funding for business
acquisitions, inventory, property, plant and equipment, customer receivables,
letters of credit, entertainment character or corporate trademark licenses and
international expansion.

As of January 31, 1999, the balance on the revolving line of credit was
$19.2 million, the balance on the term loan was $6.0 million, and the amount of
convertible subordinated debt outstanding was $15 million. The Company had $7.2
million of additional borrowing capacity available under its Revolving Credit
Term Loan with Letter of Credit Facility with The Chase Manhattan Bank ("Credit
Facility"). The Credit Facility was extended through May 17, 1999 and the
Company expects to either extend or refinance the Credit Facility prior to that
date. However, there is no assurance that the Company will be able to refinance
or secure a new credit facility, or that if obtained, it will be on terms at
least as favorable as those on the existing Credit Facility.

The Company's operating activities used net cash of $65,000 and $14.8
million in the first six months of fiscal 1999 and 1998, respectively. The cash
flow from operations in the first six months of fiscal 1999 was primarily
affected by the net loss, decreases in accounts receivable and accounts payable.

Net cash used in investing activities during the first six months of
fiscal 1999 and 1998 was $4.6 million and $932,000, respectively. In the first
six months of fiscal 1999, net cash used in investing activities consisted
principally of the purchase of property and equipment of $4.6 million, and was
composed of expenditures of $2.2 million for equipment, $2.1 million for costs
incurred related to the management information system implementation and
$284,300 for leasehold improvements for the San Antonio facility. In the first
six months of fiscal 1998, net cash used in investing activities consisted
principally of the purchase of property and equipment of $895,000.

Net cash provided by financing activities during the first six months
of fiscal 1999 and 1998 was $2.8 million and $15.4 million, respectively. During
the first six months of fiscal 1999, the Company received aggregate advances of
$77.2 million, and made repayments of $72.7 million, on the revolving line of
credit, and reduced the principal on the term loan by $1.2 million. During the
first six months of fiscal 1998, $114.4 million was used in repayment of
borrowings on the revolving line of credit, offset by aggregate advances of
$93.1 million.

The Company believes that its current available cash, net cash provided
by operating activities and available borrowings under the Company's Credit
Facility will be sufficient to meet the Company's cash requirements through May
17, 1999. The Company believes that it will be able to extend or refinance the
Credit Facility by May 17, 1999, however, there is no assurance that the Company
will be able to refinance or obtain a new credit facility, or that if obtained,
it will be on terms at least as favorable as those on the existing line of
credit.

DEFAULT UPON SENIOR SECURITIES

As of January 31, 1999, the Company was not in compliance with a
financial covenant under its 8.00% Convertible Debentures (the "Debentures").
The Company has an aggregate of $15,000,000 of the Debentures outstanding of
which the Holder of $10,000,000 has waived such covenant violation through July
31, 1999. The Company is currently seeking a waiver from the $5,000,000
Debenture Holder. Pursuant to the terms of the Debentures, the holders of the
Debentures do not have the right to accelerate the maturity of the principal of
such debt until 180 days from the date of notice to the lenders under the Credit
Facility (the "Senior Lenders"). Additionally, the Senior Lenders may require an
additional 90 days of forbearance providing the Company is not in default of any
interest or principal payments under the Credit Facility. The Company is also in
default of certain financial and cross-default covenants of its Credit Facility.
The Company is currently under negotiations with the Senior Lenders to refinance
the Credit Facility which matures May 17, 1999. The Company believes it will
successfully complete the refinancing by such date. As a result of the forgoing,
the Company has classified all debt as current until such time as the Company
completes its refinancing, and either received appropriate waiver from the
Debenture Holders or becomes compliant with the financial covenant.

YEAR 2000 COMPLIANCE

Similar to many business entities, the Company will be impacted by the
inability of computer application software programs to distinguish between the
year 1900 and 2000 due to a commonly-used programming convention. Until such
programs are modified or replaced prior to 2000, calculations and
interpretations based on date-based arithmetic or logical operations performed
by such programs may be incorrect.

Management's plan addressing the impact on the Company of the Year 2000
issue focuses on the following areas: application systems, process control
systems (embedded chips), technology infrastructure, and third party business
partners and suppliers with which the Company has significant relationships.
Management's analysis and review of these areas is comprised primarily of five
phases: developing an inventory of hardware, software and embedded chips;
assessing the degree to which each area is currently in compliance with Year
2000 requirements; performing renovations and repairs as needed to attain
compliance; testing to ensure compliance; and developing a contingency plan if
repair and renovation efforts are either unsuccessful or untimely.

