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 March, 1999
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. Press Release dated March 10, 1999
2. Press Release dated February 4, 1999
3. Press Release dated February 2, 1999
4. Press Release dated January 25, 1999
5. Press Release dated December 21, 1998
6. Press Releases dated December 15, 1998 (2 releases)
7. Press Release dated November 17, 1998
8. Press Release dated September 29, 1998
9. Press Release dated September 22, 1998
10. Press Release dated September 14, 1998
11. Annual Report to Stockholders
12. Management Information Circular/Proxy Statement dated March 15,
1999
13. Notice dated March 24, 1999 of Change of Location of Annual
Shareholders Meeting
<PAGE>
This Report on Form 6-K shall be deemed to be incorporated by reference
into the Registrant's Registration Statements on Form S-8 (No. 33-86960, No.
333-7000 and No. 333-59737) and on Form F-3 (No. 333-7526).
<PAGE>
PART II -- OTHER INFORMATION
----------------------------
Exhibits
- --------
The Registrant is filing the following exhibits which were completed
after the preparation of its report on Form 20-F for the year ended October 31,
1998.
10.1 Employment Agreement dated as of December 15, 1998 between Radica
Games Limited and David C.W. Howell
10.2 Employment Agreement dated as of December 15, 1998 between Radica
Games Limited and Lam Siu Wing
<PAGE>
Pursuant to the requirements of 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
Date: March 29, 1999 /S/ David C.W. Howell
---------------------
David C.W. Howell
President Asia Operations
Chief Financial Officer
RADICA GAMES LIMITED
ANNOUNCES CHANGE OF NASDAQ TICKER SYMBOL
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
MARCH 10, 1999 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADAF) announced today it will change
its Nasdaq ticker symbol from RADAF to RADA. The change will take place before
the market opens on FRIDAY, MARCH 12, 1999.
WE ARE PLEASED TO BE ABLE TO ACCOMMODATE OUR SHAREHOLDERS WITH THIS SIMPLIFIED
TICKER SYMBOL, said David Howell, CFO of Radica Games Limited.
THE FOREGOING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROJECTED RESULTS. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT EFFORTS TO ATTRACT OR PROSPECTS FOR ADDITIONAL OR
INCREASED BUSINESS, NEW PRODUCT INTRODUCTIONS AND OTHER STATEMENTS OF A
NON-HISTORICAL NATURE. ACTUAL RESULTS MAY DIFFER FROM PROJECTED RESULTS DUE
TO VARIOUS RISK FACTORS, INCLUDING RISKS OF MANUFACTURING IN CHINA,
DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS, AND DEPENDENCE
ON MAJOR CUSTOMERS, AS SET FORTH IN THE COMPANY ANNUAL REPORT ON FORM 20-F
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. SEE TEM 1. DESCRIPTION OF BUSINESS RISK FACTORS IN
SUCH REPORT ON FORM 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and table top games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at WWW.RADICAGAMES.COM AND ABOUT GIRL
TECH AT WWW.GIRLTECH.COM
RADICA(R) GAMES LIMITED
REPORTS TWO MONTHS RESULTS
FOR THE STUB PERIOD ENDED DECEMBER 31, 1998
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
FEBRUARY 4TH, 1999 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE VP & CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADAF) reported today 2 month results
for the stub period ended December 31, 1998. The stub period is being reported
as a result of Radica's decision to change its fiscal year end from October 31
to December 31 in accordance with industry practices. Fully diluted earnings per
share were 29 cents for the two month stub period ended December 31, 1998
compared to 27 cents for the same period in 1997.
Total revenues for the two months ended December 31, 1998 were $21.1 million,
increasing 22% from $17.3 million for the same period in 1997.
For comparative purposes the Company has provided restated numbers for the
twelve month and three month periods ended December 31, 1998. For the three
months ended December 31, 1998, fully diluted earnings per share were $0.85 and
revenues were $47.4 million. This equated to 30.8% earnings per share growth and
31.1% revenue growth. For the twelve months ended December 31, 1998 total
revenues were $159.4 million increasing 65.5% from $96.3 million for the same
period in the prior year and earnings per share were $2.41 per fully diluted
share versus $1.55 per fully diluted share in calendar 1997.
"AS WE ENTER OUR NEW FISCAL YEAR WE ARE EXTREMELY EXCITED ABOUT THE PROSPECTS
FOR OUR RANGE OF 1999 PRODUCTS. WE FEEL THAT THIS IS OUR STRONGEST OFFERING YET.
ALREADY BOTH THE GIRL TECH(TM) LINES AND THE NEW TRAVEL GAMES ARE PROVING THEIR
WORTH AT THE STORES AND WE HAVE MANY NEW PRODUCTS TO COME INCLUDING
BUCKMASTERS(R) DEER HUNTIN'(TM) WHICH COMMENCED SHIPPING IN JANUARY," said Bob
Davids, Chief Executive Officer.
THE FOREGOING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROJECTED RESULTS. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT EFFORTS TO ATTRACT OR PROSPECTS FOR ADDITIONAL OR
INCREASED BUSINESS, NEW PRODUCT INTRODUCTIONS AND OTHER STATEMENTS OF A
NON-HISTORICAL NATURE. ACTUAL RESULTS MAY DIFFER FROM PROJECTED RESULTS DUE
TO VARIOUS RISK FACTORS, INCLUDING RISKS OF MANUFACTURING IN CHINA,
DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS, AND DEPENDENCE
ON MAJOR CUSTOMERS, AS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM
20-F FOR THE FISCAL YEAR ENDED OCTOBER
<PAGE>
31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SEE "ITEM
1. DESCRIPTION OF BUSINESS -- RISK FACTORS" IN SUCH REPORT ON FORM 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ - RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and table top games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at "WWW.RADICAGAMES.COM" and about
Girl Tech at "WWW.GIRLTECH.COM".
-- END --
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
(US DOLLARS IN THOUSANDS, TWO MONTHS ENDED THREE MONTHS ENDED TWELVE MONTHS ENDED
EXCEPT PER SHARE DATA) DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Net sales $ 21,071 $ 17,320 $ 47,373 $ $36,126 $ 159,369 $ 96,283
Cost of sales (10,717) (7,855) (23,483) (14,596) (73,438) (43,877)
------------ ------------ ------------ ------------ ------------ ------------
Gross profit 10,354 9,465 23,890 21,530 85,931 52,406
------------ ------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling, general and
administrative expenses (3,657) (3,013) (6,949) (6,130) (28,432) (15,607)
Research and development (730) (320) (1,165) (774) (4,120) (2,120)
Acquired research and development - - - - (1,500) -
Depreciation and amortization (612) (287) (955) (430) (3,748) (2,307)
------------ ------------ ------------ ------------ ------------ ------------
Total operating expenses (4,999) (3,620) (9,069) (7,334) (37,800) (20,034)
------------ ------------ ------------ ------------ ------------ ------------
OPERATING INCOME 5,355 5,845 14,821 14,196 48,131 32,372
OTHER INCOME 471 163 672 124 1,115 1,041
SHARE OF LOSS OF
AFFILIATED COMPANY (120) (33) (158) (55) (421) (174)
NET INTEREST INCOME 289 220 421 407 1,965 1,066
------------ ------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 5,995 6,195 15,756 14,672 50,790 34,305
(PROVISION)/CREDIT FOR INCOME TAXES (176) (74) 1,290 (169) 164 (255)
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME $ 5,819 $ 6,121 $ 17,046 $ 14,503 $50,954 $ 34,050
============ ============ ============ ============ ============ ============
EARNINGS PER SHARE-BASIC:
Net earnings per share $ 0.31 $ 0.29 $ 0.90 $ 0.69 $2.56 $ 1.64
============ ============ ============ ============ ============ ============
Average number of shares outstanding 18,883,455 20,892,061 18,931,205 20,880,173 19,904,105 20,796,461
============ ============ ============ ============ ============ ============
EARNINGS PER SHARE-ASSUMING
DILUTION:
Net earnings per share and dilutive
potential $ 0.29 $0.27 $ 0.85 $0.65 $ 2.41 $ 1.55
common stock
Average number of shares and dilutive
potential common stock outstanding 20,094,489 22,353,638 20,085,120 22,336,621 21,116,296 21,900,202
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
(US DOLLARS IN THOUSANDS, EXCEPT DECEMBER 31, OCTOBER 31,
SHARE DATA) ------------ -----------
1998 1998
------------ -----------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 47,527 $ 33,141
Accounts receivable, net of 14,860 33,249
allowances for doubtful accounts
of $446 ($466 at Oct. 31, 1998)
and estimated customer returns of
$1,077 ($1,375 at Oct. 31, 1998)
Inventories, net of provision of 20,294 21,534
$2,437 ($2,414 at Oct. 31, 1998)
Prepaid expenses and other current 1,796 1,126
assets
Deferred income taxes 3,754 4,545
------------ -----------
Total current assets 88,231 93,595
------------ -----------
INVESTMENT IN AFFILIATED COMPANY 703 823
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 16,500 16,093
------------ -----------
INTANGIBLE ASSETS, NET 2,750 3,000
------------ -----------
DEFERRED INCOME TAXES, NONCURRENT 6 10
------------ ------------
TOTAL ASSETS $ 108,190 $ 113,521
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 9,411 14,164
Accrued payroll and employee benefits 2,688 3,510
Accrued expenses 8,204 13,943
Income taxes payable 2,152 2,065
------------ -----------
TOTAL CURRENT LIABILITIES 22,455 33,682
------------ -----------
SHAREHOLDERS' EQUITY:
Common stock par value $0.01 each, 189 189
100,000,000 shares authorized,
18,896,694 shares outstanding
(18,864,294 at Oct. 31, 1998)
Additional paid-in capital 9,382 9,298
Retained earnings 76,215 70,396
Cumulative translation adjustment (51) (44)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 85,735 79,839
------------ -----------
TOTAL LIABILITIES AND $ 108,190 $ 113,521
SHAREHOLDERS' EQUITY ============ ===========
RADICA GAMES LIMITED AND NASCAR
ANNOUNCE EXTENSION OF LICENSE AGREEMENT
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
FEBRUARY 2, 1999 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C. W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
JOHN GRIFFIN
NASCAR
(904) 947 6834
(HONG KONG) Radica Games Limited (NASDAQ RADAF) announced today that The
National Association for Stock Car Auto Racing ("NASCAR") has extended the term
of its licensing agreement with Radica USA Limited to cover products marketed
through the year 2002.
"THE NASCAR LICENSE HAS BEEN A TREMENDOUS ADDITION TO THE RADICA LINE. WE LOOK
FORWARD TO THE OPPORTUNITY TO CONTINUE TO DEVELOP INNOVATIVE, NEW PRODUCTS THAT
APPEAL TO NASCAR FANS OF ALL AGES," said Gene Murtha, President, Radica USA.
"JUST AS NASCAR FANS COME FROM ALL AGES AND BACKGROUNDS, WE PURSUE OPPORTUNITIES
THAT BRING EACH OF THEM CLOSER TO THE SPORT," SAID GEORGE PYNE, NASCAR VICE
PRESIDENT OF LICENSING AND CONSUMER PRODUCTS. "RADICA PRODUCTS WILL PROVIDE FANS
WITH A FUN, CONVENIENT WAY TO EXPERIENCE THE THRILL OF NASCAR COMPETITION
WHEREVER THEY HAPPEN TO BE."
THE FOREGOING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROJECTED RESULTS. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT EFFORTS TO ATTRACT OR PROSPECTS FOR ADDITIONAL OR
INCREASED BUSINESS, NEW PRODUCT INTRODUCTIONS AND OTHER STATEMENTS OF A
NON-HISTORICAL NATURE. ACTUAL RESULTS MAY DIFFER FROM PROJECTED RESULTS DUE
TO VARIOUS RISK FACTORS, INCLUDING RISKS OF MANUFACTURING IN CHINA,
DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS, AND DEPENDENCE
ON MAJOR CUSTOMERS, AS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM
20-F FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. SEE "ITEM 1. DESCRIPTION OF BUSINESS --
RISK FACTORS" IN SUCH REPORT ON FORM 20-F.
Radica is a leading developer, manufacturer and distributor of handheld and
table top games with subsidiaries in the U.S.A., Canada and the United Kingdom.
Radica USA Limited, headquartered in Dallas, Texas, is a subsidiary of Radica
Games Limited (RADICA), a Bermuda company headquartered in Hong Kong (NASDAQ -
RADAF).
-- END --
RADICA GAMES LIMITED
ANNOUNCES LICENSE AGREEMENT FOR OTHELLO(R)
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JANUARY 25, 1999 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica (NASDAQ RADAF) has entered into an exclusive licensing
agreement with Anjar Co. for the rights to market new Othello(R) electronic
handheld games in North and South America. The Company said it plans to
introduce Othello(R) products in the Spring of 2000.
Bob Davids, Radica's CEO said, "THE OTHELLO LICENSE IS PART OF OUR STRATEGY TO
BROADEN OUR PRODUCT LINE AND ACQUIRE LONG TERM BRAND FRANCHISES."
A strategy game for one or two players, Othello(R) was first introduced as a
board game in 1975 and has become a classic strategy game that takes "A minute
to learn...a lifetime to master(R)." Over 30 million units have been sold
worldwide since its introduction.
Othello(R) games will allow you to play against the computer, yourself or
another human opponent. Contests and tournaments are held on regional, national
and even worldwide levels. The object of the game is to gain control of the
board through placement of black or white playing pieces. Through the use of
various strategies, the person with the most pieces on the board at the end of a
game wins.
THE FOREGOING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROJECTED RESULTS. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT EFFORTS TO ATTRACT OR PROSPECTS FOR ADDITIONAL OR
INCREASED BUSINESS, NEW PRODUCT INTRODUCTIONS AND OTHER STATEMENTS OF A
NON-HISTORICAL NATURE. ACTUAL RESULTS MAY DIFFER FROM PROJECTED RESULTS DUE
TO VARIOUS RISK FACTORS, INCLUDING RISKS OF MANUFACTURING IN CHINA,
DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS, AND DEPENDENCE
ON MAJOR CUSTOMERS, AS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM
20-F FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. SEE "ITEM 1. DESCRIPTION OF BUSINESS --
RISK FACTORS" IN SUCH REPORT ON FORM 20-F.
Othello(R) is a registered trademark of Anjar Co.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at WWW.RADICAGAMES.COM.
-- END --
RADICA GAMES LIMITED
ANNOUNCES AGREEMENT WITH GERARD KLAUER MATTISON
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
DECEMBER 21ST, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today that it has
signed a financial consulting agreement with Gerard Klauer Mattison & Co. (GKM),
to provide advisory services to the Company. Pursuant to the agreement, GKM will
advise and assist Radica in identifying and evaluating financial and business
opportunities that will enhance shareholder value.
Bob Davids, Radica's CEO, said, "THE GKM AGREEMENT IS ANOTHER STEP IN EXECUTING
OUR STRATEGY TO BUILD SHAREHOLDER VALUE AND DIVERSIFY AND GROW RADICA'S
BUSINESS. THE EXPERTISE GKM HAS DEMONSTRATED IN THE TOY AND GAME INDUSTRY WILL
BE INVALUABLE TOWARDS ACHIEVING OUR OBJECTIVES."
THE FOREGOING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROJECTED RESULTS. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT EFFORTS TO ATTRACT OR PROSPECTS FOR ADDITIONAL OR
INCREASED BUSINESS, NEW PRODUCT INTRODUCTIONS AND OTHER STATEMENTS OF A
NON-HISTORICAL NATURE. ACTUAL RESULTS MAY DIFFER FROM PROJECTED RESULTS DUE
TO VARIOUS RISK FACTORS, INCLUDING RISKS OF MANUFACTURING IN CHINA,
DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS, AND DEPENDENCE
ON MAJOR CUSTOMERS, AS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM
20-F FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. SEE "ITEM 1. DESCRIPTION OF BUSINESS --
RISK FACTORS" IN SUCH REPORT ON FORM 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at WWW.RADICAGAMES.COM.
-- END --
RADICA GAMES LIMITED
ANNOUNCES NEW DIRECTOR
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
DECEMBER 15, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today the appointment
of Mr. Henry Hai-Lin Hu as a member of the Board of Directors. Mr. Hu is the
founder and Executive Director of Business Plus Consultants Limited, a Hong Kong
based toy industry consulting company and has nearly 20 years of experience in
the industry. Prior to starting Business Plus Consultants Ltd Mr. Hu was
Chairman and CEO of Zindart Ltd. (NASDAQ ZNDTY). He was also a co-founder and
Executive Director of Wah Shing Toys Consolidated Co. Ltd., one of the largest
publicly listed Hong Kong toy manufacturers.
Mr. Hu was born in Shanghai, PRC in 1945 and is a Corporate Member of The
Institute of Production and Industrial Engineers and The Institute of Electrical
Engineers. He has been a Registered Engineer since 1989 and a Chartered Engineer
since 1970. Mr. Hu has a B.Sc (Eng.) from Hong Kong University.
"MR. HU BRINGS TO RADICA TREMENDOUS EXPERIENCE IN BOTH MANUFACTURING AND THE TOY
INDUSTRY. HIS ASIAN KNOWLEDGE WILL BRING A NEW DIMENSION TO OUR BOARD AND THE
APPOINTMENT WILL ALLOW US TO TAP INTO HENRY'S MANY DIFFERENT FIELDS OF EXPERTISE
AND CONTACTS," said Bob Davids, CEO of Radica Games Limited.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at www.radicagames.com.
-- END --
RADICA GAMES LIMITED
REPORTS RECORD FOURTH QUARTER AND
FISCAL YEAR RESULTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
DECEMBER 15, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE VP & CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADAF) reported today an after tax
profit of $51.3 million or $2.53 per share for the year ended October 31, 1998
versus $29.6 million or $1.43 per share in the prior year, a 73.3% increase in
profits. Pre tax income for the fourth quarter ended October 31, 1998 was $21.3
million versus $17.7 million for the fourth quarter ended October 31, 1997,
representing a 20.3% increase for the quarter. Net income after tax for the
quarter was $22.0 million or $1.13 earnings per share versus $17.6 million or
$0.84 for the fourth quarter ended October 31, 1997.
Total revenues for fiscal year 1998 were $155.6 million, increasing 77.2% from
$87.8 million for the same period last year. Quarterly revenues for the fourth
quarter ended October 31, 1998 were $62.6 million, increasing 54.9% from $40.4
million for the same quarter last year.
The increases in net sales for both the fiscal year and the fourth quarter were
the result of continued strong sales of 1997 product together with the impact of
1998 products such as NASCAR Racer, Trail Burner, Stealth Assault, Pro World
Class Golf, Monte Carlo Enduro Racer, Monte Carlo NASCAR Racer, Lunker Bass and
Junior Bass Fishin'. In addition, Original Design Manufacturing ("ODM") sales
grew by 96.9% from $16.3 million in fiscal year 1997 to $32.1 million in fiscal
year 1998 and from $6.6 million in the fourth quarter of fiscal 1997 to $18.1
million in the fourth quarter of fiscal 1998. New product shipped for the Hasbro
Group during the year included Trivial Pursuit, Monopoly, Candyland and Mr.
Potato Head.
The gross profit for fiscal year 1998 increased by $38.1 million to $85.0
million from $46.9 million in fiscal year 1997 and the gross margin for the year
increased to 54.6% from 53.4% in 1997. The gross profit for the fourth quarter
increased by $8.6 million to $32.9 million from $24.3 million in the fourth
quarter of fiscal 1997 but the gross margin decreased to 52.6% from 60.2% for
the same quarter last year.
