<PAGE> 1
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June, 1996
RADICA GAMES LIMITED
(Translation of registrant's name into English)
Suite R, 6/F., 2-12 Au Pui Wan Street, Fo Tan, Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or 40-F
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
If "yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-
Contents:
1. Quarterly Report
2. Press Release dated June 10, 1996
This Report on Form 6-K shall be deemed to be incorporated by
reference into the Registrant's Registration Statement on Form S-8 (No.
33-86960).
<PAGE>
<PAGE> 2
QUARTERLY REPORT *
For the quarterly period ending April 30, 1996
Commission File Number 0-23696
RADICA GAMES LIMITED
(Exact name of registrant as specified in charter)
Bermuda N/A
(Country of Incorporation) (I.R.S. Employer Identification No.)
Suite R, 6/F., 2-12 Au Pui Wan Street, Fo Tan, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code:
(852) 2693 2238
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at 10 June, 1996
Common Stock, par value $0.01 per share 20,680,000
________________________
* As a foreign private issuer, the registrant is not required to
file reports on Form 10-Q. It intends to make voluntary quarterly
reports to its stockholders which generally follow the Form 10-Q
format. Such reports, of which this is one, are furnished to the
Commission pursuant to Form 6-K.
<PAGE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
RADICA GAMES LIMITED
FORM 6-K
The accompanying consolidated financial statements have been prepared
by the Company, without audit, and reflect all adjustments which are,
in the opinion of management, necessary for a fair statement of the
results for the interim periods. The statements have been prepared in
accordance with the regulations of the Securities and Exchange
Commission (the "SEC"), but omit certain information and footnote
disclosures necessary to present the statements in accordance with
generally accepted accounting principles in the United States of
America.
These financial statements should be read in conjunction with the
financial statements, accounting policies and notes included in the
Form 20F for the year ended October 31, 1995 as filed with the
Securities and Exchange Commission. Management believes that the
disclosures are adequate to make the information presented herein not
misleading.
<PAGE>
<PAGE> 4
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
(US Dollars in thousands,
APR. 30, APR. 30,
except per share data)
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $
$
<S> <C> <C> <C> <C>
REVENUES:
Net Sales 12,970 24,842 3,918 7,358
Cost of sales (9,911) (13,936) (3,735) (4,222)
Gross profit 3,059 10,906 183 3,136
OPERATING EXPENSES:
Selling, general and administrative expenses (4,511) (10,055) (1,436) (4,459)
Research and development (803) (1,121) (420) (597)
Total operating expenses (5,314) (11,176) (1,856) (5,056)
OPERATING LOSS (2,255) (270) (1,673) (1,920)
NET INTEREST EXPENSE (147) (275) (11) (70)
LOSS BEFORE INCOME TAXES
AND UNUSUAL ITEM (2,402) (545) (1,684) (1,990)
UNUSUAL ITEM (Note 3) 709 - 709 -
LOSS BEFORE INCOME TAXES (1,693) (545) (975) (1,990)
INCOME TAXES (Note 7) (13) 322 (3) 512
NET LOSS (1,706) (223) (978) (1,478)
NET LOSS PER SHARE (0.08) (0.01) (0.05) (0.06)
AVERAGE NUMBER OF
SHARES OUTSTANDING 22,203,077 22,780,000 21,613,333 22,780,000
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 5
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(US Dollars in thousands except share data) APR. 30, OCT. 31,
1996 1995
(unaudited)
$ $
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 5,003 7,757
Short-term investments (Note 4) 76 3,228
Accounts receivable, net of allowances for doubtful
accounts of $839 and $1,572 in 1996 and 1995 and estimated
customer returns of $647 and $1,790 in 1996 and 1995 3,436 10,242
Inventories, net of provision of $10,187 in 1996 and
$11,873 in 1995 (Note 5) 14,139 16,472
Prepaid expenses and other current assets 278 531
Income taxes receivable 45 1,306
Total current assets 22,977 39,536
PROPERTY, PLANT AND EQUIPMENT, NET (Note 6) 13,675 14,468
DEFERRED INCOME TAXES (Note 7) 29 29
OTHER ASSETS - 21
Total Assets 36,681 54,054
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings (Note 8) 3,369 13,970
Current portion of long-term debt (Note 9) 267 371
Accounts payable 1,123 3,006
Accrued payroll and employee benefits 179 241
Accrued expenses 3,124 6,070
Total current liabilities 8,062 23,658
6 99
LONG-TERM DEBT (Note 9)
STOCKHOLDERS' EQUITY
Common Stock