Management has substantially completed the inventory and assessment
phases regarding application systems, process control systems and technology
infrastructure, and is performing upgrades, repairs and testing of the former
two categories. The review of physical infrastructure and business partners and
merchandise suppliers is in the inventory stage. The Company anticipates that
any additional assessment efforts will be completed by the end of calendar year
1999. Costs incurred to date, which total $4.8 million, have primarily consisted
of labor from the redeployment of existing information technology, legal and
operational resources as well as computer hardware and software costs. The
Company has budgeted approximately $7.0 million for these Year 2000 compliance
efforts; however, the Company's Year 2000 program is an ongoing process and the
estimates of costs and completion dates for various aspects of the program are
subject to change.

The Company is currently replacing its management information and
operating systems with new applications that are Year 2000 compliant. The
Company has formed a contingency team to develop a work plan in the event that
such programs are not fully operational by July of calendar year 1999. The
Company does not presently anticipate a material business interruption as a
result of the Year 2000.

The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company's current and planned
activities with respect to the Year 2000 problem are expected to significantly
reduce the Company's level of uncertainty about the problem and, in particular,
about the Year 2000 compliance and readiness of its material customers and
suppliers. The Company believes that, with the implementation of new business
systems and completion of the planned activities as scheduled, the possibility
of significant interruptions of normal operations should be reduced.

Although there is a risk that the Company's plans for achieving Year
2000 compliance may not be completed on time, failure to meet critical
milestones identified in our plans would provide advance notice such that
appropriate steps could be taken to mitigate the risk of failure. Management
believes that its customers and suppliers would also receive advance notice
allowing them to implement alternate plans.

EURO

On January 1, 1999, eleven of the fifteen member countries of the
European Union introduced the euro, which has become the common currency among
the participating member countries. The participating members' sovereign
currency has been converted to the euro at the exchange rates in effect on the
introduction date. Spain is one of the participating members, which is the
country in which Play-By-Play Toys & Novelties, Europa, S.A. ("Play-By-Play
Europe") is located. Play-By-Play Europe intends to keep its books in Spain's
sovereign currency, the peseta, through the substantial portion of the
three-year introductory period, at the end of which all companies in
participating member countries must adopt the euro. As Play-By-Play Europe's
accounting system is currently capable of performing the euro conversion, the
Company does not anticipate that the costs related to the conversion will be
significant. In addition, as Play-By-Play Europe operates primarily in Spain and
in non-European Union countries, management does not anticipate that the
introduction of the euro will have a material effect on Play-By-Play Europe's
results of operations, financial position, or cash flows for the forseeable
future.

SEASONALITY

Both the retail and amusement toy industries are inherently seasonal.
Generally, in the past, the Company's sales to the amusement industry have been
highest during the third and fourth fiscal quarters, and collections for those
sales have been highest during the succeeding fiscal quarters. The Company's
sales to the retail toy industry have been highest during its first and fourth
fiscal quarters, and collections from those sales have been highest during the
succeeding fiscal quarters. The Company's working capital needs and borrowings
to fund those needs have been highest during the third and fourth fiscal
quarters. As a result of the Company's increased sales to the amusement industry
and increased penetration of the retail market, the Company anticipates that its
sales, collections and borrowings to fund working capital needs may become more
significant in the third and fourth fiscal quarters.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 6 to the consolidated financial statements included elsewhere
herein for a discussion of new pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in financial and commodity market prices and rates. The Company is
exposed to market risk in the areas of changes in United States and
international borrowing rates (i.e. prime rate or LIBOR), and changes in foreign
currency exchange rates as measured against the United States ("U.S.") dollar
and functional currencies of its subsidiaries (i.e. British pound, Spanish
peseta, Hong Kong dollar, Canadian dollar). In addition, the Company is exposed
to market risk in certain geographic areas that have experienced or are likely
to experience an economic downturn, such as China or Latin America. The Company
purchases substantially all of its inventory from suppliers in China, therefore,
the Company is subject to the risk that such suppliers will be unable to provide
merchandise at competitive prices. While the Company believes that if such an
event were to occur it would be able to find alternate sources of merchandise at
competitive prices, there can be no assurance that the Company would be
successful. At January 31, 1999, the Company had $7.7 million of accounts
receivable outstanding, payable in U.S. dollars from two companies based in
Mexico and Brazil. If the currencies of these countries were to fall
significantly against the U.S. dollar, there can be no assurance that such
companies would be able to repay the receivables in full. These exposures are
directly related to its normal operating and funding activities. Historically
and as of January 31, 1999, the Company has not used derivative instruments or
engaged in hedging activities to minimize its market risk.