The decrease in gross margin for the quarter was due to higher ODM sales, as ODM
increased as a percentage of sales from 16.3% to 29.1%, relative to sales of
current and new product together with the effect of licenses paid for use in
NASCAR Racer. In addition the Company booked $1 million of provisions in the
fourth quarter to mark down certain slow moving inventory items whereas in the
fourth quarter of 1997, 3.7% of the gross margin was due to sales of product
previously written off.
Operating income for fiscal 1998 increased by $20.5 million to $48.6 million
compared to $28.1 million for the same period last year. Operating expenses
increased 93.6% to $36.4 million in fiscal year 1998 from $18.8 million in
fiscal 1997, due to increased sales related costs, research and development , an
increase of $3 million as a result of amortization of intangible assets and
write off of acquired research and development with regards Girl Tech, and
increased salaries due to certain management additions. As a percentage of
sales, operating
<PAGE>
expenses increased from 21.4% in fiscal year 1997 to 23.4% in fiscal year 1998.
The operating margin dropped to 31.2% during the year compared to 32.0% during
the same period last year.
The tax credit for the year was comprised of an expense of $4.0 million
representing 7.8% of pre-tax income, offset by a one time deferred tax credit of
$4.6 million. This compared to a charge of $0.2 million in 1997, or 0.6% of
pre-tax income. Without the tax credit, fully diluted earnings per share for the
year would have been $2.19 per share. The increase in tax expense for the year
was as a result of the brought forward losses in the U.S. subsidiary being used
up resulting in the U.S. profits of the distribution operation becoming fully
taxable. In fiscal 1999 the U.S. subsidiary will be fully taxed for the whole
year and starting from January 1, 1999 the Company's China joint venture will
also start to pay taxes at a rate of 12% on the profit of the joint venture. The
Company expects a tax rate for fiscal 1999 of approximately 10% of pre-tax
income, however changes in tax regulations or in the mix of geographic sales
could cause this to change.
A total of 1,205,900 shares were repurchased during the quarter at an average
price of $13.07 and 2,610,400 shares for the fiscal year at an average price of
$14.36.
The Company announced that the board of directors had approved a change in
fiscal year-end to December 31. This will allow the Company to match financial
reporting of other companies in the same industry and improve investor
understanding of the information. As a result a two month period ending December
31, 1998 will be reported and the Company will then report on calendar quarters
with its next year-end on December 31, 1999.
"I AM EXTREMELY PROUD OF OUR TEAM'S ACHIEVEMENTS IN FISCAL 1998," SAID BOB
DAVIDS, CEO. "WE HAVE NOT ONLY GROWN SUBSTANTIALLY IN OVERALL SALES AND PROFITS
BREAKING ALL PREVIOUS RECORDS, BUT HAVE DIVERSIFIED OUR PRODUCT LINE VERY
SUCCESSFULLY."
"I LOOK FORWARD TO A VERY EXCITING FISCAL 1999 WHICH WILL INCLUDE BOTH OUR NEW
GIRL TECH LINE AND A NEW HUNTING CATEGORY WHICH HAS HAD AN EXCELLENT RECEPTION
FROM BUYERS," ADDED DAVIDS.
THE FOREGOING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROJECTED RESULTS. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT EFFORTS TO ATTRACT OR PROSPECTS FOR ADDITIONAL OR
INCREASED BUSINESS, NEW PRODUCT INTRODUCTIONS AND OTHER STATEMENTS OF A
NON-HISTORICAL NATURE. ACTUAL RESULTS MAY DIFFER FROM PROJECTED RESULTS DUE
TO VARIOUS RISK FACTORS, INCLUDING RISKS OF MANUFACTURING IN CHINA,
DEPENDENCE ON PRODUCT APPEAL AND NEW PRODUCT INTRODUCTIONS, AND DEPENDENCE
ON MAJOR CUSTOMERS, AS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM
20-F FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. SEE "ITEM 1. DESCRIPTION OF BUSINESS --
RISK FACTORS" IN SUCH REPORT ON FORM 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ - RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and table top games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at "www.radicagames.com" and about
Girl Tech at "WWW.GIRLTECH.COM".
-- END --
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(US Dollars in thousands, TWELVE MONTHS ENDED THREE MONTHS ENDED
except per share data) OCTOBER 31, OCTOBER 31,
1998 1997* 1998 1997*
---------------- ----------------- ---------------- ----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 155,618 $ 87,760 $ 62,566 $ 40,385
Cost of sales (70,576) (40,888) (29,663) (16,082)
---------------- ----------------- ---------------- ----------------
Gross profit 85,042 46,872 32,903 24,303
---------------- ----------------- ---------------- ----------------
OPERATING EXPENSES:
Selling general and
administrative expenses (27,788) (14,403) (9,840) (6,068)
Research and development (3,710) (2,099) (1,291) (807)
Acquired research &
development (1,500) - - -
Depreciation and
amortization (3,423) (2,278) (1,011) (435)
---------------- ----------------- ---------------- ----------------
Total operating expenses (36,421) (18,780) (12,142) (7,310)
---------------- ----------------- ---------------- ----------------
OPERATING INCOME 48,621 28,092 20,761 16,993
OTHER INCOME 807 915 291 413
SHARE OF LOSS OF
AFFILIATED COMPANY (334) (141) (166) (80)
NET INTEREST INCOME 1,896 913 369 382
---------------- ----------------- ---------------- ----------------
INCOME BEFORE INCOME
TAXES 50,990 29,779 21,255 17,708
CREDIT (PROVISION) FOR
INCOME TAXES 266 (193) 762 (108)
---------------- ----------------- ---------------- ----------------
NET INCOME $ 51,256 $ 29,586 $ 22,017 $ 17,600
================ ================= ================ ================
EARNINGS PER SHARE -
BASIC:
Net earnings per share $ 2.53 $ 1.43 $ 1.13 $ 0.84
================ ================= ================ ================
Average number of shares
outstanding 20,239,790 20,761,020 19,412,592 20,845,309
================ ================= ================ ================
EARNINGS PER SHARE -
ASSUMING DILUTION:
Net earnings per share
and dilutive potential
common stock $ 2.39 $ 1.37 $ 1.07 $ 0.79
================ ================= ================ ================
Average number of shares
and dilutive potential 21,488,364 21,635,926 20,523,333 22,292,546
common stock outstanding ================ ================= ================ ================
</TABLE>
*Restated to conform with 1998 presentation
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
(US Dollars in thousands, except share ------------------------------------
data) 1998 1997
----------------- -----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 33,141 $ 33,504
Short-term investments - 2,050
Accounts receivable, net of allowances for
doubtful accounts of $466 in 1998 and
$908 in 1997 and estimated customer
returns of $1,375 in 1998 and $2,327 in
1997 33,249 18,740
Inventories, net of provision of $2,414 in
1998 and $3,479 in 1997 21,534 11,741
Prepaid expenses and other current assets 1,126 681
----------------- -----------------
TOTAL CURRENT ASSETS 89,050 66,716
----------------- -----------------
INVESTMENT IN AFFILIATED COMPANY 823 194
----------------- -----------------
PROPERTY, PLANT AND EQUIPMENT, NET 16,093 12,539
----------------- -----------------
INTANGIBLE ASSETS, NET 3,000 -
----------------- -----------------
DEFERRED INCOME TAXES 4,555 -
----------------- -----------------
TOTAL ASSETS $ 113,521 $ 79,449
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 14,164 10,370
Accrued payroll and employee benefits 3,510 1,249
Accrued expenses 13,943 5,945
Income taxes payable 2,065 213
Deferred income taxes - 79
----------------- -----------------
TOTAL CURRENT LIABILITIES 33,682 17,856
----------------- -----------------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares
authorized, 18,864,294 shares
outstanding (20,860,200 at Oct. 31,
1997) 189 209
Additional paid-in capital 9,298 28,589
Retained earnings 70,396 32,800
Cumulative translation adjustment (44) (5)
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 79,839 61,593
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' $ 113,521 $ 79,449
EQUITY ================= =================
</TABLE>
RADICA GAMES LIMITED
ANNOUNCES NEW PRESIDENT OF AMERICAS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
NOVEMBER 17, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today the appointment
of Mr. Gene Murtha as President of its U.S. subsidiary Radica USA and of "the
Americas." Mr. Murtha will be based in Dallas, Texas and will report to Pat
Feely, President & COO of Radica Games Limited.
A 20-year veteran of the Toy and Game Industry, Mr. Murtha recently served as
Mattel's Vice President of Marketing with worldwide responsibilities for the
Matchbox line of products. He led a resurgence of Matchbox that has
reestablished it as one of the premiere toy brands in the world. He has
previously held senior marketing and R&D jobs with game companies such as Milton
Bradley and Coleco, where he had responsibility for such classic brands as
Scrabble, Trivial Pursuit and Parcheesi.
"GENE BRINGS WITH HIM A WEALTH OF PRODUCT AND MANAGEMENT EXPERIENCE FROM THE TOY
AND GAME INDUSTRY. HE WILL STRENGTHEN OUR MANAGEMENT TEAM AND ALLOW PAT FEELY,
RADICA'S COO, TO CONCENTRATE ON MORE STRATEGIC ISSUES FOR THE COMPANY," SAID BOB
DAVIDS, CEO OF RADICA GAMES LIMITED. "WE WELCOME GENE AND WISH HIM A LONG AND
FRUITFUL RADICA CAREER."
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at WWW.RADICAGAMES.COM.
-- END --
RADICA GAMES LIMITED ANNOUNCES
BUCKMASTERS(R) LICENsE
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
SEPTEMBER 29, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica (NASDAQ RADAF) has entered into an exclusive licensing
agreement with Buckmasters(R) to use the Buckmasters(R) name in the marketing of
Radica's new deer hunting game --Buckmasters(R) Deer Huntin'(TM).
Buckmasters(R) Deer Huntin'(TM), is a unique hand-held, computerized game which
incorporates all of the elements of an actual deer hunt. The unique shape of the
unit conforms to your hands while giving you a clear view of the hunt. The
impressive sound effects add even more realism to the virtual-hunting adventure.
Buckmasters(R) Deer Huntin'(TM) follows in the footsteps of Radica's hot-selling
fishing games -- Bass Fishin'(TM), Lunker Bass(TM), Deep Sea Fishin'(TM) and
Junior Bass Fishin'(TM). Buckmasters(R) Deer Huntin'(TM) will be available to
consumers in the Spring of 1999.
The largest deer hunting association in America with over 300,000 members,
Buckmasters(R) is well known for its support of ethical deer hunting,
responsible game management and hunter education. The association was founded in
1986 by Jackie Bushman in Montgomery, Alabama.
The Buckmasters(R) Whitetail Magazine(TM) television show with Jackie Bushman is
the first television show of its kind, and has been on the air for over 11
years. The show is filmed all over the U.S. and Canada and is the highest rated
hunting show nationwide with over one million viewers weekly. The show airs from
July through December each year on The Nashville Network (TNN).
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at www.radicagames.com.
--END--
RADICA GAMES LIMITED
ANNOUNCES NEW SHARE REPURCHASE PLAN
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
SEPTEMBER 22, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today that the Board
of Directors of the Company has approved a new share repurchase plan to purchase
up to one million shares of the Company's common stock. The amount and timing of
purchases will be dependent upon market conditions.
Between July 8, 1998 and September 2, 1998, the Company repurchased one million
shares at an average price of $15.78 completing the second million share
repurchase plan previously announced on July 8, 1998.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at WWW.RADICAGAMES.COM.
-- END --
RADICA GAMES LIMITED
ANNOUNCES
AUSTRALIAN INFRINGEMENT SETTLEMENT
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
SEPTEMBER 14, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
RADICA TAKES ACTION OVER COUNTERFEIT ELECTRONIC FISHING GAMES
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today that it had
successfully obtained a final settlement from a large Australian toy and games
retailer in the form of cash, receipt of all stocks of infringing product and
written undertakings from the retailer confirming Radica exclusive rights in
Bass Fishin and agreeing not to sell any further copies of counterfeit Bass
Fishin games.
Bass Fishin is the popular virtual fishing game sold by Radica around the world.
In the recent year-end list of top selling toys published by the NPD Group in
the U.S.A., Bass Fishin was ranked as the 16th best selling toy in the toy
industry in 1997. Radica has also recently taken action against retailers
selling counterfeit versions of Radica well known Lake Trout Fishin games.
We are determined to protect our intellectual property and will continue to
pursue those who infringe upon our rights, said Robert Davids, Radica CEO.
RADICA GAMES LIMITED RADICA IS A BERMUDA COMPANY HEADQUARTERED IN HONG KONG
(NASDAQ RADAF). RADICA IS A LEADING DEVELOPER, MANUFACTURER AND DISTRIBUTOR OF
ELECTRONIC HANDHELD AND TABLETOP GAMES. RADICA HAS SUBSIDIARIES IN THE U.S.A.,
CANADA AND THE U.K., AND A FACTORY IN DONGGUAN, SOUTHERN CHINA. MORE INFORMATION
ABOUT RADICA CAN BE FOUND ON THE INTERNET AT HYPERLINK
"HTTP://WWW.RADICAGAMES.COM" WWW.RADICAGAMES.COM
RADICA GAMES LIMITED
1998 ANNUAL REPORT
(for fiscal year ended October 31, 1998)
<PAGE>
ABOUT RADICA:(R)
Radica Games Limited (NASDAQ - RADAF) is a Bermuda company headquartered in Hong
Kong. The Company is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the USA,
Canada and the UK, and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at "www.radicagames.com".
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
OPERATING RESULTS 1998 1997 1996
(US dollars in thousands, except per share data)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $155,618 $87,760 $47,535
Net income $ 51,256 $29,586 $ 1,494
Earnings per share - assuming dilution $ 2.39 $ 1.37 $ 0.07
Average number of shares and dilutive 21,488 21,636 21,439
potential common share outstanding
FINANCIAL POSITION AT OCTOBER 31, 1998 1997 1996
(US dollars in thousands)
- -------------------------------------------------------------------------------------
Working capital $ 59,913 $48,860 $18,847
Total assets $113,521 $79,449 $42,725
Total liabilities $ 33,682 $17,856 $10,912
Shareholders' equity $ 79,839 $61,593 $31,813
</TABLE>
1
<PAGE>
TO OUR SHAREHOLDERS
- -------------------
We are pleased to report record results for the second year in a row. Most
importantly, we have enhanced the asset base of our business. This base includes
our most important asset, our people, and their creativity along with a strong
balance sheet, world-class manufacturing, a strong line of products,
strengthened brands and new technologies. These accomplishments have positioned
us for an exciting future.
Radica grew by 77% in 1998 to $155.6 million in sales, which generated 77% EPS
growth to $2.53 per share. This growth resulted from efforts to diversify our
product line while maintaining the strength of continuing business segments.
Radica has revolutionized the handheld game business by recreating it as a
virtual reality medium. In the racing category our NASCAR(R) Racer game proved
to be one of the top products in the industry by giving players the feeling that
they were really behind the wheel of a NASCAR vehicle. Stealth Assault(TM)
created the first air combat game with Virtual Motion Sensor(TM) (VMS) that
allows you to feel like you are actually flying. Trail Burner(TM) created the
real feel of extreme mountain biking. This product strategy is best summed up by
our new advertising slogan, "Get Real, Get Radica(TM).
As a result of this strategy we were able to build our market share of handheld
games to 28% for 1998, up from 18% in 1997. This achievement carries with it the
challenge of maintaining leadership in product innovation. We are meeting that
challenge by adding talent to our management and product development teams. In
1998 we added significantly to our marketing expertise including the addition of
Gene Murtha to our staff as President, Americas. Gene brings to Radica over 20
years of marketing and product development experience in toys and games.
We have also formed a new product development team that is located in the San
Francisco Bay Area. Included in the same office is the organization we acquired
as part of the Girl Tech acquisition and their Internet site group. Together
these groups provide a new gateway into the technology community on the West
Coast. To further support our growth we have increased our engineering staff in
both Hong Kong and China.
Girl Tech represents the first effort by Radica to diversify its business
outside of our traditional handheld game category. The Girl Tech mission is to
empower and enhance girls' lives through technology. Our 1999 product line
embodies this promise through the use of voice recognition technology addressing
girls' privacy issues. Our new Password Journal(TM), Door Pass(TM) and Bug
'Em(TM) will be our leading Girl Tech product introductions this year. However,
we have just brushed the surface of what is possible here. These possibilities
include exploring ways of capitalizing more directly upon the growth of the
Internet and our award-winning web site (www.girltech.com).
We are determined to diversify our business, but we want to do it based upon a
well- constructed strategy that builds upon our strengths. With that in mind we
have retained Gerard Klauer Mattison ("GKM") to advise us on strategic
acquisitions and other opportunities designed to build shareholder value. GKM is
highly experienced in our industry and will add significant expertise to our
diversification process.
2
<PAGE>
Our efforts to diversify will include initiatives for the coming year to expand
the customer base of our Original Design Manufacturing ("ODM") business.
Historically, all of our ODM sales came from the Hasbro Games Group. Our
relationship with Hasbro continues to be strong. We are currently preparing to
manufacture four Star Wars (TM) handheld electronic games for Hasbro for the
upcoming new Star Wars(TM) movie scheduled for 1999. Additionally, we added some
powerful ODM experience to our Board this year with the addition of Henry Hu as
a director. Henry has been a pioneer in creating toy-manufacturing businesses in
Asia over his many years in the industry.
During the year we doubled the size of our factory in China while meeting
increased production demands without any disruption in service or quality. We
are very proud of our organization and facility in Dongguan and what they have
accomplished this year. Production doubled from 11 million units to almost 22
million units in 1998. We believe our factory capability is a powerful
competitive weapon creating industry-leading margins, shortened time-to-market
and quality products.
Another important strategic initiative for Radica is the building of our
distribution network around the world. During the year we added nine new
distributors for 1999. This strengthens our presence in many of the key markets
and will add promotion for the Radica brand since most distributors have
promised advertising support for our product line.
At the end of the day, great product is the key. We believe Radica is the clear
leader in product innovation, consumer stimulation and play value. For 1999 we
are incorporating more new technologies than at any time in our history. But,
technology means little unless it adds great game play and the "wow" factor. We
have already mentioned voice recognition technology that adds the sizzle to the
Girl Tech line. Also new is our invention of the scrolling LCD, which is
included in our new Buckmasters(R) Deer Huntin'(TM) game. This adds the
dimension of tracking the deer that would not have been possible before with
traditional LCD's. We also are introducing color and 3D graphics with our new 3D
Alien Intruder(TM) vision game. With this game the action jumps out at you
through the vision scope. Probably the most exciting new innovation is our swing
sensor technology for the Grip 'n Rip Golf game. This game senses swing velocity
and club head angle to realistically measure the power and direction of your
swing.
We are passionate about creating great products that push the limits of what is
possible in our industry. 1998 has again proven that great results can be
created by a highly motivated team focused on innovation and creativity. The
1999 product line takes this creativity to the next level. For 2000 and beyond
we are determined to reach new levels of innovation and achievement.