par value $0.01 each, 100,000,000 shares authorized,
20,680,000 shares outstanding (22,780,000 at 31st October
1995) 207 228
Additional paid-in capital 28,371 28,328
Retained earnings 14 1,720
Cumulative translation adjustment 21 21
Total stockholders' equity 28,613 30,297
Total liabilities and stockholders' equity 36,681 54,054
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 6
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APR. 30,
(US Dollars in thousands)
1996 1995
(unaudited) (unaudited)
$ $
<S> <C> <C>
Cash flow from operating activities:
Net loss (1,706) (223)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deferred income taxes - 7
Depreciation and amortization 857 672
Gain on disposal of property, plant and
equipment (657) -
Provision for compensation expense related to
stock options 22 100
Changes in assets and liabilities:
Accounts receivable 6,806 17,250
Inventories 2,649 (698)
Prepaid expenses and other current assets 253 845
Accounts payable (1,883) (7,310)
Accrued payroll and employee benefits (62) (114)
Accrued expenses (2,946) (1,439)
Income taxes payable 1,261 (2,675)
Total Adjustments 6,300 6,638
Net cash provided by operating activities 4,594 6,415
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment 929 -
Purchase of property, plant and equipment (631) (3,110)
Proceed from the sales of short-term investments 3,152 -
Increase in other assets - 29
Net cash provided by/(used in) investing activities 3,450 (3,081)
(continued)<PAGE>
<PAGE> 7
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
APR. 30,
(US Dollars in thousands)
1996 1995
(unaudited) (unaudited)
$ $
(Continued from previous page)
Cash flow from financing activities:
Decrease in short-term borrowings (10,601) (5,225)
Repayment of long-term debt (197) (114)
Net cash used in financing activities (10,798) (5,339)
Net decrease in cash and cash equivalents (2,754) (2,005)
Cash and cash equivalents:
Beginning of period 7,757 11,038
End of period 5,003 9,033
Supplementary disclosures of cash flow information:
Cash paid during the period for:
Interest 300 526
Income taxes - 2,354
Cash received during the period for:
Income taxes (1,248) -
Non cash transactions:
Property, plant and equipment acquired under
capital leases - 298
Transfer of property, plant and equipment to inventory 316 -
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
<PAGE> 8
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US dollars in thousands)
1.BASIS OF CONSOLIDATION AND PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the
Company and all subsidiaries. All significant intra-group
transactions and balances have been eliminated on consolidation.
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America and are presented in U.S. dollars as the
Company's sales are predominantly denominated in U.S. 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.
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, the term of the lease. 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. No depreciation
and amortization is provided for construction-in-progress until it
is put into use. Depreciation of Pub Poker units held for use
under operating leases will commence at the inception of the
relevant lease using the straight line method over a period of 12
months.
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.
<PAGE>
<PAGE> 9
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Short-term investments -- During 1995, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115
("SFAS 115"), "Accounting for Certain Investments in Debt and
Equity Securities". In accordance with SFAS 115, investment
securities are classified as "trading", "held-to-maturity", or
"available-for-sale". Debt and equity securities that will be held
for resale in anticipation of short-term market movements are
classified as trading securities and are stated at fair value, with
unrealized holding gains and losses included in earnings. Debt
securities are classified as held-to-maturity securities when the
company has the positive intent and ability to hold the securities
until their maturity. Held-to-maturity securities are stated at
their amortized cost. Debt securities not classified as trading or
held-to-maturity are classified as available-for-sale. Available-
for-sale securities are stated at fair value, with unrealized gains
and losses, net of tax, reported as a separate component of
shareholders equity. Management determines the appropriate
classification of securities at the time of purchase and re-
evaluates such classification as of each balance sheet date.
