LOCALLY listed electronics company Watary International has rejected allegations that development of hi-tech virtual reality (VR) products lost the company between $60 million and $80 million. Industry sources claimed the company planned to produce 200,000 VR units by March, 1996, but suffered multi-million dollar losses after failing to develop liquid crystal displays with sufficient definition for the headsets. Managing director Horace Cheng Lung-don said: 'It is nonsense. If people read our balance sheet they will know we just do not have such an amount of money to inject into one single project.' Mr Cheng said Watary had yet to decide whether to start production of VR machines. He declined to comment on whether the company had conducted a feasibility study on the products, saying only that the production of VR products was a 'very sensitive' topic at the moment. Virtual reality is considered a major growth area for the computer games industry, which is suffering from declining sales and increasing competition worldwide. However, research and development in the fledgling industry is extremely capital intensive, market experts said. Instead of commenting on its VR plan, Mr Cheng said the toy company would concentrate on new, simpler items which were cheaper to develop. 'The production of talkback clocks and dolls will be our focus,' he said. He revealed that of the $123 million generated by a rights issue approved by shareholders on Friday, only $20 million will be spent on manufacturing. The rest will be used to develop a money-lending business and a brokerage, Magnum International Securities, which Watary bought in September. Mr Cheng insisted the move represented a diversification of the company's business rather than a switch of business focus. He blamed keen international competition for an interim loss of $25.02 million for the six months to September 30. The rumours have battered Watary's shares which have lost 23 per cent of their value since January 1. They are presently trading on a price-earnings ratio of 11.5.