Sincerely,
/s/ Jon N. Bengtson /s/ Robert E. Davids
Jon N. Bengtson Robert E. Davids
Chairman Chief Executive Officer
February 10, 1999 February 10, 1999
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
The following table sets forth items from the Company's Consolidated
Statements of Income as a percentage of net revenues:
<TABLE>
<CAPTION>
Year ended October 31,
-----------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0%
Cost of sales 45.4% 46.6% 64.6%
Gross margin 54.6% 53.4% 35.4%
Selling, general and administrative expenses 17.8% 16.4% 24.7%
Research and development 2.4% 2.4% 3.6%
Acquired research and development 1.0% -- --
Depreciation and amortization 2.2% 2.6% 3.3%
Operating income 31.2% 32.0% 3.8%
Other income 0.5% 1.0% 1.6%
Share of loss of affiliated company (0.2%) (0.1%) --
Interest income (expense), net 1.2% 1.0% (0.4%)
Unusual item -- -- 1.5%
Income before income taxes 32.7% 33.9% 6.5%
Credit (provision) for income taxes 0.2% (0.2%) 0.3%
Discontinued operation -- -- (3.7%)
Net income 32.9% 33.7% 3.1%
</TABLE>
Net sales for the year ended October 31, 1998 were $155.6 million,
increasing 77.2% from $87.8 million for the prior year.
4
<PAGE>
The following table sets out the percentages of sales achieved from
each category of products:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1998 1997
------------------------------------ ----------- --------------------------
% OF UNITS NO. OF % OF UNITS NO. OF
PRODUCT LINES NET SALES SOLD MODELS NET SALES SOLD MODELS
- ------------- --------- ---- ------ --------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Fishing games 44.0% 5,598,897 5 40.7% 3,261,086 3
Combat games 4.6% 548,632 4 2.7% 208,649 2
Sports games 10.0% 1,145,824 12 9.3% 726,478 7
Casino games
- -- Handheld 7.6% 3,035,888 54 13.2% 3,416,426 84
- -- Tabletop 0.9% 172,956 11 2.4% 238,310 32
Heritage games 7.4% 1,037,105 16 12.3% 985,163 16
Extreme games 4.5% 466,921 3 0.0% -- --
ODM products 21.0% 5,663,867 20 19.4% 3,519,665 12
---------- -------------- -------- --------- -------------- --------
Total 100.0% 17,670,090 125 100.0% 12,355,777 156
========== ============== ======== ========= ============== ========
</TABLE>
During 1998, the Company sold 125 different models of games, totaling
17.7 million units, compared to 156 models totaling 12.4 million units in 1997,
an increase of 42.7%. Of the 125 models of Radica and Monte Carlo games sold
during the period a number of models are discontinued lines, which unless the
market warrants reintroduction, the Company only intends to continue selling so
long as inventories exist. Twenty new models were sold during 1998. The Company
intends to introduce approximately 25 new models in 1999.
The gross profit for fiscal year 1998 was $85.0 million compared to
$46.9 million for fiscal 1997, an increase of 81.2%. The gross margin for the
year was 54.6% compared to 53.4% for fiscal year 1997.
Operating profit for fiscal year 1998 was $48.6 million, an increase of
$20.5 million from $28.1 million in fiscal 1997. Operating expenses increased to
$36.4 million from $18.8 million in 1997.
The following table lays out the changes in operating expenses for the
major expense categories.
5
<PAGE>
October 31,
---------------------------
1998 1997
------------ -----------
(dollars in millions)
Commissions $ 4.73 $ 2.45
Indirect salaries and wages 6.36 4.72
Advertising and promotion expenses 9.20 0.80
Research and development expenses 3.71 2.10
The effective blended tax rate for the year ended October 31, 1998 was
a credit of 0.5% on continuing operations compared to a provision of 0.6% for
fiscal 1997. The tax credit for the year was comprised of an expense of $4.0
million representing 7.8% of pre-tax income, offset by a one time deferred tax
credit of $4.6 million. This compared to a charge of $0.2 million in 1997, or
0.6% of pre-tax income. The increase in tax expense for the year was as a result
of the brought forward losses in the US subsidiary being used up resulting in
the US profits of the distribution operation becoming fully taxable.
Net profit for fiscal year 1998 was $51.3 million or $2.53 per share
compared to $29.6 million or $1.43 per share in fiscal 1997.
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents totaled $33.1 million at October 31, 1998, a
drop of $0.4 million from October 31, 1997. Working capital at October 31, 1998
was $59.9 million, an $11.0 million increase from working capital of $48.9
million at October 31, 1997. The increase in working capital is due primarily to
an increase in net income offset by the purchase of 2,610,400 Company shares at
an average price of $14.36 during the fiscal year. The ratio of current assets
to current liabilities decreased to 2.8 at October 31, 1998 from 3.7 at October
31, 1997. This decrease in the current ratio is due mainly to the purchase of
the Company's shares.
There were no short-term borrowings at October 31, 1998 and 1997.
The Company believes that its existing cash and cash equivalents and
cash generated from operations are sufficient to satisfy the current anticipated
working capital needs of its core business.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for the year ended October 31, 1997 were $87.8 million,
increasing 84.8% from $47.5 million for the prior year. Approximately 50.6% of
sales related to Sports games, 12.4% to Heritage games, 2.7% to Action games,
15.7% to Casino games and 18.6% to ODM sales in fiscal 1997 in comparison to
18.1 %, 17.3%, 0%, 40.5% and 24.1% in fiscal 1996. During 1997, the Company sold
156 different models of games, totaling 12.4 million units, compared to 139
models totaling 9.0 million units in 1996, an increase of 37.8%. Of the 147
models of Radica and Monte Carlo games sold during the period 122 models were
discontinued lines, which unless the market warranted reintroduction, the
Company only intended to continue selling so long as inventories exist. Ten new
models were sold during 1997.
6
<PAGE>
The gross profit for fiscal year 1997 was $46.9 million compared to
$16.8 million for fiscal 1996, an increase of 179.2%. The gross margin for the
year was 53.4% compared to 35.4% for fiscal year 1996. The increase in gross
margin was due to higher sales volume of current and new product at historic
margin levels relative to sales of low margin promotional product and ODM
production. In addition, approximately 3.6% of the year end margin or $3.2
million was as a result of sales of product which had previously been written
off.
Operating profit for fiscal year 1997 was $28.1 million, an increase
from $1.8 million from fiscal 1996. Operating expenses increased 25.3% to $18.8
million from $15 million in 1996. Commissions increased 113% to $2.45 million
from $1.15 million in fiscal 1996; indirect salaries and wages increased 36.8%
to $4.72 million from $3.45 million in fiscal 1996; advertising and promotion
expenses increased 11.1% to $0.8 million from $0.72 million in fiscal 1996; and
research and development expenses increased 23.5% to $2.10 million from $1.70
million in fiscal 1996.
The effective blended tax rate for the year ended October 1997 was 0.6%
on continuing operations compared to a credit of 3.9% for fiscal 1996. This was
due to the effective USA tax rate of 34% combined with the 16.5% effective tax
rate of the operations in Hong Kong and 0% effective tax rate of the
manufacturing operation in China conducted by a British Virgin Islands
subsidiary. It should be noted that the US subsidiary had significant releases
of inventory provisions which were not taxable during the year, so that although
it was profitable there was no tax charge.
Net profit for fiscal year 1997 of $29.6 million or $1.43 per share
compared to $1.5 million or $.07 per share in fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for the year ended October 31, 1996 were $47.5 million,
decreasing 9.9% from $52.7 million for the prior year. Approximately 40.5% of
sales related to Casino games, 17.3% to Heritage games, 18.1% to Sports games
and 24.1% to ODM sales in fiscal 1996 in comparison to 94.5%, 2.9%, 0% and 2.6%
in fiscal 1995. During 1996, the Company sold 139 different models of games,
totaling 9.0 million units, compared to 104 models totaling 8.6 million units in
1995, an increase of 4.7%. Of the 139 models of Radica and Monte Carlo games
sold during the period 87 models were discontinued lines, which unless the
market warranted reintroduction, the Company only intended to continue selling
so long as inventories exist. Twelve new models were sold during 1996 including
a Sports line of Casino games, Tournament Golf, Golf Range, World Class Golf,
Bass Fishin'(TM), King Pin Bowling, 9 Ball Pool, Pinball Rider, Talking Bingo,
Hearts and Gin Rummy.
The gross profit for fiscal year 1996 was $16.8 million compared to $18
million for fiscal 1995, a decrease of 6.7%. The gross margin for the year was
35.4% compared to 34.2% for fiscal year 1995. The increase in gross margin was
due to the sale of new Sports and Heritage product at higher margins offset by
continued sales of promotional Casino product at low margins and lower margin
ODM production for the Hasbro Games Group.
Operating profit for fiscal year 1996 before accounting for cessation
of Pub Poker business was $1.8 million, an increase from operating loss of $22.1
million for fiscal 1995. Operating expenses decreased 62.6% to $15.0 million
from $40.1 million in 1995. These decreases were primarily due to the
7
<PAGE>
effects of the Company's cost cutting program together with lower commissions
due to lower sales and a new commission structure and the write down of assets
of $15.3 million in fiscal 1995. Commissions decreased 62.2% to $1.15 million
from $3.04 million in fiscal 1995; indirect salaries and wages decreased 45.4%
to $3.45 million from $6.32 million in fiscal 1995; advertising and promotion
expenses decreased 76.8% to $0.72 million from $3.10 million in fiscal 1995; and
research and development expenses decreased 19.0% to $1.70 million from $2.10
million in fiscal 1995.
The effective blended tax rate for the year ended October 1996 was a
credit of 3.9% on continuing operations compared to a credit of 4.0% for fiscal
1995. This was due to the effective USA tax rate of 34% combined with the 16.5%
effective tax rate of the operations in Hong Kong and 0% effective tax rate of
the manufacturing operation in China conducted by a British Virgin Islands
subsidiary.
After tax profit from continuing operations of $3.2 million or $.15 per
share for fiscal year 1996 compared to a net loss of $21.5 million or $.94 per
share in the prior year.
Net profit after discontinued operations for fiscal year 1996 of $1.5
million or $.07 per share compared to a net loss for fiscal 1995 of $21.7
million or $.95 per share.
8
<PAGE>
<TABLE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
At October 31,
------------------------------------
(US dollars in thousands, except share data) 1998 1997*
---------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 33,141 $ 33,504
Short-term investments (Note 3) - 2,050
Accounts receivable, net of allowances for doubtful
accounts of $466 in 1998 and $908 in 1997 and estimated
customer returns of $1,375 in 1998 and $2,327 in 1997 33,249 18,740
Inventories, net of provision of $2,414 in 1998 and
$3,479 in 1997 (Note 4) 21,534 11,741
Prepaid expenses and other current assets 1,126 681
Deferred income taxes (Note 9) 4,545 -
---------------- ----------------
Total current assets 93,595 66,716
---------------- ----------------
Investment in affiliated company (Note 5) 823 194
---------------- ----------------
Property, plant and equipment, net (Note 6) 16,093 12,539
---------------- ----------------
Intangible assets, net (Note 7) 3,000 -
---------------- ----------------
Deferred income taxes, noncurrent (Note 9) 10 -
---------------- ----------------
Total assets $ 113,521 $ 79,449
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,694 $ 8,209
Accrued warranty expenses 2,470 2,161
Accrued payroll and employee benefits 3,510 1,249
Accrued advertising expenses 6,178 718
Accrued sales expenses 3,316 1,254
Commissions payable 1,444 915
Accrued other expenses 3,005 3,058
Income taxes payable 2,065 213
Deferred income taxes (Note 9) - 79
---------------- ----------------
Total current liabilities 33,682 17,856
---------------- ----------------
Shareholders' equity:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
18,864,294 shares outstanding (20,860,200 at Oct. 31, 1997) (Note 11) 189 209
Additional paid-in capital 9,298 28,589
Retained earnings 70,396 32,800
Cumulative translation adjustment (44) (5)
---------------- ----------------
Total shareholders' equity 79,839 61,593
---------------- ----------------
Total liabilities and shareholders' equity 113,521 79,449
================ ================
<FN>
* Restated to conform with 1998 presentation.
</FN>
</TABLE>
/s/ Jon N. Bengtson /s/ David C.W. Howell
- -------------------------- ---------------------------
Director Director
See accompanying notes to the consolidated financial statements.
9
<PAGE>
<TABLE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(US dollars in thousands, except per share data) Year ended October 31,
-------------------------------------------------------------
1998 1997* 1996*
------------------- ------------------- -------------------
<S> <C> <C> <C>
Revenues:
Net sales $ 155,618 $ 87,760 $ 47,535
Cost of sales (70,576) (40,888) (30,696)
------------------- ------------------- -------------------
Gross profit 85,042 46,872 16,839
------------------- ------------------- -------------------
Operating expenses:
Selling, general and administrative expenses (27,788) (14,403) (11,752)
Research and development (3,710) (2,099) (1,699)
Acquired research & development (1,500) - -
Depreciation and amortization (3,423) (2,278) (1,594)
------------------- ------------------- -------------------
Total operating expenses (36,421) (18,780) (15,045)
------------------- ------------------- -------------------
Operating income from continuing operations 48,621 28,092 1,794
Other income 807 915 748
Share of loss of affiliated company (334) (141) -
Net interest 1,896 913 (165)
------------------- ------------------- -------------------
Income from continuing operations
before income taxes and unusual item 50,990 29,779 2,377
Unusual item (Note 8) - - 709
------------------- ------------------- -------------------
Income from continuing operations before income taxes 50,990 29,779 3,086
Credit (provision) for income taxes (Note 9) 266 (193) 120
------------------- ------------------- -------------------
Income from continuing operations after income taxes 51,256 29,586 3,206
Discontinued operation: (Note 10)
Loss from operation of Pub Poker business - - (1,712)
------------------- ------------------- -------------------
Net Income $ 51,256 $ 29,586 $ 1,494
=================== =================== ===================
Earnings per share - basic: (Note 12)
Income from continuing operations $ 2.53 $ 1.43 $ 0.15
Effect of discontinued operation - - (0.08)
------------------- ------------------- -------------------
Net earnings per share $ 2.53 $ 1.43 $ 0.07
=================== =================== ===================
Average number of shares outstanding 20,239,790 20,761,020 21,439,452
=================== =================== ===================
Earnings per share - assuming dilution: (Note 12)
Income from continuing operations $ 2.39 $ 1.37 $ 0.15
Effect of discontinued operation - - (0.08)
------------------- ------------------- -------------------
Net earnings per share and dilutive potential common stock $ 2.39 $ 1.37 $ 0.07
=================== =================== ===================
Average number of shares and
dilutive potential common stock outstanding 21,488,364 21,635,926 21,439,452
=================== =================== ===================
<FN>
* Restated to conform with 1998 presentation.
</FN>
</TABLE>
See accompanying notes to the consolidated financial statements.
10
<PAGE>
<TABLE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(US dollars in thousands)
<CAPTION>
Common stock
------------ Additional Cumulative Total
Number paid-in Retained translation shareholders'
of shares Amount capital earnings adjustment equity
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1995 22,780,000 $ 228 $ 28,328 $ 1,720 $ 21 $ 30,297
Cancellation of stock (2,100,000) (21) 21 -- -- --
Grant of stock options -- -- 22 -- -- 22
Net income -- -- -- 1,494 -- 1,494
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 1996 20,680,000 $ 207 $ 28,371 $ 3,214 $ 21 $ 31,813
Stock options exercised 180,200 2 218 -- -- 220
Net income -- -- -- 29,586 -- 29,586
Foreign currency translation -- -- -- -- (26) (26)
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 1997 20,860,200 $ 209 $ 28,589 $ 32,800 $ (5) $ 61,593
Issuance of stock 190,094 2 3,598 -- -- 3,600
Cancellation of repurchased
stock (Note 11) (2,610,400) (26) (23,901) (13,660) -- (37,587)
Stock options exercised 424,400 4 1,012 -- -- 1,016
Net income -- -- -- 51,256 -- 51,256
Foreign currency translation -- -- -- -- (39) (39)
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 1998 18,864,294 $ 189 $ 9,298 $ 70,396 $ (44) $ 79,839
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
11
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
Year ended October 31,
-----------------------------------
1998 1997* 1996*
------- ------- --------
Cash flow from operating activities:
Net income $ 51,256 $ 29,586 $ 1,494
Adjustments to reconcile net income
to net cash provided by operating
activities:
Deferred income taxes (4,634) 108 -
Depreciation 1,923 1,613 1,594
Amortization 1,500 665 -
Shares of loss of affiliated company 334 141 -
Acquired research and development 1,500 - -
Loss (gain) on disposal and write
off of property, plant and
equipment 22 (21) (97)
Provision for compensation expense
related to stock options - - 22
Changes in assets and liabilities:
Accounts receivable (14,548) (9,142) 618
Inventories (9,793) (757) 5,488
Prepaid expenses and other current
assets (445) (134) (16)
Accounts payable 3,485 2,674 2,529
Accrued payroll and employee benefits 2,261 563 445
Commissions payable 529 439 (527)
Accrued advertising expenses 5,460 461 (79)
Accrued sales expenses 2,062 (573) (277)
Accrued warranty expenses 309 607 1,101
Accrued other expenses (53) 2,625 (1,741)
Income taxes payable 1,852 168 1,351
-------- ------- --------
Net cash provided by operating
activities 43,020 29,023 11,905
Cash flow from investing activities:
Decrease (increase) in short-term
investments 2,050 (1,973) -
Proceeds from sale of property, plant
and equipment 33 61 929
Purchase of property, plant and equipment (5,532) (1,255) (874)
Purchase of Girl Tech assets (2,400) - -
Investment in an affiliate company (963) (1,000) -
Proceeds from the sales of money
market funds - - 3,151
-------- ------- --------
Net cash (used in) provided by
investing activities (6,812) (4,167) 3,206
-------- ------- --------
12
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
Year ended October 31,
-----------------------------------
1998 1997* 1996*
------- -------- --------
Cash flow from financing activities:
Repurchase of common stock (37,587) - -
Funds from stock options exercised 1,016 220 -
Decrease in short-term borrowings - - (13,970)
Repayment of long-term debt - (99) (371)
-------- -------- --------
Net cash (used in) provided by
financing activities (36,571) 121 (14,341)
-------- -------- --------
Net (decrease) increase in cash
and cash equivalents $ (363) $24,977 $ 770
Cash and cash equivalents:
Beginning of year 33,504 8,527 7,757
-------- -------- --------
End of Year $33,141 $33,504 $ 8,527
======== ======== ========
Supplementary disclosures of cash
flow information:
Cash paid during the year:
Interest $ 61 $ 12 $ 413
Income taxes 2,381 - -
* Restated to conform with 1998 presentation.
See accompanying notes to the consolidated financial statements.
13
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US dollars in thousands, except share and per share data)
1. Organization and Basis of Financial Statements
- --------------------------------------------------
The consolidated financial statements include the accounts of the Company
and all subsidiaries. Investments in affiliates, owned more than 20 percent
but not in excess of 50 percent, are recorded using the equity method. All
significant intra-group transactions and balances have been eliminated on
consolidation.
The Company designs, develops, manufactures and distributes a variety of
electronic handheld and mechanical games.
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
and are presented in US dollars as the Company's sales are predominantly
denominated in US dollars.
2. Summary of Significant Accounting Policies
- ----------------------------------------------
Cash and cash equivalents - Cash and cash equivalents include cash on hand,
cash accounts, interest-bearing savings accounts, and time certificates of
deposit with a maturity at purchase date of three months or less.
Inventories - Inventories are stated at the lower of cost, determined by
the weighted average method, or market. Provision for potentially obsolete
or slow-moving inventory is made based on management's analysis of
inventory levels and future expected sales.
Depreciation and amortization of property, plant and equipment -
Depreciation is provided on the straight-line method at rates based upon
the estimated useful lives of the property, generally not more than seven
years except for leasehold land and buildings which are 50 years or where
shorter, the remaining term of the lease, by equal annual instalments.