Income taxes -- Certain items are treated differently for financial
reporting purposes than for income tax purposes. Pursuant to the
provision of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," deferred income taxes are provided,
under the liability method, in recognition of these temporary
differences, using the tax rates expected to be in effect when the
related temporary differences reverse.
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 $29 in
the quarter ended April 30, 1996 and $227 the quarter ended April
30, 1995 are included in selling, general and administrative
expenses.
Post-retirement and post-employment benefits -- The Company does not
provide post-retirement benefits to employees and post-employment
benefits are immaterial.
Warranty -- Future warranty costs are provided for at the time of
revenue recognition based on management's estimate by reference to
historical experience adjusted for known trends.
3. UNUSUAL ITEM
During the second quarter of 1996, a gain of $709 was made from the
sale of a property in Hong Kong.
<PAGE>
<PAGE> 10
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
4. SHORT-TERM INVESTMENTS
At October 31, 1995, the Company had an investment in a money market
fund of $3,000 which was subsequently sold in December 1995.
5. INVENTORIES
Inventories by major categories are summarized as follows:
<TABLE>
<CAPTION>
April 30, 1996 October 31, 1995
(unaudited)
<S> <C> <C>
Raw materials $ 3,863 $ 4,036
Work in progress 2,392 2,576
Finished goods 7,884 9,860
$ 14,139 $ 16,472
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
April 30, 1996 October 31, 1995
(unaudited)
<S> <C> <C>
Land and buildings $ 9,882 $ 9,628
Plant and machinery 2,913 2,958
Furniture and equipment 2,893 2,849
Leasehold improvements 1,175 1,130
Pub Poker Units 160 476
Total $ 17,023 $ 17,041
Less: Accumulated depreciation and
amortization (3,348) (2,573)
Total $ 13,675 $ 14,468
</TABLE>
<PAGE>
<PAGE> 11
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
6.PROPERTY, PLANT AND EQUIPMENT (Continued)
Additions, disposals and depreciation and amortization of property,
plant and equipment for the periods shown are as follows:
<TABLE>
<CAPTION>
Six Months Ended April 30, Year Ended October 31,
1996 1995
(unaudited)
<S> <C> <C>
Additions $ 631 $ 6,339
Disposals -- net book value 272 642
Write off of fixed assets - 1,478
Depreciation and amortization 836 1,542
Reallocation to inventory 316 -
</TABLE>
Included in property, plant and equipment are assets acquired under
capital leases with the following net book values:
<TABLE>
<CAPTION>
Six Months Ended April 30, Year Ended October 31,
1996 1995
(unaudited)
<S> <C> <C>
At cost:
Plant and machinery $ 968 $ 968
Less: accumulated depreciation (253) (156)
$ 715 $ 812
</TABLE>
Amortization of capital lease assets, which is included in
depreciation and amortization expenses in the accompanying
statements of income, was $97 for the period ended April 30, 1996
and $48 for the year ended October 31, 1995.
<PAGE>
<PAGE> 12
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
7.INCOME TAXES
The components of loss before income taxes are as follows:
<TABLE>
<CAPTION>
Six Months Ended April 30, Six Months Ended April 30,
1996 1995
(unaudited) (unaudited)
<S> <C> <C>
United States $ (1,138) $ (1,024)
Foreign subsidiaries operating in:
People's Republic of China (174) 498
Hong Kong (381) (19)
$ (1,693) $ (545)
</TABLE>
Under the existing processing arrangement and in accordance with the
current tax regulations in the People's Republic of China("PRC"),
the manufacturing income generated in the PRC is not subject to PRC
income taxes.
As the Company's PRC subsidiary is a sino-foreign joint venture
enterprise, it is eligible for certain tax holidays and
concessions. The PRC subsidiary incurred a loss during the period.
In addition, under the existing processing arrangement and in
accordance with the current tax regulations in the PRC, the
manufacturing income generated in the PRC is not subject to PRC
income taxes.