INTEREST RATE RISK

The interest payable on the Company's revolving line-of-credit and term
loan is variable based on LIBOR and/or the prime rate, and therefore, affected
by changes in market interest rates. At January 31, 1999, approximately $19.2
million and $6 million was outstanding on the revolving line of credit and the
term loan, respectively. The Credit Facility matures May 15, 1999 and the
Company expects to either extend or refinance the Credit Facility prior to that
date. However, there is no assurance that the Company will be able to refinance
or obtain a new credit facility, or that if obtained, it will be on terms at
least as favorable as those on the existing line of credit. See "Liquidity and
Capital Resources."

FOREIGN CURRENCY RISK

The Company has wholly-owned subsidiaries in Valencia, Spain and
Doncaster, England. Sales from these operations are typically denominated in
Spanish Pesetas or British Pounds, respectively, thereby creating exposures to
changes in exchange rates. Changes in the Peseta/U.S. Dollar exchange rate and
British Pound/U.S. Dollar exchange rate may positively or negatively affect the
Company's sales, gross margins, net income and retained earnings. The Company
does not believe that reasonably possible near-term changes in exchange rates
will result in a material effect on future earnings, fair values or cash flows
of the Company, and therefore, has chosen not to enter into foreign currency
hedging transactions. There can be no assurance that such an approach will be
successful, especially in the event of a significant and sudden decline in the
value of the Spanish Peseta or the British Pound. Purchases of merchandise by
the Company's European toy subsidiary from its suppliers in the Far East are
generally denominated in U.S. dollars and are thus subject to currency risk to
the extent that there are fluctuations in the exchange rate between the United
States dollar and the Spanish peseta. Certain of this European subsidiary's
license agreements call for payment of royalties in a currency different from
their functional currency, and these arrangements subject the Company to
currency risk to the extent that exchange rates fluctuate from the date that
royalty obligations are incurred until the date royalties are actually paid to
the licensor.

PART II. OTHER INFORMATION

ITEM 3. DEFAULT UPON SENIOR SECURITIES

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
2.1 Asset Purchase Agreement dated May 1, 1996, by and among Ace
Novelty Acquisition Co., Inc. a Texas corporation ("Buyer"), Play
By Play Toys & Novelties, Inc., a Texas corporation and the parent
corporation of Buyer ("PBYP"), Ace Novelty Co., Inc., a Washington
corporation ("ACE"), Specialty Manufacturing Ltd., a British
Columbia, Canada corporation ("Specialty"), ACME Acquisition Corp.,
a Washington corporation ("ACME"), and Benjamin H. Mayers and Lois
E. Mayers, husband and wife, Ronald S. Mayers, a married
individual, Karen Gamoran, a married individual, and Beth
Weisfield, a married individual (collectively, "Stockholders")
(filed as Exhibit 2.1 to Form 8-K, Date of Event: May 1, 1996),
incorporated herein by reference.

2.2 Amendment No. 1 to Asset Purchase Agreement dated June 20, 1996 by,
and among Buyer, PBYP, ACE, Specialty, ACME and Stockholders.
(filed as Exhibit 2.2 to Form 8-K, Date of Event: May 1, 1996),
incorporated herein by reference.

3.1 Amended Articles of Incorporation of the Company (filed as Exhibit
3.1 to the Registration Statement on Form S-1, File No. 33-92204),
incorporated herein by reference.

3.2 Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to
the Registration Statement on Form S-1, File No. 33-92204),
incorporated herein by reference.

4.1 Specimen of Common Stock Certificate (filed as Exhibit 4.1 to the
Registration Statement on Form S-1, File No. 33-92204),
incorporated herein by reference.

4.2 Form of Warrant Agreement and Form of Warrant (filed as Exhibit 4.2
to the Registration Statement on Form S-1, File No. 33-92204),
incorporated herein by reference.

4.3 Form of Play By Play Toys & Novelties, Inc. Grant of
Incentive Stock Option (filed as Exhibit 4.3 to the
Registration Statement on Form S-1, File No. 33-92204),
incorporated herein by reference.

4.4 Form of Play By Play Toys & Novelties, Inc. Non-qualified
Stock Option Agreement (filed as Exhibit 4.4 to the
Registration Statement on Form S-1, File No. 33-92204),
incorporated herein by reference.

4.5 Play By Play Toys & Novelties, Inc. Warrant to Purchase Common
Stock (filed as Exhibit 4 to Form 8-K, Date of Event: May 1, 1996),
incorporated herein by reference.