Costs of leasehold improvements and leased assets are amortized over the
life of the related asset or the term of the lease, whichever is shorter.
Upon sale or retirement, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and any resulting
gain or loss is included in income.
Intangible assets - Intangible assets primarily represent the excess of the
purchase price of acquisition of a business over the fair value of the net
assets acquired. Intangible assets also represent cost allocated to brand
names. Such assets are amortized on a straight-line basis over the period
estimated to be benefited, but not to exceed 40 years. The carrying value
of intangible assets is periodically reviewed by the Company and
impairments are recognized when there is a permanent diminution in value.
The Company policy is to charge a full year of amortization in the year of
acquisition.
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
14
<PAGE>
product returns in certain other instances. Accordingly, the Company
provides allowances for the estimated amounts of these returns at the time
of revenue recognition, based on historical experience adjusted for known
trends.
Investments - Debt and equity securities which the Company has both the
positive intent and ability to hold to maturity are classified as
held-to-maturity and carried at amortized cost. Debt and equity securities
which might be sold prior to maturity are classified as available-for-sale
and carried at approximate fair value. Any material unrealized gains and
losses related to available-for-sale investments, net of applicable taxes,
are reported in other comprehensive income. The Company determines the
appropriate classification of securities at the time of purchase and
evaluates such classification as of each balance sheet date.
Income taxes - Income taxes are provided based on an asset and liability
approach for financial accounting and reporting of income taxes. Deferred
income tax liabilities or benefits are recorded to reflect the tax
consequences in future years of differences between the tax basis of assets
and liabilities and the financial reporting amounts at each year end. A
valuation allowance is recognized if it is more likely than not that some
portion of, or all of, a deferred tax asset will not be realized.
Advertising - The production costs of advertising are expensed by the
Company the first time the advertising takes place. Advertising costs
associated with customer benefit programs are accrued as the related
revenues are recognized. Advertising expense was $9,121, $735 and $569 in
1998, 1997 and 1996, respectively.
Foreign currency translation - Assets and liabilities of foreign operations
are translated using year-end exchange rates. Revenues and expenses of
foreign operations are translated using average monthly exchange rates. The
impact of exchange rate changes is shown as "Cumulative Translation
Adjustment" in shareholders' equity. Net losses from foreign exchange
transactions of $281, $122 and $102 in 1998, 1997 and 1996 respectively,
are included in selling, general and administrative expenses.
Post-retirement and post-employment benefits - The Company does not provide
post-retirement benefits other than pensions to employees and
post-employment benefits are immaterial.
Warranty - Future warranty costs are provided for at the time of revenue
recognition based on management's estimate by reference to historical
experience adjusted for known trends.
Stock options - The Company continues to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", in accounting
for its stock options. As a result, no compensation expense has been
recognized as the exercise price of the Company's employee stock options
equals the market price of the underlying stock at the date of grant. Pro
forma disclosures of the effect on net income (loss) and earnings (loss)
per share as if the Company had accounted for its employee stock options
under the fair value method prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", are
shown in note 13.
15
<PAGE>
Earnings per share - Earnings per share is based on the weighted average
number of shares of common stock and dilutive potential common stock
outstanding. Dilutive potential common stock results from dilutive stock
options. The effect of such dilutive potential common stock on net income
per share is computed using the treasury stock method.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of
estimates. Actual results could differ from those estimates.
Comprehensive income and segment information - Comprehensive income
includes both net income and other comprehensive loss (income). Other
comprehensive loss for the years ended October 31, 1998, October 31, 1997
and October 31, 1996 of $0, $39 and $26, respectively, represented foreign
currency translation adjustments. Accumulated other comprehensive loss
(income) included in the accompanying condensed consolidated balance sheets
as of October 31, 1998 and October 31, 1997 was $44 and $5, respectively,
consisting of the accumulated foreign currency translation adjustment.
Further, as the Company has only one operating segment, the adoption of
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information", did not result in any restatement of comparative information.
New accounting standards adopted - In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires that an entity recognizes all derivatives as either an asset or
liability and measures those instruments at fair value, as well as
identifying the conditions for which a derivative may be specially designed
as a hedge. The Company does not have any derivative instruments.
Reclassifications - Certain reclassifications have been made to prior
periods amounts to conform with the 1998 presentation and to comply with
new SFAS's.
3. Short-term Investments
- --------------------------
The Company's short-term investments, all of which were classified as
available-for-sale as defined by SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", consisted primarily of United
States government and Federal agency securities and were stated at market
value.
4. Inventories
- ---------------
Inventories by major categories are summarized as follows:
16
<PAGE>
October 31,
----------------------------
1998 1997
------------ ------------
Raw materials $ 4,650 $ 2,786
Work in progress 5,733 2,889
Finished goods 11,151 6,066
------------ ------------
$ 21,534 $ 11,741
============ ============
5. Investment in Affiliated Company
- ------------------------------------
In May 1997, the Company acquired approximately 35% of the capital stock of
U- Tel, Inc., a private company incorporated in Nevada, United States of
America, which is engaged in research and development of telecommunication
equipment, for $1,000 in cash. U-Tel, Inc. is in the early stages of its
product development cycle and accordingly the excess purchase price over
fair value of the net assets acquired of $665, was charged to operations
for the year ended October 31, 1997.
In July 1998, following a refinancing of U-Tel, Inc., the Company purchased
additional shares for $963 in cash. This allowed the Company to maintain
its percentage interest in U-Tel, Inc.
6. Property, Plant and Equipment
- ---------------------------------
Property, plant and equipment consists of the following:
October 31,
---------------------------
1998 1997
------------ -----------
Land and buildings $ 11,950 $ 9,882
Plant and machinery 5,549 3,633
Furniture and equipment 4,003 3,184
Leasehold improvements 1,866 1,318
------------ -----------
Total $ 23,368 $ 18,017
Less: Accumulated depreciation and
amortization (7,275) (5,478)
------------ -----------
Total $ 16,093 $ 12,539
============ ===========
7. Intangible Assets
- ---------------------
The intangible asset of $3,000 on the balance sheet at October 31, 1998
represents a portion of the acquisition price allocated to brand name and
goodwill with regards the assets and business of KidActive, LLC, dba Girl
Tech(TM) acquired during the quarter ended April 30, 1998. KidActive, LLC,
dba Girl Tech(TM) was a development stage enterprise and had not traded
prior to the Company's acquisition of its assets. The Company purchased the
assets and business of KidActive, LLC, dba Girl Tech(TM) for $2,400 in cash
plus 190,094 shares, a total of $6,000. Of this $4,500 was capitalised as
goodwill and brand name and $1,500 was written off immediately as purchased
research and development. It is management's opinion that the amounts
capitalized of $4,500 represent the fair
17
<PAGE>
value assigned to the intangible assets acquired. This cost is being
amortized over a three year fiscal period on a straight-line basis.
Accumulated amortization was $1,500 at October 31, 1998.
Intangible assets are as follows:
October 31,
1998
------------
At cost:
Brand name $ 1,000
Goodwill 3,500
------------
Total 4,500
Less: Accumulated amortization (1,500)
------------
Total $ 3,000
============
18
<PAGE>
8. Unusual Item
- ----------------
During the second quarter of 1996, a gain of $709 was made from the sale of
a property in Hong Kong.
9. Income Taxes
- ----------------
The components of income from continuing operations before income taxes are
as follows:
Year ended October 31,
----------------------------------------
1998 1997 1996
----------- ----------- ----------
United States $ 11,579 $ 2,167 $ 910
Foreign subsidiaries operating in:
People's Republic of China 39,274 27,544 1,348
Hong Kong 137 68 828
----------- ----------- ----------
$ 50,990 $ 29,779 $ 3,086
=========== =========== ==========
As the Company's subsidiary in the People's Republic of China ("PRC") is a
sino-foreign joint venture enterprise, it is eligible for an exemption from
income tax for two years starting from the first profitable year of
operations and thereafter a 50 percent relief from income tax for the
following three years under the Income Tax Law of the PRC. That subsidiary
had its first profitable year of operations in the year ended December 31,
1997 and is expected to be taxed at a 12% rate from January 1, 1999. In
addition, under the existing processing arrangement and in accordance with
the current tax regulations in the PRC, manufacturing income generated in
the PRC is not subject to PRC income taxes.
The credit (provision) for income taxes consists of the following:
19
<PAGE>
Year ended October 31,
-------------------------------
1998 1997 1996
------- ------- -------
Hong Kong
Current income tax $ (61) $ (123) $ 45
United States
State tax (expense) benefit, net of
federal tax (expense) benefit $(4,307) $ 38 $ 75
Change in deferred tax 4,634 (108) --
------- ------- -------
$ 327 $ (70) $ 75
------- ------- -------
Income tax credit (provision) $ 266 $ (193) $ 120
======= ======= =======
A reconciliation between the credit (provision) for income taxes computed
by applying the statutory tax rates in the United States for 1998, 1997 and
1996 to income before income taxes and the actual credit (provision) for
income taxes is as follows:
Year ended October 31,
------------------------------------
1998 1997 1996
-------- -------- --------
US statutory rate 34% 34% 34%
-------- -------- --------
Provision for income taxes at
statutory rate on income for
the year $(17,337) $(10,125) $ (1,049)
State income taxes (133) (7) 95
International rate differences 15,369 9,807 365
Accounting (losses) gains for
which deferred income tax
cannot be recognized (1,991) (430) 302
Decrease in valuation allowance 4,406 854 293
Other (48) (292) 114
-------- -------- --------
Income tax credit (provision) $ 266 $ (193) $ 120
======== ======== ========
Deferred income taxes reflect the net tax effect of temporary differences
between the amounts of assets and liabilities for income tax purposes
compared with the respective amounts for financial statement purposes. At
October 31, 1998 and 1997 deferred income taxes comprised:
m
20
<PAGE>
October 31,
------------------
1998 1997
------- -------
Deferred tax assets (liabilities):
Excess of tax over financial
reporting depreciation $ (79) $ (79)
Tax losses -- 1,173
Bad debt allowance 158 309
Advertising allowances 2,100 244
Inventory obsolescence reserve 749 643
Accrued sales adjustments and returns 1,583 1,321
Other 44 716
------- -------
4,555 4,327
Valuation allowance -- (4,406)
------- -------
$ 4,555 $ (79)
======= =======
10. Discontinued Operation
- ---------------------------
On July 31, 1996 the Company adopted a plan to discontinue its Pub Poker
operations. All products and raw materials relating to Pub Poker were
disposed of by October 31, 1996 either by means of sale at discounted
prices or by scrapping. The loss from Pub Poker operations has been
accounted for as a discontinued operation.
11. Common Stock
- -----------------
On December 22, 1997, the Board adopted a plan authorizing the Company to
repurchase up to one million shares of its common stock. On June 16, 1998,
the Board adopted another plan authorizing the Company to repurchase up to
one million additional shares of its common stock. On September 18, 1998,
the Board adopted a further plan authorizing the Company to repurchase up
to another one million additional shares of its common stock.
During the year ended October 31, 1998, the Company repurchased 2,610,400
shares at an average price of $14.36 per share under these programs. All
repurchased shares were cancelled.
During the quarter ended April 30, 1998, the Company issued 190,094 shares
of newly issued common stock at $18.938 per share as a portion of the
acquisition price for the assets and business of KidActive, LLC, dba Girl
Tech(TM).
12. Earnings Per Share
- -----------------------
The following information shows the numbers used in computing earnings per
share and the effect on income and the weighted average number of shares of
dilutive potential common stock:
21
<PAGE>
Year ended October 31, 1998
----------------------------------------
Earnings
Numerator Denominator per share
---------- ----------- ----------
Basic earnings per share:
Net income $ 51,256 20,239,790 $ 2.53
==========
Effective of dilutive options 1,248,574
---------- -----------
Diluted earnings per share:
Net income, assuming $ 51,256 21,488,364 $ 2.39
all dilutive options exercised ========== ============ ===========
Options on 197,000 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
13. Stock Options
- ------------------
The Company's 1994 Stock Option Plan (the "Stock Option Plan") provided for
options to be granted for the purchase of an aggregate of 1,600,000 shares
of common stock at per share prices not less than 100% of the fair market
value at the date of grant as determined by the Compensation Committee of
the Board of Directors. Following approval at the annual shareholders
meetings in April 1997 and 1998, the Stock Option Plan's aggregated common
stock increased by 400,000 and 800,000 respectively. In total, the Stock
Option Plan's aggregate common stock increased to 2,800,000 shares
available for options. Options under this plan are generally exercisable
ratably over five years from the date of grant unless otherwise provided.
In January 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 exercise 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 January 1997, 60,000 stock options held by outside directors at an
exercise price of $11.00 per share were repriced to $1.72 per share, the
market price on January 3, 1997. Upon each re-election to the Board of
Directors in 1995 and 1996, each outside director received non-qualified
stock options to purchase 5,000 shares of common stock of the Company at
$3.66 per share and $1.50 per share, respectively (the closing market price
on those dates). Upon re-election to the Board of Directors in 1997 and
thereafter, each outside director received or will receive non-qualified
stock options to purchase 15,000 shares of Common Stock of the Company at
an exercise price equal to the closing market price on such date.
Option activity for each of the three fiscal years ended October 31, 1996,
1997 and 1998:-
22
<PAGE>
Weighted average
Number exercise price
of shares per share
--------- ----------------
(in thousands)
Outstanding at October 31, 1995 1,269 $ 7.44
Options granted 1,091 1.37
Options cancelled (1,194) 7.12
-----------
Outstanding at October 31, 1996 1,166 $ 2.09
Options granted 856 2.98
Options cancelled (86) 8.22
Options exercised (180) 1.22
-----------
Outstanding at October 31, 1997 1,756 $ 2.31
Options granted 649 13.97
Options cancelled (43) 14.63
Options exercised (424) 2.39
-----------
Outstanding at October 31, 1998 1,938 5.92
===========
Exercisable at October 31, 1998 215 $ 2.59
The following is additional information relating to options outstanding as
of October 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options exercisable
----------------------------------------- ----------------------------------
Weighted average
Weighted average remaining Weighted average
Exercise Number exercise price contractual Number exercise price
price range of shares per share life (years) of shares per share
- ----------- --------- ---------------- ---------------- ---------- ----------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
$ 0.567 to 2.000 862 $ 1.33 7.40 115 $ 1.46
$ 2.001 to 4.000 394 3.51 8.49 90 3.49
$ 4.001 to 6.000 8 5.00 8.63 - -
$ 6.001 to 8.000 55 6.76 8.75 8 6.63
$ 8.001 to 10.000 5 8.60 8.80 1 9.00
$ 10.001 to 12.000 321 10.99 9.98 - -
$ 12.001 to 14.000 45 12.87 9.18 1 12.00
$ 14.001 to 16.000 26 15.54 9.12 - -
$ 16.001 to 18.000 121 17.02 9.46 - -
$ 18.001 to 20.000 101 19.10 9.47 - -
----- -----
1,938 $ 5.92 8.40 215 $ 2.59
===== =====
</TABLE>
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee stock options under the fair value
method of SFAS No. 123. The weighted average fair value of stock options at
date of grant of $7.23, $1.59 and $0.71 per option for the year ended
October 31, 1998,
23
<PAGE>
1997 and 1996, respectively, were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
Year ended October 31,
----------------------------------------------
1998 1997 1996
------------- ------------ -------------
Expected life of options 5 years 5 years 5 years
Risk-free interest rate 6.50% 6.50% 6.25%
Expected volatility of
underlying stock 50% 50% 50%
Dividends 0% 0% 0%
The Black-Scholes option pricing model requires the input of highly
subjective assumptions, including the expected volatility of stock price.
Because changes in subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing model does not
necessarily provide a reliable single measure of the fair value of the
stock options.
If the Company had accounted for its stock option plans by recording
compensation expenses based on the fair value at grant date for such awards
consistent with the method of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts as
follows:
Year ended October 31,
----------------------------------------------
1998 1997 1996
------------- ------------ -------------
Pro forma net income $ 50,548 $ 29,154 $ 1,202
Pro forma earnings per share $ 2.50 $ 1.40 $ 0.06
14. 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 three customers which
accounted for more than twenty-five percent, twenty-one percent and ten
percent of net sales in fiscal 1998, three customers which accounted for
more than twenty percent, eighteen percent and ten percent of net sales in
fiscal year 1997 and had two customers which accounted for more than twenty
and sixteen percent of net sales in fiscal year 1996. The Company performs
ongoing credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers.
15. 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 SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments". The estimated fair
value amounts have been determined by the Company, using available market
24
<PAGE>
information and appropriate valuation methodologies. The estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange.
The carrying amounts of cash and short-term investments, accounts
receivable and accounts payable are reasonable estimates of their fair
value.
16. Commitments and Contingencies
- ----------------------------------
The Company leases certain warehouses and equipment under operating leases.
Total expense for the operating leases was $401, $358 and $411 in 1998,
1997 and 1996, respectively.
At October 31, 1998, the Company was obligated under operating leases
requiring future minimum lease payments as follows:
Operating leases
----------------
1999 $ 260
2000 267
2001 134
2002 108
2003 106
Thereafter 586
-------------
Total minimum lease payments $ 1,461
=============
At October 31, 1998, certain leasehold land and buildings with a net book
value of $4,887 and bank balances of $3,871 were pledged to secure general
banking facilities including overdraft and trade facilities granted to the
Company.
17. Retirement Plan
- --------------------
The Company has defined contribution retirement plans covering
substantially all employees in Hong Kong. Under these plans, eligible
employees may contribute amounts through payroll deductions which are 5% or
more of individual salary, supplemented by employer contributions ranging
from 5% to 10% of individual salary depending on the years of service. The
expenses related to these plans were $125, $94 and $55 for the year ended
October 31, 1998, 1997 and 1996, respectively.
18. 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 were
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.
25
<PAGE>
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 1993, and
limited to certain specified statements in the Company's registration
statement, were dismissed without prejudice. Pursuant to a stipulation of
the parties, the Court provisionally agreed to treat the remaining claims
as class claims.
After the close of discovery, plaintiffs moved for leave to amend their
complaint to add allegations with respect to an additional claimed omission
in the registration statement. Shortly thereafter, the Company moved for
summary judgment seeking dismissal of the complaint. Following a hearing on
July 31, 1996, the District Court entered an Order (i) denying plaintiffs'
motion to amend the complaint and (ii) granting the Company's (and the
other defendants') motion for summary judgment, and on August 9, 1996 the
District Court entered a judgment dismissing the action. Plaintiffs
subsequently moved for reconsideration of the grant of summary judgment
against them, and the court denied their motion.
Plaintiffs filed a timely appeal to the United States Court of Appeals for
the Ninth Circuit, and oral argument of such appeal was held on November 5,
1997. On November 14, 1997, the Court of Appeals entered an Order affirming
the judgment of the District Court. Plaintiffs sought no further review and
such judgment is now final.
19. Segment Information
- ------------------------
The Company operates in one principal industry segment: the design,
development, manufacture and distribution of a variety of electronic and
mechanical handheld and tabletop games. Geographic financial information is
as follows:
26
<PAGE>
Year ended October 31,
----------------------------------------------
1998 1997 1996
------------- ------------ -------------
Net sales:
United States $ 114,688 $ 57,478 $ 33,036
PRC and Hong Kong 38,029 28,537 13,456
Other 2,901 1,745 1,043
---------- --------- ---------
$ 155,618 $ 87,760 $ 47,535
========== ========= =========
Operating income (loss):
United States $ 9,347 $ 2,269 $ 973
PRC and Hong Kong 39,053 25,990 906
Other 221 (167) (85)
---------- --------- ---------
$ 48,621 $ 28,092 $ 1,794
========== ========= =========
Identifiable assets:
United States $ 45,296 $ 24,745 $ 16,011
PRC and Hong Kong 66,660 53,639 25,313
Other 1,565 1,065 1,401
--------- --------- ---------
$ 113,521 $ 79,449 $ 42,725
========== ========= =========
A significant portion of PRC and Hong Kong net sales were export sales to
the United States.