<PAGE>
<PAGE> 13
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
7. INCOME TAXES (Continued)
The (provision)/credit for income taxes consists of the following:
<TABLE>
<CAPTION>
Six Months Ended April 30, Six Months Ended April 30,
1996 1995
(unaudited) (unaudited)
<S> <C> <C>
Hong Kong
Current $ (8) $ (12)
Deferred - (7)
$ (8) $ (19)
United States
Federal income taxes $ (5) $ 17
State income taxes - 324
Deferred - -
$ (5) $ 341
$ (13) $ 322
</TABLE>
<PAGE>
<PAGE> 14
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
7. INCOME TAXES (Continued)
A reconciliation between the credit for income taxes computed by
applying the statutory tax rates in the United States for 1996 and
1995 to loss before income taxes and the actual (provision)/credit
for income taxes is as follows:
<TABLE>
<CAPTION>
Six Months Ended April 30, Six Months Ended April 30,
1996 1995
(unaudited) (unaudited)
<S> <C> <C>
US Statutory Rate 34% 34%
Credit for income taxes at statutory rate on
loss for the period $ 576 $ 185
State income taxes - 2
International rate differences (7) 3
Accounting (losses)/gains for which deferred
income tax cannot be recognised (603) 169
Other 21 (37)
Income tax (provision)/credit $ (13) $ 322
</TABLE>
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
statements purposes. At April 30, 1996 and October 31, 1995 deferred
income taxes comprised:
<TABLE>
<CAPTION>
April 30, 1996 October 31, 1995
(unaudited)
<S> <C> <C>
Deferred tax assets (liabilities):
Excess of tax over financial reporting
depreciation $ (79) $ (79)
Bad debt allowance 517 517
Advertising allowances 123 123
Inventory obsolescence reserve 4,066 4,066
Other 955 955
5,582 5,582
Valuation allowance (5,553) (5,553)
$ 29 $ 29
</TABLE>
<PAGE>
<PAGE> 15
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
8. SHORT-TERM BORROWINGS
These include borrowings in the form of trade acceptances, and
overdrafts with various banks.
<TABLE>
<CAPTION>
April 30, 1996 October 31, 1995
(unaudited)
<S> <C> <C>
Credit facilities available at end of period $ 7,648 $ 22,394
Utilized at end of period $ 3,369 $ 13,970
Weighted average interest rate on borrowings
at end of period 6.77% 8.74%
</TABLE>
Interest rates are generally based on the banks' prime rate.
9. LONG-TERM DEBT
<TABLE>
<CAPTION>
April 30, 1996 October 31 1995
(unaudited)
<S> <C> <C>
Long-term debt consists of:
Capital lease obligations, (interest at 13.35% to
13.80%) $ 273 $ 470
Current portion of long-term debt (267) (371)
Long-term debt, less current portion $ 6 $ 99
</TABLE>
<PAGE>
<PAGE> 16
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
10.STOCK OPTIONS
The Company's 1994 Stock Option Plan (the "Stock Option Plan")
provides 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.
Options under this plan are generally exercisable ratably over five
years from the date of grant unless otherwise provided.
In January 1996, due to the reduced market price of Radica Games
common stock, the company offered active employees holding
outstanding options the opportunity to exchange them for stock
options at an exercisable price equal to the fair market value at
that time. As a result of the offer, holders of 916,000 options at
an exercise price of $ 8.50 returned their options for cancellation
and 916,000 options at an exercise price of $ 1.375 were granted in
exchange. In the second quarter of 1996, 4,000 options and 1,000
options at an exercise price of $1.375 were canceled and vested
respectively.
At April 30, 1996, 1,002,000 options granted under the Stock Option
Plan, exercisable at prices of $1.375, 34,000 options, exercisable
at a price of $ 8.50, 15,000 options, exercisable at a price of
$3.66, 90,000 options, exercisable at a price of $11.00 and 75,200
options, exercisable at a price of $0.567 granted under an
employment agreement, are outstanding.