10.1 Play By Play Toys & Novelties, Inc. 1994 Incentive Plan
(filed as Exhibit 10.1 to the Registration Statement on
Form S-1, File No. 33-92204), incorporated herein by
reference.

10.2 Credit Agreement dated June 20, 1996, by and among Play By Play
Toys & Novelties, Inc., Ace Novelty Acquisition Co., Inc., Newco
Novelty, Inc. and Chemical Bank, a New York banking corporation as
agent for the lenders (filed as Exhibit 10.1 to Form 8-K, Date of
Event: May 1, 1996), incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.3 Promissory Note dated June 20, 1996, of Ace Novelty Acquisition
Co., Inc. payable to the order of Ace Novelty Co., Inc. in the
principal sum of $2,900,000 (filed as Exhibit 10.5 to Form 8-K,
Date of Event: May 1, 1996), incorporated herein by reference.

10.4 Employment agreement dated November 4, 1996, between the Company
and Raymond G. Braun, as amended by Amendment No.1 to Employment
agreement dated August 29, 1997 (filed as Exhibit 10.4 to Form 10-K
for the fiscal year ended July 31, 1997), incorporated herein by
reference.

10.5 Non-Qualified Stock Option agreement dated November 4, 1996,
between the Company and Raymond G. Braun, as amended by Amendment
No. 1 to Non-Qualified Stock Option agreement dated August 29, 1997
(filed as Exhibit 10.5 to Form 10-K for the fiscal year ended July
31, 1997), incorporated herein by reference.

10.6 Employment agreement dated May 2, 1996, between the Company and
Saul Gamoran, as amended by Amendment No. 1 dated May 16, 1996
(filed as Exhibit 10.6 to Form 10-K for the fiscal year ended July
31, 1997), incorporated herein by reference.

10.7 Employment agreement dated June 20, 1997, between the Company and
James A. Weisfield (filed as Exhibit 10.7 to Form 10-K for the
fiscal year ended July 31, 1997), incorporated herein by reference.

10.8 Subordinated Convertible Debenture Agreements dated July 3, 1997,
between the Company and each of Renaissance Capital Growth and
Income Fund III, Inc., Renaissance U.S. Growth and Income Trust PLC
and Banc One Capital Partners II, Ltd. (the "Convertible Lenders")
(filed as Exhibit 10.8 to Form 10-K for the fiscal year ended July
31, 1997), incorporated herein by reference.

10.9 Convertible Loan Agreement dated July 3, 1997, among the Company,
the Convertible Lenders and Renaissance Capital Group, Inc. (filed
as Exhibit 10.9 to Form 10-K for the fiscal year ended July 31,
1997), incorporated herein by reference

10.10 License Agreement dated March 22, 1994 by and between Warner Bros.,
a division of Time Warner Entertainment, L.P., and the Company (as
successor by assignment to Ace Novelty, Inc.) (filed as Exhibit
10.10 to Form 10-K for the fiscal year ended July 31, 1997),
incorporated herein by reference.

10.11 License Agreement dated March 22, 1996 by and between Warner Bros.,
a division of Time Warner Entertainment, L.P., and the Company (as
successor by assignment to Ace Novelty, Inc.) (filed as Exhibit
10.11 to Form 10-K for the fiscal year ended July 31, 1997),
incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.12 License Agreement dated September 10, 1997 by and between Warner
Bros., a division of Time Warner Entertainment, L.P., and the
Company (as successor by assignment to Ace Novelty, Inc.) (filed as
Exhibit 10.12 to Form 10-K for the fiscal year ended July 31,
1997), incorporated herein by reference.

10.13 License Agreement dated January 1, 1998 by and between Warner
Bros., a division of Time Warner Entertainment, L.P. and the
Registrant (filed as Exhibit 10.13 to Form 10-Q for the quarter
ended January 31, 1998, and incorporated herein by reference).

10.14 License Agreement dated January 1, 1998 by and between Warner
Bros., a division of Time Warner Entertainment, L.P. and the
Registrant (filed as Exhibit 10.14 to Form 10-Q for the quarter
ended January 31, 1998, and incorporated herein by reference).

10.15 Amendment dated January 14, 1998 to License Agreement dated
September 10, 1997 by and between Warner Bros., a division of Time
Warner Entertainment, L.P. and the Registrant (filed as Exhibit
10.15 to Form 10-Q for the quarter ended January 31, 1998, and
incorporated herein by reference).

27 Financial Data Schedule

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 17th day of March 1999.

PLAY BY PLAY TOYS & NOVELTIES, INC.

By: /s/ JOE M. GUERRA
Joe M. Guerra
CHIEF FINANCIAL OFFICER