27
<PAGE>
20. Valuation and Qualifying Accounts
- ---------------------------------------
Year ended October 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
Beginning of year:
Allowances for doubtful accounts $ 908 $ 234 $ 1,572
Estimated customer returns 2,327 817 1,790
Provision for inventories 3,479 8,419 11,873
-------- --------- ---------
$ 6,714 $ 9,470 $ 15,235
======== ========= =========
Charged for the year:
Allowances for doubtful accounts $ 213 $ 818 $ 70
Estimated customer returns 456 1,995 1,250
Provision for inventories 1,105 - -
-------- --------- ---------
$ 1,774 $ 2,813 $ 1,320
======== ========= =========
Release of provision:
Allowances for doubtful accounts $ (655) $ (144) $ (1,408)
Estimated customer returns (1,408) (485) (2,223)
Provision for inventories (2,170) (4,940) (3,454)
-------- --------- ---------
$ (4,233) $ (5,569) $ (7,085)
======== ========= =========
End of year:
Allowances for doubtful accounts $ 466 $ 908 $ 234
Estimated customer returns 1,375 2,327 817
Provision for inventories 2,414 3,479 8,419
------- --------- ---------
$ 4,255 $ 6,714 $ 9,470
======= ========= =========
28
<PAGE>
21. Selected Quarterly Financial Data (Unaudited)
- --------------------------------------------------
Quarter ended
-------------------------------------------
Jan. 31 Apr. 30 Jul. 31 Oct. 31
------- ------- ------- -------
Fiscal 1998
- -----------
Net sales $26,473 $31,750 $34,829 $62,566
Gross profit 14,674 17,984 19,481 32,903
Net income 9,009 9,046 11,184 22,017
Basic earnings per share 0.43 0.45 0.55 1.13
Fiscal 1997
- -----------
Net sales $12,668 $12,175 $22,532 $40,385
Gross profit 5,476 5,422 11,671 24,303
Net income 2,522 2,317 7,147 17,600
Basic earnings per share 0.12 0.11 0.34 0.84
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of Radica Games Limited
We have audited the accompanying consolidated balance sheets of Radica
Games Limited and subsidiaries as of October 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended October 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Radica Games Limited and
subsidiaries as of October 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1998, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte Touche Tohmatsu
HONG KONG
December 15, 1998
30
<PAGE>
COMMON STOCK DATA
- -----------------
As of January 31, 1999 there were approximately 140 record holders of
the Company's common stock. The Company believes that this represents more than
2,000 individual shareholders.
Price Range of Common Stock
- ---------------------------
Fiscal Year and Quarter
- ----------------------- High Low
1998
Two months stub period ending December 31, 1998*........ $ 17 1/2 $ 13 5/8
Fourth.................................................. 16 5/8 9 3/4
Third................................................... 22 1/4 16 1/8
Second.................................................. 20 5/8 14 3/4
First................................................... 19 12 7/8
1997
Fourth.................................................. $ 15 3/8 $ 7 1/2
Third................................................... 7 7/8 2 7/8
Second.................................................. 4 1/8 2 3/8
First................................................... 3 1/4 1 1/16
1996
Fourth.................................................. $ 1 3/4 $ 3/4
Third................................................... 1 15/16 15/16
Second.................................................. 2 1 1/4
First................................................... 2 1/2 1 1/8
* The Company changed its fiscal year-end date from October 31 to December 31
effective from 1999.
The Company's common shares have been traded on the NASDAQ National Market
System since May 13, 1994. Prior to that time, the Company's securities were
privately held. The Company's symbol for its common shares is "RADAF". On
October 30, 1998 the share price closed at $14 7/16.
The Company has not declared any dividends since it became public.
31
RADICA GAMES LIMITED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 12, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Radica Games Limited (the "Company") will be held at the DoubleTree Hotel
Pasadena, 191 North Los Robles Avenue, Pasadena, California 91101 on Monday,
April 12, 1999, commencing at 10:00 a.m., to consider and act upon the following
proposals or matters:
(1) To elect directors;
(2) To re-appoint Deloitte Touche Tohmatsu as Independent Auditor and
to authorize the directors to fix the Independent Auditor's remuneration; and
(3) To transact such further or other business matters as may properly
come before the meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 12, 1999
will be entitled to notice of the meeting.
The Annual Report containing the Financial Statements of the Company
and the Report of the Independent Auditor thereon, the Management Information
Circular/Proxy Statement and a form of proxy are enclosed with this Notice of
Meeting.
By order of the Board of Directors,
DAVID C.W. HOWELL
President Asia Operations,
Chief Financial Officer and
Chief Accounting Officer
March 15, 1999
Fo Tan, Hong Kong
Note: If you are unable to be present at the meeting in person, please fill
in, date and sign the enclosed proxy and return it to the President of
the Company in the enclosed envelope.
<PAGE>
RADICA GAMES LIMITED
MANAGEMENT INFORMATION CIRCULAR/PROXY STATEMENT
This Management Information Circular/Proxy Statement ("this Circular")
is furnished to shareholders of Radica Games Limited (the "Company") in
connection with the solicitation by and on behalf of the management of the
Company of proxies to be used at the Annual Meeting of Shareholders (the
"Meeting") of the Company to be held at the DoubleTree Hotel Pasadena, 191 North
Los Robles Avenue, Pasadena, California 91101 on Monday, April 12, 1999 at 10:00
a.m., and at any adjournments, for the purposes set forth in the attached Notice
of Annual Meeting of Shareholders (the "Notice").
This Circular, the attached Notice and the accompanying form of proxy
are first being mailed to shareholders of the Company on or about March 15,
1999. The Company will bear all costs associated with the preparation and
mailing of this Circular, the Notice and form of proxy as well as the cost of
solicitation of proxies. The solicitation will be primarily by mail; however,
officers and regular employees of the Company may also directly solicit proxies
(but not for additional compensation) by telephone or telegram. Banks, brokerage
houses and other custodians and nominees or fiduciaries will be requested to
forward proxy solicitation material to their principals and to obtain
authorizations for the execution of proxies and will be reimbursed for their
reasonable expenses in doing so.
No person is authorized to give any information or to make any
representations other than those contained in this Circular and, if given or
made, such information must not be relied upon as having been authorized.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named as proxies in the enclosed form of proxy are
directors or officers of the Company. A SHAREHOLDER HAS THE RIGHT TO APPOINT A
PERSON (WHO NEED NOT BE A SHAREHOLDER OF THE COMPANY) AS PROXY TO ATTEND AND ACT
FOR AND ON SUCH SHAREHOLDER'S BEHALF AT THE MEETING OTHER THAN THE MANAGEMENT
PROXIES NAMED IN THE ACCOMPANYING FORM OF PROXY. This right may be exercised
either by striking out the names of the management proxies where they appear on
the front of the form of proxy and by inserting in the blank space provided the
name of the other person the shareholder wishes to appoint, or by completing and
submitting another proper form of proxy naming such other person as proxy.
A shareholder who has given a proxy, in addition to revocation in any
other manner permitted by applicable law, may revoke the proxy within the time
periods described in this Circular by an instrument in writing executed by the
shareholder or by his/her attorney authorized in writing or, if the shareholder
is a body corporate, by an officer or attorney thereof duly authorized.
Shareholders desiring to be represented at the Meeting by proxy or to
revoke a proxy previously given, must deposit their form of proxy or revocation
of proxy at the office of Radica Enterprises, Ltd. ("Radica USA") at 180 S. Lake
Avenue, Suite 440, Pasadena, CA 91101, addressed to the President of the
Company, at any time up to and including the last business day preceding the day
of the Meeting, or any adjournment thereof, at which the proxy is to be used, or
on the day of the Meeting with the chairman of the Meeting prior to the Meeting,
or any adjournment thereof. If a shareholder who has completed a proxy attends
the Meeting in person, any votes cast by the shareholder on a poll will be
counted and the proxy will be disregarded.
1
<PAGE>
VOTING OF PROXIES
THE SHARES REPRESENTED BY ANY VALID PROXY IN FAVOR OF THE MANAGEMENT
PROXIES NAMED IN THE ACCOMPANYING FORM OF PROXY WILL BE VOTED FOR, AGAINST OR
WITHHELD FROM VOTING (ABSTAIN) ON THE ELECTION OF DIRECTORS, AND ON THE
REAPPOINTMENT OF THE INDEPENDENT AUDITOR AND THE AUTHORIZATION OF THE DIRECTORS
TO FIX THE REMUNERATION OF THE INDEPENDENT AUDITOR, IN ACCORDANCE WITH ANY
SPECIFICATIONS OR INSTRUCTIONS MADE BY A SHAREHOLDER ON THE FORM OF PROXY. IN
THE ABSENCE OF ANY SUCH SPECIFICATIONS OR INSTRUCTIONS, SUCH SHARES WILL BE
VOTED FOR THE ELECTION AS DIRECTORS OF THE MANAGEMENT NOMINEES NAMED IN THIS
CIRCULAR, AND FOR THE RE-APPOINTMENT OF DELOITTE TOUCHE TOHMATSU AS INDEPENDENT
AUDITOR AND THE AUTHORIZATION OF THE DIRECTORS TO FIX THE INDEPENDENT AUDITOR'S
REMUNERATION.
Each share of Common Stock is entitled to one vote on each matter
submitted to vote at the meeting. Under the Company's Bye-laws, action may be
taken by the shareholders at any duly convened Annual General Meeting of the
Company by a majority of the votes cast on each proposal (other than certain
proposals requiring a special resolution as defined in the Bye-laws). In the
case of elections of directors, the number of vacant positions (in the case of
this meeting, nine director positions) will be filled by the nominees who
receive the greatest number of votes at the meeting, with each shareholder being
entitled to vote for a number of directors equal to the number of vacancies, but
without cumulative voting. Although the Bye-laws permit voting by a show of
hands in certain circumstances, the Company follows the practice of voting by
poll or ballot (i.e. tabulating written votes submitted at the meeting in person
or by proxy).
The accompanying form of proxy confers discretionary authority upon the
persons named therein with respect to amendments or variations to matters
identified in the Notice and with respect to such other business or matters
which may properly come before the Meeting or any adjournments thereof.
RECORD DATE
The Board of Directors of the Company has fixed the close of business
on March 12, 1999, as the record date (the "Record Date") for the Meeting. Only
holders of record of the Common Stock as of the close of business on the Record
Date are entitled to receive notice of and to attend and vote at the Meeting.
2
<PAGE>
VOTING SECURITIES AND THEIR PRINCIPAL HOLDERS
As of January 31, 1999 there were issued and outstanding 19,048,894
shares of the Common Stock of the Company.
The following table sets forth information with respect to shareholders
which the Company believes own beneficially more than 5% of the issued and
outstanding shares of Common Stock of the Company, as of January 31, 1999:
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF SHARES COMMON STOCK
BENEFICIAL OWNER OUTSTANDING
- ---------------------------------- ---------------- -------------
Robert E. Davids(1) 3,265,800 17.1%
Suite R, 6th Floor
2-12 Au Pui Wan Street
Fo Tan, Hong Kong
Dito Devcar Corporation, et al. (2) 6,062,218 31.8%
c/o Wedbush Morgan Securities
610 Newport Center Road, Suite 1300
Newport Beach, California 92660
- -------------------------
(1) Mr. Davids is a Director and the Chief Executive Officer of the Company.
Also includes shares held by Mr. Davids as trustee for a family trust.
(2) Includes shares of Common Stock owned by the following related persons:
Dito Devcar Corporation, DRP Charitable Unitrust, TMP Charitable Unitrust,
Dito Devcar, LP, Dito Caree, LP, Pickup Family Trust, Pickup Charitable
Remainder Unitrust II, TD Investments, LLC, BP Ventures, LLC, Richard H.
Pickup and Todd Pickup.
In addition to the foregoing, the Company is aware of one other
significant shareholder who is to own approximately 5% of the Company's common
stock. This is The John and Mary Hansen 1989 Trust (the "Hansen Trust"), 369
Adrian Road, Millbrae, California 94030. Mr. John N. Hansen was a co-founder of
the Company, and served as a director of the Company until his death in early
1995. Thereafter, Mrs. Mary J. Hansen, the widow of Mr. Hansen, was a director
of the Company until April 1997. Also includes shares held individually by Mrs.
Hansen or by trustee(s) for other family trusts.
ELECTION OF DIRECTORS
The following persons are nominees proposed by management for election
as directors of the Company to serve until the next annual meeting of the
shareholders of the Company or until their successors are duly elected or
appointed. A SHAREHOLDER MAY WITHHOLD HIS VOTE FROM ANY INDIVIDUAL NOMINEE BY
WRITING THE PARTICULAR NOMINEE'S NAME ON THE LINE PROVIDED IN THE FORM OF PROXY.
Management does not contemplate that any of the nominees will be unable to serve
as a director. If, as a result of circumstances not now contemplated any nominee
shall be unavailable to serve as a director, the proxy will be voted for the
election of such other person or persons as Management may select. The
management nominees for election as directors of the Company are Robert E.
Davids, Jon N. Bengtson, Patrick Feely, David C.W. Howell, Siu Wing Lam, James
O'Toole, Millens W. Taft, Peter Thigpen and Henry Hai-Lin Hu.
3
<PAGE>
The following table and the textual discussion which follows sets forth
information as of January 31, 1999 with respect to each current director of the
Company, each of the management nominees for director and each executive
officer, including their names, ages, the number of shares beneficially owned by
each such person individually and as a group, all positions and offices with the
Company held by each such person (in addition to their directorships) and their
term of office as a director:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF
TERM AS OTHER POSITIONS AND OFFICES SHARES COMMON
AGE AT DIRECTOR PRESENTLY HELD WITH THE BENEFICIALLY STOCK
NAME 1/1/99 EXPIRES COMPANY OWNED OUTSTANDING
(1)
- ----------------------- -------- ---------- ---------------------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Directors:
- ---------
Robert E. Davids(2) 55 1999 Vice Chairman, Chief 3,265,800 17.1%
Executive Officer
Jon N. Bengtson 55 1999 Chairman of the Board 162,960
Patrick Feely 52 1999 President, Chief Operating 60,000
Officer
David C.W. Howell 36 1999 President Asia Operations, 101,000
Chief Financial Officer,
Chief Accounting Officer
Siu Wing Lam 40 1999 Executive Vice President, 151,000
Engineering
James O'Toole (3)(4) 53 1999 None 42,900
Millens W. Taft (3)(4) 76 1999 None 2,000
Peter Thigpen (3)(4) 59 1999 None 500
Henry Hai-Lin Hu (3)(4) 53 1999 None -
Executive Officers:
- ------------------
Gene Murtha 48 President, Americas -
Kam Cheong Wong 43 Vice President of China 7,700
Operations
Hermen H.L. Yau 39 MIS Director 4,100
Samuel Kwok 34 Plant Administration Director 4,000
Ben Hui 42 Materials Director -
You Liang Wang 59 Quality Director -
Rick C.K. Chu 45 International Sales Director 4,000
Christopher Dingley 39 European Marketing Manager, -
Radica UK Ltd.
Michael L. Pikett 59 President, Radica Canada 24,000
Ltd
- -------------------------
<FN>
(1) Except as indicated, in each case these shares represent less than 1%
of the total stock outstanding.
(2) Includes shares held by Mr. Davids as trustee for a family trust.
(3) Member of the Audit Committee.
(4) Member of the Compensation, Organization and Nominating Committee.
</FN>
</TABLE>
All directors and executive officers of the Company as a group (18
persons) owned beneficially 3,831,960 shares of Common Stock (not including
1,119,600 option shares not yet vested held by such persons), or approximately
20.1% of the Common Stock outstanding, as of January 31, 1999. The executive
officers of the Company do not have any fixed term of office and serve at the
pleasure of the Board of Directors. Since the mailing date of last year's Proxy
Statement, as previously announced by the Company,
4
<PAGE>
Mr. Peter Thigpen and Mr. Henry Hai-Liu Hu were added to the Board of Directors,
in June and December 1998, respectively. Also, Mr. Gene Murtha was appointed
President of Radica USA in December 1998.
Robert E. Davids has been the Chief Executive Officer of the Company
since January 1994, and a director since December 1993. He was President of the
Company from December 1993 to July 1997. Prior to 1993, Mr. Davids had been the
Co-Chief Executive Officer and a director of Radica HK since he joined the
Company in 1988. Mr. Davids has over 30 years experience in the development,
design and engineering of non-gambling casino gifts, commercial gaming machines,
automobiles and other products. From 1984 until he joined the Company, he was
the General Manager of Prospector Gaming Enterprises Inc., a casino in Reno,
Nevada. From 1978 through 1984, Mr. Davids served in various positions at
International Game Technology ("IGT"), including Director of Special Projects
and Director of Engineering.
Jon N. Bengtson, formerly the Executive Vice President and Chief
Financial Officer of the Company, became the Chairman of the Board of the
Company in January 1996, and has been a director of the Company since January
1994. He is currently the President and Chief Operating Officer of U-Tel, Inc.,
a telecommunications company. Mr. Bengtson was formerly an Executive Vice
President and Chief Operating Officer of the Company from September 1995 to
January 1996. He was Chief Financial Officer of the Company from January 1994 to
September 1995, and was appointed President and Chief Executive Officer of
Radica USA in December 1993. Mr. Bengtson joined The Sands Regency in 1984 and
served in various positions, including Vice President of Finance and
Administration, Chief Financial Officer, Treasurer and Director, Senior Vice
President and Director and Executive Vice President and Chief Operating Officer
and Director until December 1993. From 1980 to 1984, Mr. Bengtson was a director
and served in various positions with IGT, including Treasurer and Vice President
of Finance and Administration and Vice President of Marketing. Mr. Bengtson is
currently a director of The Sands Regency and its subsidiary, Patrician, Inc.
Patrick Feely has been Chief Operating Officer and President of the
Company since July 1997 and a director of the Company since July 1996.
Previously, he was President of Fun Source, a Strottman International, Inc.
company; President and CEO of Spectrum HoloByte, Inc. from 1993 to 1995;
President of Bandai America, Inc. from 1991 to 1992; founder and President of
Toy Soldiers, Inc. (which merged with Bandai America) from 1988 to 1991; and
President of the Tonka Products Division of Tonka, Inc. from 1986 to 1988. Mr.
Feely was also Director of the Toy Manufacturers Association from 1992 to 1995.
He has a BA from Duke University and an MBA from the University of Michigan.
David C.W. Howell was appointed President Asia Operations in December
1998. He has been Executive Vice President and Chief Financial Officer and a
director of the Company since September 1995. Prior to that, he was Vice
President and Chief Accounting Officer and a director of the Company from
January 1994 to September 1995. From 1992 to 1994, Mr. Howell was a Finance
Director and Company Secretary of Radica HK. From 1984 to 1991, Mr. Howell was
employed by Ernst & Young in London, Hong Kong and Vietnam. He has a B.Sc from
Nottingham University, is a member of the Institute of Chartered Accountants in
England and Wales and is a fellow of the Hong Kong Society of Accountants.