11. OFF-BALANCE-SHEET RISK AND 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 twenty five
percent and fifteen percent of net sales in the six months ended
April 30, 1996 and had three customers which accounted for more
than nineteen, thirteen and eleven percent of net sales in fiscal
1995. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no
collateral from its customers.
<PAGE>
<PAGE> 17
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
12. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of the
Statement of Financial Accounting Standards 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 investment, accounts
receivable, accounts payable and a note payable are reasonable
estimates of their fair value.
At April 30, 1996, the Company has letters of credit outstanding
totaling $457 which guarantee various trade activities. The
contract amount of the letters of credit is a reasonable estimate
of the fair value since the value for each is fixed over the life
of the commitment.
13. 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 not more than 5% 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 $47 and $83 for the six months ended
April 30, 1996 and fiscal 1995 respectively.
<PAGE>
<PAGE> 18
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
14. LITIGATION
Ten purported class actions filed in various United States District
Courts against the Company, various of its officers and directors,
and the managing underwriters of the Company's initial public
offering have been consolidated in the United States District Court
for the District of Nevada under the caption In re Radica Games
Limited Securities Litigation, Master File No. CV-S-94-00653-DAE
(LRL). Plaintiffs filed a consolidated complaint on November 4,
1994 that superseded all the complaints in the individual actions.
The named plaintiffs originally sought to represent a class
consisting of purchasers of the Company's common stock in the
initial public offering or in the open market from May 13 through
July 22, 1994, and sought unquantified monetary damages and other
relief against the defendants for alleged violations of Sections
11, 12(2), and 15 of the Securities Act of 1933, Sections 10b (and
Rule 10b-5 thereunder), 20(a), and 20A(a) of the Securities
Exchange Act of 1934, Sections 90.570, 90.660 and 90.660.4 of the
Nevada Revised Statutes, and the common law of Nevada relating to
the Company's registration statement and other public disclosures.
As a consequence of an Order of the Court granting in part
defendants' motion to dismiss the complaint and a stipulation of
the parties, all of plaintiffs' claims other than those arising
under the Securities Act of 1933, and limited to certain specified
statements in the Company's registration statement, have been
dismissed without prejudice. Pursuant to a stipulation of the
parties, the Court has provisionally agreed to treat these
remaining claims as class claims.
Fact discovery concluded on March 31, 1996 and the parties are in
the process of completing expert discovery. Plaintiffs have moved
for leave to amend their complaint to add allegations with respect
to an additional claimed omission in the registration statement.
The motion to amend, which is opposed by the Company, is presently
scheduled to be heard by the Court at a hearing in July 1996. The
Company also plans to move for summary judgment seeking dismissal
of the complaint. That summary judgment motion may also be heard
by the Court in July 1996. In the event the case is not dismissed,
it has tentatively been scheduled for trial in November 1996.
The Company believes the allegations in the complaint, which all
arise under the Securities Act of 1933, are without merit and the
Company intends to defend the action vigorously.
<PAGE>
<PAGE> 19
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
15.SEGMENT INFORMATION
The Company operates in one principal industry segment: the design,
development, manufacturing and distribution of a variety of non-
gambling casino-theme and non casino-theme games. Over 90% of the
Company's products are sold in the United States. Geographic
financial information is as follows:
<TABLE>
<CAPTION>
Six Months Ended April 30, Six Months Ended April 30,
1996 1995
(unaudited) (unaudited)
<S> <C> <C>
Net Sales:
United States $ 11,540 $ 24,206
PRC and Hong Kong 1,430 636
$ 12,970 $ 24,842
Operating Loss:
United States $ (1,130) $ (723)
PRC and Hong Kong (1,125) 453
$ (2,255) $ (270)
Identifiable assets:
United States $ 15,931 $ 28,591
PRC and Hong Kong 20,750 42,558
$ 36,681 $ 71,149
</TABLE>
A significant portion of PRC and Hong Kong net sales in the six
months ended April 30, 1996 were export sales to the United States.
<PAGE>
<PAGE> 20
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and with the audited
financial statements, accounting policies and notes included in the
Company's Annual Report to Shareholders for the fiscal year ended
October 31, 1995, and in the Company's Annual Report on Form 20-F for
such fiscal year as filed with the United States Securities and
Exchange Commission.