Siu Wing Lam has been Executive Vice President, Engineering of the
Company since December 1998 and was previously Vice President, Engineering and a
director of the Company since January 1994. Prior to that, he was the head of
the Radica HK engineering department for eight years since joining the Company
in 1985. Mr. Lam has over 18 years of experience in manufacturing, product
design and engineering management. He has an Associateship in Production and
Industrial Engineering from Hong Kong Polytechnic, a post graduate diploma in
Engineering Management from City Polytechnic of Hong Kong, and is an associate
member of the Institute of Electrical Engineers of UK.
5
<PAGE>
James O'Toole has been a director of the Company since June 1994. He is
Research Professor in the Center for Effective Organization at the University of
Southern California's Marshall School of Business. He is Chairman of the Board
of Academic Advisors of the Booz Allen Hamilton Strategic Leadership Center.
Millens W. Taft has been a director of the Company since April 1997. He
brings with him five decades of toy and games experience and currently advises
companies in the toy industry on marketing, product development and licensing in
both the domestic and international markets. He retired from the Milton Bradley
Company in 1984, where he was Corporate Senior Vice President of Research and
Development and was also a Director of the firm. Mr. Taft had been with Milton
Bradley since graduating from Harvard Business School in June of 1949 with the
degree of Master of Business Administration. From 1942 to 1945 he was in the
military service with the 8th Air Force as First Lieutenant and Pilot. Upon his
early retirement from Milton Bradley, he started his own company, Mel Taft &
Associates in 1984, which helps companies in the USA and around the world with
marketing, product development and licensing projects primarily in the Toy,
Games, Craft, Specialty and International Markets.
Peter Thigpen has been a director of the Company since June 1998. He
owns Executive Reserves, a consulting company that specializes in quality
processes, ethics and marketing strategy. Prior to starting Executive Reserves,
Mr. Thigpen was Senior Vice President - U.S. Operations and a member of the
Executive Management Committee at Levi Strauss & Company, retiring after 23
years with the San Francisco-based apparel company. During his tenure at Levi
Strauss, Mr. Thigpen held positions of President of European Operations,
President - Levi Strauss USA, President - The Jeans Company and was a member of
the Board of Directors. Mr. Thigpen is a Senior Fellow and a Moderator at the
Aspen Institute, member of the Board of the San Francisco School Volunteers, a
lecturer on ethics at the Haas Graduate School of Business at the University of
California, Berkeley, and Member of the Board of Directors of Designs, Inc.
Henry Hai-Lin Hu has been a director of the Company since December
1998. He is currently the Principal of Business Plus Consultants Limited
providing services to Hong Kong toy companies on business development. From 1993
through 1996, he was Chairman and Chief Executive Officer of Zindart Industrial
Co. Ltd., a NASDAQ listed manufacturer of die cast car replicas and premium
giftwares. He co-founded Wah Shing Toy Group since 1982, a Singapore listed toy
company, and retired from Wah Shing in 1991. Mr. Hu has served in director and
senior officer roles in several toy companies in Hong Kong since 1967. He has a
B.Sc in Mechanical Engineering from Hong Kong University, is a Registered
Professional Engineer, and a member of the Institution of Electrical Engineers,
Hong Kong.
Gene Murtha has been the President, Americas since December 1998. A
20-year veteran of the Toy and Game Industry, Mr. Murtha recently served as
Mattel's Vice President of Marketing with worldwide responsibilities for the
Matchbox line of products. He has previously held senior marketing and R&D jobs
with game companies such as Milton Bradley and Coleco, where he had
responsibility for such classic brands as Scrabble, Trivial Pursuit and
Parcheesi.
Kam Cheong Wong has been the Vice President of China Operations for the
Company since May 1998. Prior to that, he was the Director of Manufacturing for
the Company from June 1994 to May 1998. Mr. Wong has over 19 years of experience
in product design, R&D, production and sales in toys, consumer electronics and
the electrical appliance industry. Mr. Wong has a BSc in Mechanical Engineering
from Taiwan University, a post graduate diploma in Manufacturing Technology from
City University, London and is a member of the Institute of Management, UK.
Hermen H.L. Yau has been the MIS Director of the Company since March 1,
1994. From 1982 to 1994, he worked in Outboard Marine Corporation Asia Ltd in
various positions in the Systems & Data
6
<PAGE>
Processing Department. He has more than 17 years experience in Information
Technology and particular experience in IBM mid-range computer systems and
solutions. He has a Higher Diploma in Computer Studies from the National
Computing Center UK and a Diploma in Management Studies from the Hong Kong
Polytechnic and Hong Kong Management Association.
Samuel Kwok has been the Plant Administration Director since February
1998. Mr. Kwok has over 10 years working experience in Finance and
Administration in multinational companies and is responsible for the general
administration in the China factory. He has an MBA and is a certified
accountant.
Ben Hui has been the Materials Director since May 1998. Prior to that,
he has previously held materials and purchasing management jobs with companies
such as Sunciti Manufacturers Limited, HK Air Cargo Terminals Limited, Computer
Products and Saitek Ltd. Mr. Hui has 20 years extensive experience in
manufacturing management with responsibility for purchasing, shipping, inventory
and warehousing. He has been a full member of the Institute of Purchasing and
Supply of Hong Kong since 1990.
You Liang Wang has been the Quality Director of the Company since
December 1993. Prior to that, he was Head of the Quality Assurance Section of
Foxboro Co. Ltd in Shanghai from 1986 to 1993 and a Quality Control Engineer
from 1982 to 1986.
Rick C.K. Chu has been the International Sales Director of the Company
since April 1996. Prior to that, Mr. Chu was International Sales Administrative
Manager of the Company from April 1994 to April 1996. He has more than 16 years
experience in international trade and business management. From 1988 to 1994, he
was the Senior Manager managing the sales administration function and marketing
of industrial materials for a leading trading company in Hong Kong.
Christopher Dingley has been the European Marketing Manager of Radica
UK since January 1998 and Company Secretary of Radica UK since January 1995. Mr.
Dingley was General Manager of Radica UK from January 1995 to December 1997.
From January 1991 to December 1994 he acted for Radica as Manager of European
Operations. From 1987 to 1991 he was the Sales Manager for Export Military Sales
in UK. Prior to that he worked for Chrysler Military Sales in Germany, Italy and
the UK from 1982 to 1986.
Michael L. Pikett has been President of Radica Canada Ltd since October
1994. From 1993 to 1994 Mr. Pikett was employed as a Commercial Attache for the
Government of Quebec in Toronto. From 1986 to 1993 Mr. Pikett was employed as
Vice President-General Manager of Melitta Canada Inc. He was the Director of
Sales for J.M. Schneider Inc. from 1980 to 1985. Mr. Pikett has over 30 years
senior management experience in the Canadian market. He was born and educated in
the UK, moving to Canada in 1968.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During fiscal 1998, the Board of Directors of the Company met four
times. Each of the directors, during his tenure as a director, attended at least
75% of the meetings of the Board of Directors and of each committee of the board
on which he has served.
The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent certified public accountants to be selected
to conduct the annual audit of the books and accounts of the Company, reviewing
the proposed scope of such audit and approving the audit fees to be paid, and
reviewing the adequacy and effectiveness of the internal auditing, accounting
and financial controls of the Company with the independent certified public
accountants and the Company's financial and accounting staff. The Audit
Committee consists entirely of non-management directors. The Audit Committee is
7
<PAGE>
currently comprised of four members of the Board, being Messrs. O'Toole, Taft,
Thigpen and Hu. In fiscal 1998, it held one meeting.
The responsibilities of the Compensation, Organization and Nominating
Committee include reviewing and approving director nominations, executive
appointments and remuneration and supervising the administration of the
Company's employee benefit plans. This Committee is currently comprised of four
members of the Board, being Messrs. O'Toole, Taft, Thigpen and Hu. In fiscal
1998, it held one meeting.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Mr. Davids, Mr. James J. Sutter, the Hansen Trust, IGT and the Company
were parties to a shareholders agreement (the "Shareholders Agreement") which
provided for certain matters relating to the management of the Company and
ownership of its Common Stock. In January 1998, after Mr. Sutter and IGT had
ceased to be parties to the Shareholders Agreement, it was amended to eliminate
provisions respecting the election and removal of directors, restrictions on
transfer and a right of first refusal. The registration rights provisions of the
Shareholders Agreement remain operative.
Pursuant to the Shareholders Agreement, the Company has agreed, subject
to certain specified conditions, to use its reasonable efforts to prepare and
file one registration statement on behalf of each shareholder that is a party to
such agreement (collectively, the "Shareholders") under the Securities Act of
1933, and to use its reasonable efforts to qualify the shares for offer and sale
under any applicable U.S. state securities laws. The Shareholders Agreement also
grants each Shareholder certain "piggyback" registration rights entitling each
Shareholder to sell Common Stock in certain registered offerings of equity
securities by the Company. These "piggyback" registration rights are exercisable
by each Shareholder only twice. The foregoing registration rights are subject to
other limitations set forth in the Shareholders Agreement. In 1997, the Company
effected a demand registration at the request of Mr. Davids and also included
certain shares at the request of the Hansen Trust. Such registration covered an
aggregate of 1,855,000 shares.
COMPENSATION OF OFFICERS AND DIRECTORS
COMPENSATION
In fiscal 1998, the aggregate amount of compensation paid by the
Company to all executive officers and directors as a group for services in all
capacities was approximately $1.39 million.
Commencing in April 1997, each outside (i.e., non-employee and
non-affiliated) director of the Company receives a fee of $600 for attendance at
each meeting of the Board of Directors and a fee of $600 for attendance at each
Committee meeting. Directors who are employees or affiliates of the Company will
not be paid any fees or additional remuneration for service as members of the
Board of Directors or its Committees.
Prior to April 1997, each outside director of the Company also
received, in addition to the above, a $10,000 annual fee paid in quarterly
installments.
Prior to fiscal year 1996, each outside director received non-qualified
stock options to purchase 30,000 shares of Common Stock of the Company upon
initial election to the Board of Directors at an exercise price equal to the
initial public offering price ($11.00 per share) of the Company's Common Stock
and exercisable after one year from the date of grant. In January 1997, the
board of directors resolved to reprice 30,000 stock options (at $11.00 per
share) for each of two outside directors to the market price as of the date of
such meeting ($1.75 per share) and the change was ratified in the board meeting
on April 9, 1997.
8
<PAGE>
In the same board meeting, one outside director was appointed and received
non-qualified stock options to purchase 30,000 shares of Common Stock of the
Company at an exercise price equal to the average of bid and asked closing
price ($3.125) on such date. Upon each re-election to the Board of Directors in
1995, 1996, 1997 and 1998, each outside director received non-qualified stock
options to purchase 5,000 shares (15,000 shares in 1997 and 1998, to reflect
elimination of the $10,000 annual fee) of Common Stock of the Company at $3.66,
$1.50, $3.125 and $18.75 per share, respectively. Upon re-election to the Board
of Directors in 1999 and thereafter, each outside director will receive
non-qualified stock options to purchase 15,000 shares of Common Stock of the
Company at an exercise price equal to the then current market price of the
Company's Common Stock. In 1998, each of two outside directors received
non-qualified stock options to purchase 30,000 shares of Common Stock of the
Company upon initial election at exercise prices of $17.25 and $16.375 per
share, respectively. These subsequent options are also exercisable after one
year from the date of grant.
EMPLOYMENT AGREEMENTS
Messrs. Davids, Feely, Howell, Lam, Murtha and Bengtson have each
entered into individual employment agreements with the Company. After giving
effect to the latest renewals, the employment agreements are for periods of two
years each, from December 1997 for Mr. Davids, from December 1998 for Messrs.
Feely, Howell, Lam and Bengtson, and from November 30, 1998 for Mr. Murtha. Each
employment agreement is terminable by the Company for cause. Messrs. Davids,
Feely, Howell, Lam, Murtha and Bengtson shall each receive minimum annual base
salaries of $182,000, $200,000, $182,000, $160,000, $200,000 and $43,200,
respectively. The agreement with Mr. Bengtson, since December 1995, is for
part-time services. The employment agreements for Messrs. Davids, Feely, Howell,
Lam and Murtha contain certain restrictions on their involvement in businesses
other than the Company during the course of their employment and certain
provisions applicable after termination of employment which prohibit the
solicitation of customers and other employees of the Company, employment or
engagement with competing entities, or the disclosure of proprietary information
of the Company. The Company provides residences in Hong Kong for both Mr. Davids
and Mr. Howell. In the agreement for Mr. Feely, he was granted 300,000 stock
options of the Company common stock at $3.625 per share, and another 60,000
stock options at $14.125 per share in November 1998, subject to the terms and
conditions of the agreement and the 1994 Stock Option Plan. Additionally, after
the end of each of the Company's 1999 and 2000 fiscal years, Mr. Feely will be
granted 60,000 stock options (up to 120,000 shares in the aggregate) at market
price provided he achieves certain conditions as stated in the agreement. In the
agreement for Mr. Murtha, he was granted 300,000 stock options of the Company
common stock at $11.00 per share subject to the terms and conditions of the
agreement and the 1994 Stock Option Plan. Additionally, after the end of each of
the Company's 2000, 2001 and 2002 fiscal years, Mr. Murtha will be granted
25,000 stock options (up to 75,000 shares in the aggregate) at market price
provided certain conditions are met as stated in the agreement. In the
agreements for Mr. Howell and Mr. Lam, after the end of the Company's 1999, 2000
and 2001 fiscal years, Mr. Howell and Mr. Lam will each be granted 25,000 stock
options (up to 75,000 shares in the aggregate for each) at market price provided
certain conditions are met as stated in the agreements.
CONSULTING AGREEMENT
The Company, acting through its subsidiary Radica China Limited,
entered into a one-year Consulting Agreement, dated November 1, 1997, with Mr.
Millens W. Taft, one of the Company's outside directors. Under such agreement,
Mr. Taft acted as an independent contractor and assisted in identifying,
contacting and developing relationships with inventors and other product concept
sources in the toy and game industry in order to develop new products for the
Radica line of games. After giving effect to certain changes to this agreement,
Mr. Taft was paid an aggregate consulting fee of $80,000 in fiscal 1998 and
9
<PAGE>
certain travel, lodging, entertainment and similar expenses were reimbursed by
the Company. The agreement has not been renewed.
OPTIONS TO PURCHASE SECURITIES FROM THE COMPANY
The Company's 1994 Stock Option Plan provides for the granting of stock
options to directors, officers and employees of the Company. The Stock Option
Plan is administered by the Compensation, Organization and Nominating Committee
(for this purpose, the "Compensation Committee") of the Board of Directors.
Subject to the provisions of the Stock Option Plan, the Compensation Committee
shall have sole authority to determine which of the eligible directors and
employees of the Company shall receive stock options, the terms, including
applicable vesting periods, of such options, and the number of shares for which
such options shall be granted.
The total number of shares of the Company's Common Stock that may be
purchased pursuant to stock options under the Stock Option Plan shall not exceed
in the aggregate 2.8 million shares. The option price per share with respect to
each such option shall be determined by the Compensation Committee but shall be
not less than 100% of the fair market value of the Company's Common Stock on the
date such option is granted as determined by the Compensation Committee.
Ordinarily, twenty percent of the stock options vest and become exercisable on
each of the first five anniversaries of the date of grant, and all of the
options expire in ten years. The Stock Option Plan terminates in 2004 unless
terminated earlier.
In fiscal years 1994 and 1995, an aggregate of 1,181,000 options
(exclusive of the outside directors' options referred to above, and net of stock
options that were both issued and cancelled in such years) were granted to
directors, officers and other employees under the Stock Option Plan to purchase
the Company's shares at exercise prices ranging from $8.50 to $8.53 per share.
In addition, Mr. Bengtson was granted options under his employment agreement, as
amended, to purchase 75,200 shares of the Company's Common Stock at an exercise
price of $0.57 per share.
On January 4, 1996, the Company's Board of Directors authorized the
officers of the Company to make offers to holders of options under the Company's
Stock Option Plan (excluding the option plan for the Company's outside
directors), in which each holder was offered the right to surrender existing
options for cancellation, and receive new stock options for the same number of
shares at a new exercise price (equal to $1.38 per share, the market price on
January 4, 1996), and subject to the commencement of a new vesting period. The
term of the new options will not extend beyond the ten-year period of the
original options surrendered. The effect of this authorization was that holders
of options who elected to surrender their previous options received new options
at a lower exercise price subject to starting a new vesting period. The holders
of 916,000 options previously granted accepted such offers. As referred to
above, in January 1997 the Board of Directors approved a similar repricing of
certain outside directors' options.
In fiscal year 1996, an aggregate of 30,000 options (exclusive of the
outside directors' options and the options issued in exchange for prior options,
as referred to above, and net of stock options that were both issued and
cancelled in the year) were granted to directors, officers and other employees
under the Stock Option Plan to purchase the Company's shares at an exercise
price of $1.38 per share.
In fiscal year 1997, an aggregate of 779,000 options (exclusive of the
outside directors' options and net of stock options that were both issued and
canceled in the year) were granted to directors, officers and other employees
under the Stock Option Plan to purchase the Company's shares at exercise prices
ranging from $1.09 to $12.25 per share.
10
<PAGE>
In fiscal year 1998, an aggregate of 549,000 options (exclusive of the
outside directors' options and net of stock options that were both issued and
canceled in the year) were granted to directors, officers and other employees
under the Stock Option Plan to purchase the Company's shares at exercise prices
ranging from $10.875 to $19.75 per share.
As a result of the foregoing, at the end of fiscal year 1998, after
giving effect to all prior exercises and cancellations of options, an aggregate
of 1,822,600 options (exclusive of the outside directors' options) were
outstanding at exercise prices ranging from $0.57 to $19.75 per share, and of
such amount a total of 1,235,600 options were held by directors and executive
officers of the Company as a group. Also, an aggregate of 115,000 outside
director's options were outstanding at exercise prices ranging from $1.50 to
$18.75 per share. By the end of fiscal year 1998, a total of 604,600 shares had
been issued upon the exercise of options, at exercise prices ranging from $0.57
to $11 per share.
After the end of fiscal year 1998 and through January 31, 1999, 105,000
additional options were granted under the Stock Option Plan (including under
employment agreements) at exercise prices ranging from $14.125 to 15.625 per
share, and, as referred to above, an outside director received an option for
30,000 shares exercisable at $16.375 per share.
Additional information with respect to stock options is contained in
the Company's Annual Report on Form 20-F for the fiscal year ended October 31,
1998. See Note 13 of the Notes to the Consolidated Financial Statements included
therein.
APPOINTMENT OF INDEPENDENT AUDITOR
The person named in the enclosed form of proxy will, in the case of a
ballot and in the absence of specifications or instructions to vote against or
not to vote (abstain) in the form of proxy, vote for the re-appointment of
Deloitte Touche Tohmatsu as the Independent Auditor of the Company, to hold
office until the next annual meeting of shareholders of the Company or until a
successor is duly elected or appointed, and the authorization of the directors
to fix the Independent Auditor's remuneration. Deloitte Touche Tohmatsu has been
the Independent Auditor of the Company or its predecessors since 1989.
Representatives of Deloitte Touche Tohmatsu are expected to attend the
Meeting, will have an opportunity to make a statement if they so desire and are
expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2000 annual
meeting of shareholders must be received by the Company at the principal
executive offices of Radica USA in the United States (see address below) on or
before November 15, 1999 in order to be considered for inclusion in the
Company's 2000 management information circular/proxy statement.
OTHER MATTERS
Management is not aware of any amendments or variations to matters
identified in the Notice or of any other matters that are to be presented for
action to the Meeting other than those described in the Notice.
Information stated in this Circular is dated as of January 31, 1999
except where otherwise indicated. The contents and the mailing of this Circular
have been approved by the Board of Directors of the Company.
11
<PAGE>
<TABLE>
<S> <C> <C> <C>
ROBERT E. DAVIDS JON N. BENGTSON PATRICK FEELY DAVID C.W. HOWELL
Vice Chairman and Chief Chairman of the Board President and President Asia Operations,
Executive Officer Chief Operating Officer Chief Financial Officer and
Chief Accounting Officer
</TABLE>
THE COMPANY FILES AN ANNUAL REPORT ON FORM 20-F WITH THE SECURITIES AND
EXCHANGE COMMISSION. A COPY OF THIS CIRCULAR AND THE ANNUAL REPORT CONTAINING
THE FINANCIAL STATEMENTS OF THE COMPANY AND MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, WILL BE SENT TO ANY PERSON
UPON REQUEST IN WRITING ADDRESSED TO INVESTOR RELATIONS AT RADICA USA'S OFFICE
AT 180 S. LAKE AVENUE, SUITE 440, PASADENA, CA 91101. COPIES ARE WITHOUT CHARGE
TO ANY SHAREHOLDER.
12
<PAGE>
FORM OF PROXY
RADICA GAMES LIMITED
ANNUAL MEETING
APRIL 12, 1999
The undersigned shareholder of Radica Games Limited hereby appoints the
person selected below,
Robert E. Davids, or failing him Patrick Feely, or failing him David
C.W. Howell (strike out if another proxy is to be appointed)
___________________________________________ (Other)
as such shareholder's proxy, with the power of substitution, and hereby
authorizes such person to represent and to vote as designated below all of the
Common Stock, $0.01 par value per share, of Radica Games Limited (the "Company")
that the undersigned is entitled to vote at the Company's Annual Meeting of
Shareholders to be held at the DoubleTree Hotel Pasadena, 191 North Los Robles
Avenue, Pasadena, California 91101 on Monday, April 12, 1999, or any
postponement or adjournment thereof.
Every shareholder of the Company is entitled to appoint one proxy (or
representative in the case of a corporation) to attend the meeting and vote on
such shareholder's behalf. The proxy need not be another shareholder of the
Company. To be effective, this Proxy must be completed and deposited at the
principal office of Radica Enterprises, Ltd. ("Radica USA") located at 180 S.
Lake Avenue, Suite 440, Pasadena, CA 91101, not later than the last business day
preceding the day of the meeting, or any postponement or adjournment thereof.
Please insert the number of shares registered in your name in the space
provided on the reverse. If no number is inserted, this Proxy will be deemed to
relate to the total number of shares registered in your name.
PLEASE INDICATE WITH AN "X" IN THE APPROPRIATE BOX HOW YOU WISH YOUR
PROXY TO VOTE. IF THIS PROXY IS RETURNED WITHOUT AN INDICATION AS TO HOW THE
PROXY SHALL VOTE, THE PROXY WILL VOTE FOR, AGAINST OR ABSTAIN IN RESPECT OF
PROPOSALS 1 AND 2 AS SET FORTH IN THE ACCOMPANYING CIRCULAR.
The Board of Directors recommends a vote for all Nominees listed in
Proposal 1 and adoption of Proposal 2.
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
for the terms set forth in to vote for all
the Proxy Statement (except nominees listed
as marked to the contrary below. / /
below). / /
<TABLE>
<S> <C> <C> <C> <C>
Robert E. Davids Patrick Feely Siu Wing Lam Millens W. Taft Henry Hai-Lin Hu
Jon N. Bengtson David C.W. Howell James O'Toole Peter Thigpen
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
13
<PAGE>
2. To approve the reappointment of Deloitte Touche Tohmatsu as the
Company's Independent Auditor and to authorize the directors to fix the
Independent Auditor's remuneration.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
This Proxy must be signed by the appointing shareholder, or such
shareholder's attorney duly authorized in writing, exactly as such shareholder's
name appears herein. In the case of joint shareholders, all joint shareholders
must sign. In the case of a corporation, the Proxy must be executed under its
Common Seal or the hand of its attorney duly authorized in writing. In the case
of partnerships, the Proxy must be signed in the partnership name by an
authorized person. Each power of attorney, or a duly certified copy thereof,
must be deposited at the principal office of Radica USA not later than the last
business day preceding the day of the meeting, or any postponement or
adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder. If no direction is given, this proxy
will be voted for Proposals 1 and 2. The undersigned hereby acknowledges receipt
of the accompanying Notice of Annual Meeting and Circular and hereby revokes any
proxy or proxies heretofore given.
Please mark, sign, date and return this Proxy in the accompanying
prepaid envelope.
Date: , 1999
---------------------------
---------------------------------------
(Printed Name of Shareholder)
---------------------------------------
(Signature)
---------------------------------------
(Printed Name of Shareholder)
---------------------------------------
(Signature)
---------------------------------------
(Number of Shares held)
(PLEASE SIGN EXACTLY AS
YOUR NAME APPEARS ON THIS
PROXY. WHEN SIGNING AS
ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF SHARES
ARE HELD JOINTLY, BOTH
OWNERS SHOULD SIGN.)
14
RADICA GAMES LIMITED
NOTICE OF CHANGE OF LOCATION OF
ANNUAL MEETING OF SHAREHOLDERS
April 12, 1999
NOTICE IS HEREBY GIVEN that the location of the Annual Meeting of the
Shareholders of Radica Games Limited has been changed. The meeting will now be
held at the Pasadena Hilton, 150 South Los Robles Avenue, Pasadena, CA 91101.
The new location is approximately one-half (1/2) mile from the original location
(the DoubleTree Hotel). Any shareholder who goes to the original location will
be directed to the Pasadena Hilton. The meeting time and date remain the same,
Monday, April 12, 1999 at 10:00 AM.
This change will have no effect on shareholders who vote by sending in
completed proxy cards.
By order of the Board of Directors,
PATRICK S. FEELY
President and
Chief Operation Officer
March 24, 1999
Pasadena, California USA
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of December 15, 1998, by and between
Radica Games Limited, a Bermuda company, having a registered address at
Clarendon House, Church Street, Hamilton HM11, Bermuda, and David C.W. Howell,
who resides at 46 Che Keng Tuk Road, Sai Kung, New Territories, Hong Kong.
WHEREAS, Radica is engaged through its subsidiaries in designing and
manufacturing electronic and mechanical gifts and games for worldwide sale, and
ODM manufacturing for others;
WHEREAS, Employee has substantial executive management experience including
financial and accounting experience;
WHEREAS, Radica desires to secure the services of Employee, and Employee is
willing to provide such services, each upon the terms and subject to the
conditions set forth in this Agreement all as negotiated and agreed by the
parties in Pasadena, California, USA on December 14, 1998.
NOW, THEREFORE, in consideration of the premises, the parties agree as follows:
DEFINITIONS. For the purposes of this Agreement, the parties hereby adopt the
following definitions:
(a) "Cause" means:
(i) breach by Employee of a fiduciary obligation to any member of Radica
Group;
commission by Employee of any act or omission to perform any act (excluding the
omission to perform any act attributable to Employee's Total Disability) which
results in serious adverse consequences to any member of Radica Group;
breach of any of Employee's agreements set forth in this Agreement including,
but not limited to, continual failure to perform substantially his duties with
Radica Group, excessive absenteeism and dishonesty;
any attempt by Employee to assign or delegate this Agreement or any of the
rights, duties, responsibilities, privileges or obligations hereunder without
the prior written consent of Radica (except in respect of any delegation by
Employee of his employment duties hereunder to other employees of Radica Group
in accordance with its usual business practice);
Employee's arrest or indictment for, or written confession of, a felony or any
crime involving moral turpitude under the laws of the United States or Bermuda
or any state or
<PAGE>
of Hong Kong;
death of Employee;
declaration by a court that Employee is insane or incompetent to manage his
business affairs; or
the filing of any petition or other proceeding seeking to find Employee bankrupt
or insolvent.
(b) "Dollars" and "US$" means United States dollars.
(c) "Employee" means David C.W. Howell.
(d) "1994 Plan" means the 1994 stock option plan adopted by Radica, as
amended from time to time.
(e) "Radica" means Radica Games Limited, a Bermuda company.
(f) "Radica Group" means Radica and any other corporation or other entity
which at the relevant time is more than fifty percent (50%) owned,
directly or indirectly, by Radica.
(g) "Termination" means, according to the context, the termination of this
Agreement or the cessation of rendering employment services by
Employee.
(h) "Total Disability" means Employee shall become disabled to an extent
which renders him unable to perform the essential functions of his
job, with or without reasonable accommodation, for a cumulative period
of twelve (12) weeks in any twelve (12) month period.
2. EMPLOYMENT.
Employee has previously been employed by Radica as Executive Vice President,
Chief Financial Officer, Chief Accounting Officer and as one of the Directors of
Radica. In such capacities, Employee has had responsibility for financial and
accounting matters affecting the Radica Group. All prior employment agreements
and arrangements between Radica Group and Employee shall be superceded and
merged into this Agreement, but so that employment of Employee shall continue
without any break in service and with change in the Employee's title to
President Asia Operations, Chief Financial Officer for purposes of his
employment by Radica Group. Employee's principal employer within Radica Group
shall be Radica itself, but his duties shall extend to other members of Radica
Group. During his period of employment, employee also agrees to serve in other
executive capacities for Radica Group as may be determined by the Board of
Directors of Radica ("Board"). Employee shall perform services of an executive
nature consistent with his offices with Radica Group as may from time to time be
assigned or delegated to him by the Board.
<PAGE>
Employee will devote his full business time and attention to his duties under
this Agreement.
Employee shall perform his duties under this Agreement principally in Hong Kong
and China. It is contemplated Employee will frequently travel to carry out his
duties under this Agreement, including travel to the offices of Radica
subsidiaries in Nevada and California. Air travel and other travel arrangements
will comply with current Radica Group policies respecting class of travel, etc.
Radica Group will provide Employee, including his spouse and children, with
medical and dental benefits, as provided to other officers of Radica Group.
Radica Group will contribute to a provident fund for the benefit of Employee on
such terms and conditions to be agreed between Radica Group and Employee.
Radica Group will provide Employee with accommodation in Hong Kong of a standard
and size commensurate (in the opinion of Radica Group) with the position and
remuneration for the time being.
Radica Group will provide Employee with a motor car of a size and type
commensurate (in the opinion of Radica Group) with his position and remuneration
for the time being which he will be permitted to use for reasonable private
journeys. Radica Group will contract for and pay the cost of all repairs,
maintenance, fuel, lubricants and insurance thereof.
Employee shall have five (5) weeks paid vacation during each year of this
Agreement taken at such times as mutually convenient to Employee and Radica
Group.
3. TERM OF EMPLOYMENT.
This Agreement and Employee's employment hereunder shall commence as of December
15, 1998 and continue until the second anniversary of such date, and shall be
renewed annually at each December 15 anniversary date (commencing December 15,
1999) for an additional one year period so that the term hereof at each renewal
date shall be a two year period, unless a party to this Agreement gives notice
at least ninety (90) days prior to such renewal date that this Agreement shall
not be renewed, in which case this Agreement shall terminate at the end of the
ensuing year.
Notwithstanding Paragraph (a) above, this Agreement may be sooner terminated by
Radica for Cause, by Employee without consent of Radica, by Radica without
Cause, or by Radica in the event of the Total Disability of Employee.
On termination of this Agreement pursuant to Paragraph (a) above, or by Radica
for Cause, or by Employee without consent of Radica, all benefits and
compensation shall cease as of the date of such Termination. On termination of
this Agreement by Radica
<PAGE>
without Cause or in event of Total Disability of Employee, all benefits and
compensation shall continue for twelve (12) months after such a Termination.
BUSINESS EXPENSE REIMBURSEMENT. Employee will be entitled to reimbursement by
Radica Group for the reasonable business expenses paid by him on behalf of
Radica Group in the course of his employment hereunder on presentation to Radica
Group of appropriate vouchers (accompanied by receipts or paid bills) setting
forth information sufficient to establish:
the amount, date, and place of each such expense;
the business reason for each such expense and the nature of the business benefit
derived or expected to be derived as a result thereof; and
the names, occupations, addresses, and other information sufficient to establish
the business relationship to Radica Group of any person who was entertained by
Employee.
COMPENSATION. Radica agrees to pay Employee, and Employee agrees to accept from
Radica, during the first year after December 15, 1998, for the services to be
rendered by him hereunder a minimum salary at the rate of US$162,000 per annum
and holiday warrant allowance of US$20,000 payable in arrears in thirteen (13)
installments, payable monthly, with two (2) payments at the end of January.
Employee shall receive annual salary reviews by the Board provided that such
salary and holiday warrant allowance shall not be reduced below US$182,000 per
year. Such compensation shall be paid to Employee's account in Jersey or such
other place as he may from time to time direct.
In respect of the payments under holiday warrant allowance, Employee is
requested to provide receipts and/or invoices to substantiate these payments.
In so far as the total receipts or invoices exceed the figures under holiday
warrant allowance, no additional payment will be made to Employee in respect of
the excess. In so far as the total of such receipts or invoices is less than the
said figures, Radica Group may declare a discretionary bonus in Employee's
favor. This bonus will be taxable as normal remuneration in Employee's hands.
Employee shall be considered for annual bonuses pursuant to the Radica Games
Bonus Policy for officers of Radica Group. Such Radica Games Bonus Policy
describes potential amounts of bonus which may be earned in respect of each
fiscal year, but with no mandatory amount for any particular employee.
If Radica Group institutes a retirement, bonus or other benefit plan which
applies generally to executive officers of Radica Group of similar status as
Employee, Employee shall be entitled to participate therein, but not to the
extent such benefits would be duplicative of the benefits herein.
<PAGE>
All payments by Radica Group shall be subject to required withholdings including
taxes.
STOCK OPTIONS.
(a) (i) Nothing in this Agreement shall affect stock options previously granted
to Employee, which shall continue to be governed by the 1994 Plan and the terms
of the grant of such stock options.
(ii) Additionally, at or promptly after the end of each of Radica's 1999, 2000
and 2001 fiscal years (i.e., fiscal years ending December 31), Radica shall
grant to Employee an option (up to three such options in total) to purchase
twenty-five thousand (25,000) shares (up to 75,000 shares in the aggregate) of
the common stock of Radica at the then applicable market price, subject to the
terms and conditions of this Section 6 and the 1994 Plan; provided, however,
that each such grant shall be subject to the conditions that (x) Employee
continues to be employed in good standing by Radica Group through the relevant
date of grant and (y) sufficient shares are available under the 1994 Plan to
cover Employee and other similarly situated executives (i.e. adequate shares
must be available for this special program in the option pool under the 1994
Plan). If such quantity of shares is not available, the grant dates will roll
forward by one year per year until such shares are available. Such stock options
under this clause (ii) are herein called the "Stock Options".
(iii) The Stock Options shall vest and become exercisable 20% per year for each
year Employee is employed by Radica Group following the date of grant,
commencing at the first anniversary of the date of grant.
(b) The number of shares subject to the Stock Options will be adjusted for stock
splits and reverse splits; provided that such number of shares shall not be
adjusted if Radica should otherwise change or modify its capitalization,
including but not limited to the issuance by Radica of new securities (including
options or convertible securities), ESOP's or other employee stock plans. It is
the intent of the parties that the stock subject to the Stock Options shall be
subject to dilution, except for stock splits and reverse splits.
(c) Any other provision hereof to the contrary notwithstanding, (i) as of the
date of Termination in the event of Termination pursuant to Section 3(a) or
Termination by Radica for Cause or by Employee without consent of Radica, or
(ii) twelve (12) months after the date of Termination in the event of
Termination by Radica without Cause or the Total Disability of Employee, (each
of such applicable dates being called a "Determination Date"), Employee shall
forfeit the Stock Options (measured by percentages of the stock subject to the
Stock Options) and they shall expire as follows:
if the Determination Date is within the first year after the date the Stock
Option is granted (the "Grant Date") then Employee shall forfeit 100% of the
stock subject to the Stock Option;
if the Determination Date is after the end of said first year and within the
second year
<PAGE>
after the Grant Date, then Employee shall forfeit 80% of the stock subject to
the Stock Option;
if the Determination Date is after the end of said second year and within the
third year after the Grant Date, then Employee shall forfeit 60% of the stock
subject to the Stock Option;
if the Determination Date is after the end of said third year and within the
fourth year after the Grant Date, then Employee shall forfeit 40% of the stock
subject to the Stock Option; or
if the Determination Date is after the end of said fourth year and within the
fifth year after the Grant Date, then Employee shall forfeit 20% of the stock
subject to the Stock Option.
(d) In any event each Stock Option shall expire to the extent not previously
exercised on the tenth anniversary of the Grant Date. Otherwise, Employee may at
any time within ninety (90) days following the Determination Date, exercise his
right to purchase stock subject to the Stock Options, but subject to the
foregoing provisions respecting vesting and forfeitures.
(e) Employee shall have no right to sell, alienate, mortgage, pledge, gift or
otherwise transfer the Stock Options or any rights thereto, except by will or by
the laws of descent and distribution, and except as specifically contemplated in
the 1994 Plan. In any event, any transfer must comply with applicable state and
federal securities laws.
NON-COMPETE; CONFIDENTIALITY.
(a) During the term of employment of Employee, and for a period of one year
after any Termination of such relationship or employment for any reason (either
by Employee or Radica), with or without cause, voluntarily or involuntarily (the
period of employment plus such additional year being called the "Prohibition
Period"), Employee agrees that he will not engage in, be employed by or become
affiliated with, in the United States of America or anywhere else in the world,
directly or indirectly, any person or entity which offers, develops, performs or
is engaged in services, products or systems which are competitive with the
business of Radica Group or any other products, services or systems hereafter
developed, produced or offered by Radica Group, to be determined at the relevant
time but not later than the commencement of such one-year period ("Companies'
Business"). During the Prohibition Period, Employee shall not, directly or
indirectly, become an owner or member, to the extent of an ownership interest of
five percent (5%) or more, of a joint venture, partnership, corporation or other
entity, or a consultant, employee, agent, officer or director of a corporation,
joint venture, partnership or other entity, which is competitive with, directly
or indirectly, the Companies' Business.
(b) Employee understands and agrees that he has been exposed to (or had access
to), and may be further exposed to (or have access to), confidential
information, knowhow,
<PAGE>
knowledge, data, techniques, computer software and hardware, and trade secrets
of Radica Group or related to the Companies' Business, including, without
limitation, customer or supplier requirements, notes, drawings, writings,
designs, plans, specifications, records, charts, methods, procedures, systems,
price lists, financial data, records, and customer or supplier lists
(collectively "Confidential Information"). Notwithstanding the above, the
following shall not be considered "Confidential Information" within the meaning
of this section: (a) information known to Employee or to the public at the date
of this Agreement; and (b) information which hereafter becomes known to the
public through no fault of Employee. Accordingly, except as permitted or
required in the performance of his duties for Radica Group, Employee agrees not
to disclose, divulge, make public, utilize, communicate or use, whether for his
own benefit or for the benefit of others, either directly or indirectly, any
Confidential Information relating to the Companies's Business unless
specifically authorized in writing by Radica to do so.