RESULTS OF OPERATIONS -- QUARTER ENDED APRIL 30, 1996
COMPARED TO THE QUARTER ENDED APRIL 30, 1995
Net sales for the quarter ended April 30, 1996 of $3.9 million
decreased 47% from the $7.4 million for the same quarter in 1995. Unit
sales increased 8.5% during the second quarter 1996 over the second
quarter 1995 from 1.1 million units in 1995 to 1.2 million units in
1996. New products included two new golf games, a pinball game and a
new version of Milton Bradley's Yahtzee (TM) game for sale as part of
the Monte Carlo line. Sales of non casino-theme games accounted for
25.9% of net sales and sales of casino-theme games accounted for 74.1%
of net sales. Of the casino-theme games, handheld games accounted for
63% of net sales, down from 83% in the second quarter of 1995. The
second quarter decrease in net sales is due to the sale of promotional
products at lower prices and lower margins to reduce inventory levels
combined with the soft retail market in the U.S.A. during this period.
Gross profit for the second quarter of 1996 was $0.2 million or
4.7% as compared to $3.1 million or 42.6% for the second quarter of
1995, a decrease of $2.9 million or 37.2%. The gross margin for the
second quarter of 1996 of 5.4% has dropped from 42.6% for the same
quarter in 1995. This decline is due primarily to sale of promotional
products to reduce inventories of casino-theme games.
<PAGE>
<PAGE> 21
RESULTS OF OPERATIONS -- QUARTER ENDED APRIL 30, 1996
COMPARED TO THE QUARTER ENDED APRIL 30, 1995 (Continued)
Operating loss for the second quarter of 1996 was $1.7 million,
down $0.2 million or a decrease of 10.5% from the operating loss of
$1.9 million in the same quarter in 1995. Operating expenses decreased
to $1.9 million from $5.1 million in the second quarter of fiscal 1995
and $3.5 million in the first quarter of fiscal 1996. These decreases
were primarily due to decreased commissions (as a result of lower
sales), a release from the bad debt provision and the benefits of the
Company's cost cutting program. Commissions decreased 46% to $255,000
from $475,000 in the second quarter of 1995; salaries and wages
decreased 47% to $0.9 million from $1.7 million; advertising and
promotion expenses decreased 73% to $180,000 from $655,000 and research
and development expenses decreased 30% to $420,000 from $597,000.
During the quarter, a property in Hong Kong was sold at a profit
of $0.7 million for $0.9 million.
Net loss for the second quarter of 1996 was $0.98 million, down
from net loss of $1.5 million in the second quarter of 1995, a decrease
of 35%. The net loss per common share in the second quarter of 1996
was $0.05 as compared to net loss per share of $0.06 for the second
quarter of 1995.
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents totaled $5 million at April 30, 1996,
down $2.8 million from year-end 1995. Working capital at April 30,
1996 was $14.9 million, a $1.0 million decrease from working capital of
$15.9 million at October 31, 1995. The ratio of current assets to
current liabilities increased to 2.84 at April 30, 1996 from 1.67 at
October 31, 1995. This increase in the current ratio is due to
repayment of short-term debt.
Inventories at April 30, 1996 totaled $14.1 million compared to
$16.4 million at October 31, 1995. This decrease is due mainly to
sales of the promotional inventory.
Short-term borrowings of $3.4 million at April 30, 1996 were down
from $13.9 million at October 31, 1995. This decrease is due primarily
to repayment of credit lines used for the purchase of raw materials for
the manufacturing operation.
The Company believes that its existing cash and cash equivalents
and cash generated from operations are sufficient to satisfy its
current anticipated working capital needs.
<PAGE>
<PAGE> 22
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
See Note 14 of Notes to Financial Statements, included herein.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders held on April 10,
1996, the shareholders of the Company elected the management nominees,
who were named in the Company's Proxy Statement dated March 12, 1996,
to serve as directors for the period until the next annual meeting of
shareholders or until his or her respective successor is elected or
appointed in accordance with applicable law and the Company's bye-laws.
However, subsequent to the date of such Proxy Statement, the
resignation of James J. Sutter and the death of Calvin A.H. Waller,
have been announced. The board of directors currently consists of
seven members: Robert E. Davids, Jon N. Bengtson, David C.W. Howell,
Lam Siu Wing, Mary Jane Hansen, Robert Townsend and James O'Toole. At
such meeting, the shareholders also reappointed Deloitte Touche
Tohmatsu as independent auditor and authorized the directors to fix the
independent auditor's remuneration.
The shareholder votes were as follows:
Abstain/
Against/ Broker
For Withhold Nonvotes
Election of Directors
Robert E. Davids 15,532,032 5,380,958
Jon N. Bengtson 15,533,032 5,379,958
David C.W. Howell 15,532,938 5,380,052
Lam Siu Wing 15,530,257 5,382,733
Mary Jane Hansen 15,533,032 5,379,958
Robert Townsend 15,533,032 5,379,958
James O'Toole 15,533,032 5,379,958
Reappoint Auditor
Deloitte Touche Tohmatsu 20,858,688 29,914 24,388
<PAGE>
<PAGE> 23
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
<PAGE> 24
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.
RADICA GAMES LIMITED
(Registrant)
Date: June 14, 1996 By: /s/ D. C.W. Howell
David C.W. Howell
Chief Financial Officer
<PAGE>
<PAGE> 1
RADICA GAMES LIMITED
RADICA GAMES LIMITED
REPORTS RESULTS FOR
THE SECOND QUARTER ENDED APRIL 30, 1996
FOR IMMEDIATE RELEASE CONTACT: JON N. BENGTSON
June 10, 1996 (RENO, NEVADA)
(702) 829 8643
DAVID C.W. HOWELL
(HONG KONG)
(852) 2693 2238
(Hong Kong) Radica Games Limited (NASDAQ RADAF) reported today net sales of
$3.9 million, a 47.3% decline from $7.4 million for the second quarter of
1995. Net loss for the second quarter was $1.0 million, down from net loss
of $1.5 million in the second quarter of 1995. The net loss per common
share in the second quarter was $0.05 compared to a net loss per share of
$0.06 for the second quarter of 1995.
The second quarter decline in net sales resulted primarily from sales of
promotional product at lower prices combined with the soft U.S. retail
market and from a decline in demand for casino-theme product offset by
sales of new product lines. Unit sales increased 8.5% to 1.2 million units
in the second quarter of 1996 from 1.1 million units in the second quarter
of 1995.
Gross profit for the second quarter of fiscal 1996 decreased 93.5% to $0.2
million from $3.1 million for the second quarter of fiscal 1995. The gross
margin for the second quarter was 5.5% compared to 42.6% for the same
quarter last year and 31.8% in the first quarter of fiscal 1996.
The decline in gross margin was due to the continued sales of promotional
product to reduce inventory levels. Sales of higher margin, non casino-
theme product are expected to impact the Company's results starting from
the third quarter of 1996.
Operating loss for the second quarter of 1996 was $1.7 million compared to
an operating loss of $1.9 million for the same quarter last year.
Operating expenses decreased to $1.9 million from $5.1 million in the
second quarter of fiscal 1995 and $3.5 million in the first quarter of
fiscal 1996. These decreases were primarily due to decreased commissions
(as a result of lower sales), a release of $378,000 from the bad debt
provision due to finalisation of Caldor's Chapter 11 settlement terms and
the benefits of the Company's cost cutting program. Commissions for the
second quarter of fiscal 1996 decreased 46% to $255,000 from $475,000 in
the second quarter of fiscal 1995; salaries and wages decreased 47% to $0.9
million from $1.7 million; advertising and promotion expenses decreased 73%
to $180,000 from $655,000 and research and development expenses decreased
30% to $420,000 from $597,000.
During the quarter, a property in Hong Kong was sold at a profit of $0.7
million for $0.9 million.