(c) Employee shall promptly communicate and disclose to Radica Group all
information, inventions, improvements, discoveries, knowhow, methods,
techniques, processes, observations and data ("Proprietary Information")
obtained, developed, invented or otherwise discovered by him in the course of
this employment. All written materials, records, computer programs or data and
documents made by Employee or coming into his possession during the employment
period concerning any Proprietary Information used or developed by Radica Group,
or by Employee, shall be the sole exclusive property of Radica Group. Employee
shall have no right, title or interest therein notwithstanding that he may have
purchased the medium on which such Proprietary Information is recorded.
(d) Upon Termination, Employee shall not take with him any of the Confidential
Information or Proprietary Information. Upon Termination, or at any time upon
the request of Radica, Employee shall promptly deliver all Confidential
Information and Proprietary information, and all copies thereof, to Radica Group
with no cost or charge to Radica Group. Upon request by Radica, Employee shall
promptly execute and deliver any documents necessary or convenient to evidence
ownership of the Confidential Information and Proprietary Information by Radica
Group, or the transfer and assignment of the Confidential Information and
Proprietary Information to Radica Group without cost or charge. The provisions
of this Section 7 shall survive any Termination of this Agreement.
BENEFIT AND BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon Radica and its successors and assigns, including but not limited to
any corporation, person or other entity which may acquire all or substantially
all of the assets and business of Radica or any corporation with or into which
it may be consolidated or merged. Radica may assign its rights and obligations
to another present or future member of Radica Group. The rights and obligations
of Employee hereunder may not be delegated or assigned, except that Employee
may, without the prior consent of any member of Radica Group, assign to his
spouse, or to a family member, proceeds of payments resulting from his death or
a disability which, in either case, occurs after a
<PAGE>
termination of this Agreement.
COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEVADA WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
ENTIRE AGREEMENT. This Agreement sets forth and is an integration of all of the
promises, agreements, conditions and understandings among the parties hereto
with respect to all matters contained or referred to herein, and all prior
promises, agreements, conditions, understandings, warranties or representations,
oral, written, express or implied, are hereby superseded and merged herein.
VALIDITY OF PROVISIONS. Should any provision(s) of this Agreement be void or
unenforceable in whole or in part, the remainder of this Agreement shall not in
any way be affected thereby, and such provision(s) shall be modified or amended
so as to provide for the accomplishment of the provision(s) and intentions of
this Agreement to the maximum extent possible.
MODIFICATIONS OR DISCHARGE. This Agreement shall not be deemed waived, changed,
modified, discharged or terminated in whole or in part, except as expressly
provided for herein or by written instrument signed by all parties hereto.
NOTICES. Any notice which either party may wish to give to the other parties
hereunder shall be deemed to have been given when actually received by the party
to whom it is addressed. Notices by Employee to either Radica or Radica USA
shall be sent to both of them. Notices hereunder may be sent by courier, mail,
telefax, telegram or telex, to the following addresses, or to such other
addresses as the parties may from time to time furnish to each other by like
notice:
To: Radica Games Limited
Suite R, 6/F
2-12 Au Pui Wan Street
Fo Tan
Hong Kong
Attention: Robert E. Davids
Telephone: (852) 2693 2238
Telefax: (852) 2695 9657
To: Employee:
Mr. David C.W. Howell
Che Keng Tuk Road
Sai Kung, New Territories, Hong Kong
<PAGE>
Telephone: 852-2791-1654
Telefax: 852-2791-1514
NUMBER; GENDER. In this Agreement, the masculine shall include the feminine and
neuter and vice versa, and the singular shall include the plural and vice versa,
as the context may reasonably require or permit.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
RADICA GAMES LIMITED
By:
DAVID C.W. HOWELL
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of December 15, 1998, by and among
Radica Games Limited, a Bermuda company, having a registered address at
Clarendon House, Church Street, Hamilton HM11, Bermuda, Disc, Inc., a Nevada
corporation (dba Radica Innovations), having an office at 13628A Beta Road,
Dallas, Texas 75244, and Lam Siu Wing, who resides at 7909 Aqua Vista Drive,
Plano, Texas 75025.
WHEREAS, Radica is engaged through its subsidiaries in designing and
manufacturing electronic and mechanical gifts and games for worldwide sale, and
ODM manufacturing for others;
WHEREAS, Radica Innovations is engaged in design services and engineering for
products manufactured by Radica;
WHEREAS, Employee has substantial executive management experience including
design and engineering experience;
WHEREAS, Radica Innovations desires to secure the services of Employee, and
Employee is willing to provide such services, each upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the parties agree as follows:
DEFINITIONS. For the purposes of this Agreement, the parties hereby adopt the
following definitions:
"Cause" means:
breach by Employee of a fiduciary obligation to any member of Radica Group;
commission by Employee of any act or omission to perform any act (excluding the
omission to perform any act attributable to Employee's Total Disability) which
results in serious adverse consequences to any member of Radica Group;
breach of any of Employee's agreements set forth in this Agreement including,
but not limited to, continual failure to perform substantially his duties with
Radica Group, excessive absenteeism and dishonesty;
any attempt by Employee to assign or delegate this Agreement or any of the
rights, duties, responsibilities, privileges or obligations hereunder without
the prior written consent of Radica (except in respect of any delegation by
Employee of his employment duties hereunder to other employees of Radica Group
in accordance with its usual business practice);
<PAGE>
Employee's arrest or indictment for, or written confession of, a felony or any
crime involving moral turpitude under the laws of the United States or any state
or of Hong Kong;
death of Employee;
declaration by a court that Employee is insane or incompetent to manage his
business affairs; or
the filing of any petition or other proceeding seeking to find Employee bankrupt
or insolvent.
"Dollars" and "US$" means United States dollars.
"Employee" means Lam Siu Wing.
"1994 Plan" means the 1994 stock option plan adopted by Radica, as amended from
time to time.
"Radica" means Radica Games Limited, a Bermuda company.
"Radica Group" means Radica, Radica Innovations and any other corporation or
other entity which at the relevant time is more than fifty percent (50%) owned,
directly or indirectly, by Radica.
"Radica Innovations" means Disc, Inc., a Nevada corporation.
"Termination" means, according to the context, the termination of this Agreement
or the cessation of rendering employment services by Employee.
"Total Disability" means Employee shall become disabled to an extent which
renders him unable to perform the essential functions of his job, with or
without reasonable accommodation, for a cumulative period of twelve (12) weeks
in any twelve (12) month period.
EMPLOYMENT.
Employee has previously been employed as Vice President, Engineering and as one
of the Directors of Radica. In such capacities, Employee has had responsibility
for design services and engineering affecting the Radica Group generally,
including Radica Innovations. All prior employment agreements and arrangements
between Radica Group and Employee shall be superceded and merged into this
Agreement, but so that employment of Employee shall continue without any break
in service and with no change in the title or status of Employee for purposes of
his employment by Radica Group, except that Employee shall be promoted to the
title of Executive Vice President,
<PAGE>
Engineering of Radica. Employee's employer within Radica Group shall
be Radica Innovations, but his duties shall extend to other members of Radica
Group including acting as a director of Radica. During his period of employment,
employee also agrees to serve in other executive capacities for Radica Group as
may be determined by the Board of Directors of Radica ("Board"). Employee shall
perform services of an executive nature consistent with his offices with Radica
Group as may from time to time be assigned or delegated to him by the Board.
Employee will devote his full business time and attention to his duties under
this Agreement.
Employee shall perform his duties under this Agreement principally in or around
Dallas, Texas. It is contemplated Employee will frequently travel to carry out
his duties under this Agreement, including travel to the offices of Radica Group
in Hong Kong, Nevada and California. Air travel and other travel arrangements
will comply with current Radica Group policies respecting class of travel, etc.
Radica Group will provide Employee, including his spouse and children, with
medical and dental benefits, and life insurance program, as provided to other
officers of Radica Group.
Employee shall have four (4) weeks paid vacation during each year of this
Agreement taken at such times as mutually convenient to Employee and Radica
Group.
TERM OF EMPLOYMENT.
This Agreement and Employee's employment hereunder shall commence as of December
15, 1998 and continue until the second anniversary of such date, and shall be
renewed annually at each December 15 anniversary date (commencing December 15,
1999) for an additional one year period so that the term hereof at each renewal
date shall be a two year period, unless a party to this Agreement gives notice
at least ninety (90) days prior to such renewal date that this Agreement shall
not be renewed, in which case this Agreement shall terminate at the end of the
ensuing year.
Notwithstanding Paragraph (a) above, this Agreement may be sooner terminated by
Radica for Cause, by Employee without consent of Radica, by Radica without
Cause, or by Radica in the event of the Total Disability of Employee.
On termination of this Agreement pursuant to Paragraph (a) above, or by Radica
for Cause, or by Employee without consent of Radica, all benefits and
compensation shall cease as of the date of such Termination. On termination of
this Agreement by Radica without Cause or in event of Total Disability of
Employee, all benefits and compensation shall continue for twelve (12) months
after such a Termination.
BUSINESS EXPENSE REIMBURSEMENT. Employee will be entitled to reimbursement by
Radica Group for the reasonable business expenses paid by him on
<PAGE>
behalf of Radica Group in the course of his employment hereunder on presentation
to Radica Group of appropriate vouchers (accompanied by receipts or paid bills)
setting forth information sufficient to establish:
the amount, date, and place of each such expense;
the business reason for each such expense and the nature of the business benefit
derived or expected to be derived as a result thereof; and
the names, occupations, addresses, and other information sufficient to establish
the business relationship to Radica Group of any person who was entertained by
Employee.
COMPENSATION. Radica Innovations agrees to pay Employee, and Employee agrees to
accept from Radica Innovations, during the first year after December 15, 1998,
for the services to be rendered by him hereunder a minimum salary at the rate of
US $160,000 per annum payable in arrears in monthly installments. Employee shall
receive annual salary reviews by the Board provided that such salary shall not
be reduced below US $160,000 per year.
Employee shall be considered for annual bonuses pursuant to the Radica Games
Bonus Policy for officers of Radica Group. Such Radica Games Bonus Policy
describes potential amounts of bonus which may be earned in respect of each
fiscal year, but with no mandatory amount for any particular employee.
If Radica Group institutes a retirement, bonus or other benefit plan which
applies generally to executive officers of Radica Group of similar status as
Employee, Employee shall be entitled to participate therein, but not to the
extent such benefits would be duplicative of the benefits herein.
All payments by Radica Group shall be subject to required withholdings including
taxes.
STOCK OPTIONS.
(a) (i) Nothing in this Agreement shall affect stock options previously granted
to Employee, which shall continue to be governed by the 1994 Plan and the terms
of the grant of such stock options.
(ii) Additionally, at or promptly after the end of each of Radica's 1999, 2000
and 2001 fiscal years (i.e., fiscal years ending December 31), Radica shall
grant to Employee an option (up to three such options in total) to purchase
twenty-five thousand (25,000) shares (up to 75,000 shares in the aggregate) of
the common stock of Radica at the then applicable market price, subject to the
terms and conditions of this Section 6 and the 1994 Plan; provided, however,
that each such grant shall be subject to the conditions that (x) Employee
continues to be employed in good standing by Radica Group through the relevant
date of grant and (y) sufficient shares are available under the 1994 Plan to
cover Employee and other similarly situated executives (i.e. adequate shares
must be available
<PAGE>
for this special program in the option pool under the 1994 Plan). If such
quantity of shares is not available, the grant dates will roll forward by one
year per year until such shares are available. Such stock options under this
clause (ii) are herein called the "Stock Options".
(iii) The Stock Options shall vest and become exercisable 20% per year for each
year Employee is employed by Radica Group following the date of grant,
commencing at the first anniversary of the date of grant.
(b) The number of shares subject to the Stock Options will be adjusted for stock
splits and reverse splits; provided that such number of shares shall not be
adjusted if Radica should otherwise change or modify its capitalization,
including but not limited to the issuance by Radica of new securities (including
options or convertible securities), ESOP's or other employee stock plans. It is
the intent of the parties that the stock subject to the Stock Options shall be
subject to dilution, except for stock splits and reverse splits.
(c) Any other provision hereof to the contrary notwithstanding, (i) as of the
date of Termination in the event of Termination pursuant to Section 3(a) or
Termination by Radica for Cause or by Employee without consent of Radica, or
(ii) twelve (12) months after the date of Termination in the event of
Termination by Radica without Cause or the Total Disability of Employee, (each
of such applicable dates being called a "Determination Date"), Employee shall
forfeit the Stock Options (measured by percentages of the stock subject to the
Stock Options) and they shall expire as follows:
if the Determination Date is within the first year after the date the Stock
Option is granted (the "Grant Date") then Employee shall forfeit 100% of the
stock subject to the Stock Option;
if the Determination Date is after the end of said first year and within the
second year after the Grant Date, then Employee shall forfeit 80% of the stock
subject to the Stock Option;
if the Determination Date is after the end of said second year and within the
third year after the Grant Date, then Employee shall forfeit 60% of the stock
subject to the Stock Option;
if the Determination Date is after the end of said third year and within the
fourth year after the Grant Date, then Employee shall forfeit 40% of the stock
subject to the Stock Option; or
if the Determination Date is after the end of said fourth year and within the
fifth year after the Grant Date, then Employee shall forfeit 20% of the stock
subject to the Stock Option.
In any event each Stock Option shall expire to the extent not previously
exercised on the tenth anniversary of the Grant Date. Otherwise, Employee may at
any time within ninety
<PAGE>
(90) days following the Determination Date, exercise his right to purchase stock
subject to the Stock Options, but subject to the foregoing provisions respecting
vesting and forfeitures.
(e) Employee shall have no right to sell, alienate, mortgage, pledge, gift or
otherwise transfer the Stock Options or any rights thereto, except by will or by
the laws of descent and distribution, and except as specifically contemplated in
the 1994 Plan. In any event, any transfer must comply with applicable state and
federal securities laws.
NON-COMPETE; CONFIDENTIALITY.
During the term of employment of Employee, and for a period of one year after
any Termination of such relationship or employment for any reason (either by
Employee or Radica), with or without cause, voluntarily or involuntarily (the
period of employment plus such additional year being called the "Prohibition
Period"), Employee agrees that he will not engage in, be employed by or become
affiliated with, in the United States of America or anywhere else in the world,
directly or indirectly, any person or entity which offers, develops, performs or
is engaged in services, products or systems which are competitive with the
business of Radica Group or any other products, services or systems hereafter
developed, produced or offered by Radica Group, to be determined at the relevant
time but not later than the commencement of such one-year period ("Companies'
Business"). During the Prohibition Period, Employee shall not, directly or
indirectly, become an owner or member, to the extent of an ownership interest of
five percent (5%) or more, of a joint venture, partnership, corporation or other
entity, or a consultant, employee, agent, officer or director of a corporation,
joint venture, partnership or other entity, which is competitive with, directly
or indirectly, the Companies' Business.
Employee understands and agrees that he has been exposed to (or had access to),
and may be further exposed to (or have access to), confidential information,
knowhow, knowledge, data, techniques, computer software and hardware, and trade
secrets of Radica Group or related to the Companies' Business, including,
without limitation, customer or supplier requirements, notes, drawings,
writings, designs, plans, specifications, records, charts, methods, procedures,
systems, price lists, financial data, records, and customer or supplier lists
(collectively "Confidential Information"). Notwithstanding the above, the
following shall not be considered "Confidential Information" within the meaning
of this section: (a) information known to Employee or to the public at the date
of this Agreement; and (b) information which hereafter becomes known to the
public through no fault of Employee. Accordingly, except as permitted or
required in the performance of his duties for Radica Group, Employee agrees not
to disclose, divulge, make public, utilize, communicate or use, whether for his
own benefit or for the benefit of others, either directly or indirectly, any
Confidential Information relating to the Companies's Business unless
specifically authorized in writing by Radica to do so.
Employee shall promptly communicate and disclose to Radica Group all
information, inventions, improvements, discoveries, knowhow, methods,
techniques, processes,
<PAGE>
observations and data ("Proprietary Information") obtained, developed, invented
or otherwise discovered by him in the course of this employment. All written
materials, records, computer programs or data and documents made by Employee or
coming into his possession during the employment period concerning any
Proprietary Information used or developed by Radica Group, or by Employee, shall
be the sole exclusive property of Radica Group. Employee shall have no right,
title or interest therein notwithstanding that he may have purchased the medium
on which such Proprietary Information is recorded.
Upon Termination, Employee shall not take with him any of the Confidential
Information or Proprietary Information. Upon Termination, or at any time upon
the request of Radica, Employee shall promptly deliver all Confidential
Information and Proprietary information, and all copies thereof, to Radica Group
with no cost or charge to Radica Group. Upon request by Radica, Employee shall
promptly execute and deliver any documents necessary or convenient to evidence
ownership of the Confidential Information and Proprietary Information by Radica
Group, or the transfer and assignment of the Confidential Information and
Proprietary Information to Radica Group without cost or charge. The provisions
of this Section 7 shall survive any Termination of this Agreement.
BENEFIT AND BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon Radica and Radica Innovations, their successors and assigns,
including but not limited to any corporation, person or other entity which may
acquire all or substantially all of the assets and business of Radica or Radica
Innovations or any corporation with or into which they may be consolidated or
merged. Radica and Radica Innovations may assign their rights and obligations to
another present or future member of Radica Group. The rights and obligations of
Employee hereunder may not be delegated or assigned, except that Employee may,
without the prior consent of any member of Radica Group, assign to his spouse,
or to a family member, proceeds of payments resulting from his death or a
disability which, in either case, occurs after a termination of this Agreement.
COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEVADA WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
ENTIRE AGREEMENT. This Agreement sets forth and is an integration of all of the
promises, agreements, conditions and understandings among the parties hereto
with respect to all matters contained or referred to herein, and all prior
promises, agreements, conditions, understandings, warranties or representations,
oral, written, express or implied, are hereby superseded and merged herein.
VALIDITY OF PROVISIONS. Should any provision(s) of this Agreement be void or
<PAGE>
unenforceable in whole or in part, the remainder of this Agreement shall not in
any way be affected thereby, and such provision(s) shall be modified or amended
so as to provide for the accomplishment of the provision(s) and intentions of
this Agreement to the maximum extent possible.
MODIFICATIONS OR DISCHARGE. This Agreement shall not be deemed waived, changed,
modified, discharged or terminated in whole or in part, except as expressly
provided for herein or by written instrument signed by all parties hereto.
NOTICES. Any notice which either party may wish to give to the other parties
hereunder shall be deemed to have been given when actually received by the party
to whom it is addressed. Notices by Employee to either Radica or Radica
Innovations shall be sent to both of them. Notices hereunder may be sent by
courier, mail, telefax, telegram or telex, to the following addresses, or to
such other addresses as the parties may from time to time furnish to each other
by like notice:
To: Disc, Inc.
(dba Radica Innovations).
13628A Beta Road
Dallas, Texas 75244
U.S.A.
Attention: Robert E. Davids
Telephone: (972) 490-4241
Telefax: (972) 490-0765
To: Radica Games Limited
Suite R, 6/F
2-12 Au Pui Wan Street
Fo Tan
Hong Kong
Attention: David C.W. Howell
Telephone: (852) 2693 2238
Telefax: (852) 2695 9657
To: Employee:
Mr. Lam Siu Wing
7909 Aqua Vista Drive
Plano, Texas 75025
U.S.A.
Telephone: (972) 491-2915
Telefax: (972) 491-2915
NUMBER; GENDER. In this Agreement, the masculine shall include the feminine and
neuter and vice versa, and the singular shall include the plural and vice versa,
as the context may reasonably require or permit.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
RADICA GAMES LIMITED
By:
DISC, INC. (dba RADICA INNOVATIONS)
By:
LAM SIU WING