Comparison of Expenses
Q2 1995 to Q2 1996
($ millions)
(Set forth in bar chart)
Q2 1995 Q2 1996
Sales Commissions 0.5 0.3
Advertising Expenses 0.7 0.2
Salaries 1.7 0.9
Research & Development 0.6 0.4
"Our cost cutting efforts continue to provide benefits to the Company. As
the year progresses, the sale of higher margin, non casino-theme product
will increase as it becomes available for shipment while at the
<PAGE>
<PAGE> 2
same time our inventories of promotional casino-theme product will continue
to reduce," said Bob Davids, President and CEO.
Mr. Davids stated that in the third quarter the Company would be selling
eleven non casino-theme products at better margins than the promotional
product.
"We are very pleased with the positive response we have had from the market
with regard to all of our non casino-theme products. This line will be
expanded further in 1997 as the Company continues to innovate."
Mr. Davids announced the sad news of the sudden death of General Calvin
Waller, a director of the Company who died of a heart attack on May 10,
1996 age 58. "Cal will be greatly missed by all who worked with him and we
extend all of our sympathies to his family."
The Company also announced that Mr. James John Sutter, a shareholder, co-
founder of the Company and former Chairman of the Board, had resigned as a
director on 13th March 1996.
<PAGE>
<PAGE> 3
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEET
ASSETS
(US Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
(unaudited)
$ $
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 5,003 7,757
Short-term investments 76 3,228
Accounts receivable, net of allowances for doubtful accounts of $839 and
$1,572 in 1996 and 1995 and estimated customer returns of $647 and
$1,790 in 1996 and 1995 3,436 10,242
Inventories, net of provision of $10,187 in 1996 and $11,873 in 1995 14,139 16,472
Prepaid expenses and other current assets 278 531
Income taxes receivable 45 1,306
Total current assets 22,977 39,536
PROPERTY, PLANT AND EQUIPMENT, NET 13,675 14,468
DEFERRED INCOME TAXES 29 29
OTHER ASSETS - 21
Total Assets 36,681 54,054
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings 3,369 13,970
Current portion of long-term debt 267 371
Accounts payable 1,123 3,006
Accrued payroll and employee benefits 179 241
Accrued expenses 3,124 6,070
Total current liabilities 8,062 23,658
LONG-TERM DEBT 6 99
STOCKHOLDERS' EQUITY
Common stock
par value $0.01 each, 100,000,000 shares authorised, 20,680,000 shares
outstanding (22,780,000 at 31st October 1995) 207 228
Additional paid-in capital 28,371 28,328
Retained earnings 14 1,720
Cumulative translation adjustment 21 21
Total stockholders' equity 28,613 30,297
Total liabilities and stockholders' equity 36,681 54,054
</TABLE>
<PAGE>
<PAGE> 4
RADICA GAMES LIMITED
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(US Dollars in thousands,
except per share data) SIX MONTHS ENDED APRIL 30, THREE MONTHS ENDED APRIL 30,
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $
<S> <C> <C> <C> <C>
REVENUES:
Net sales 12,970 24,842 3,918 7,358
Cost of sales (9,911) (13,936) (3,735) (4,222)
Gross profit 3,059 10,906 183 3,136
OPERATING EXPENSES:
Selling, general and administrative expenses (4,511) (10,055) (1,436) (4,459)
Research and development (803) (1,121) (420) (597)
Total operating expenses (5,314) (11,176) (1,856) (5,056)
OPERATING LOSS (2,255) (270) (1,673) (1,920)
NET INTEREST EXPENSE (147) (275) (11) (70)
LOSS BEFORE INCOME TAXES
AND UNUSUAL ITEM (2,402) (545) (1,684) (1,990)
UNUSUAL ITEM 709 - 709 -
LOSS BEFORE INCOME TAXES (1,693) (545) (975) (1,990)
INCOME TAXES (CHARGE)/CREDIT (13) 322 (3) 512
NET LOSS (1,706) (223) (978) (1,478)
NET LOSS PER SHARE (0.08) (0.01) (0.05) (0.06)
AVERAGE NUMBER OF SHARES
OUTSTANDING 22,203,077 22,780,000 21,613,333 22,780,000
</TABLE>
