UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 1998
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or
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
Commission file number: 1-14025
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Capita Research Group, Inc.
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(exact name of registrant as specified in its charter)
Nevada 88-0072350
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
900 East Eighth Avenue, King of Prussia, Pennsylvania 19406
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(Address of Principal Executive Offices) (Zip Code)
(610) 768-8070
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(Issuer's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months(or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares outstanding of the registrant's common stock as of
September 30, 1998 was 13,297,000.
<PAGE>
Capita Research Group, Inc.
Balance Sheets as of December 31, 1997 and Sept 30, 1998
(Development Stage Company)
<TABLE>
<CAPTION>
ASSETS
(UNAUDITED)
Sept 30, December 31, Increase
Current Assets 1998 1997 (Decrease)
-------------- ---- ---- ----------
<S> <C> <C> <C>
Cash $ 91,384 $ 15,190 76,194
Accounts Receivable 25,000 2,000 23,000
Prepaid Expenses 3,984 -- 3,984
----------- ----------- -----------
Total Current Assets 120,368 17,190 103,178
Equipment
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Equipment - Net 96,971 85,083 11,888
----------- ----------- -----------
Other Assets
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Notes Receivable 10,535 19,638 (9,103)
Deposits 7,160 4,928 2,232
----------- ----------- -----------
Total Other Assets 17,694 24,566 (6,872)
Total Assets $ 235,034 $ 126,839 108,195
=========== =========== ===========
LIABILITIES and STOCKHOLDERS' DEFICIENCY
Current Liabilities
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Accounts payable and Accrued Expenses $ 168,550 $ 161,008 7,542
Notes payable -- 60,000 (60,000)
Due to stockholders 100,000 225,791 (125,791)
----------- ----------- -----------
Total Current Liabilities 268,550 446,799 (178,249)
Stockholders' Deficiency
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Common Stock, NextGen Systems, Inc.
$1.00 par value, 3,000,000 shares authorized;
issued & outstanding, 337,435 in 1997 -- 337,435 (337,435)
Common Stock, Media Solutions International, Inc.
$.01 par value, 10,000,000 shares authorized;
issued & outstanding, 1,260,100 in 1997 -- 12,601 (12,601)
Common Stock, Capita Research Group, Inc.
$0.001 par value, 100,000,000 shares authorized;
issued & outstanding, 13,297,000 at Sept 30, 1998 13,297 -- 13,297
Additional paid-in capital 2,114,880 532,533 1,582,347
Deficit accumulated during
development stage (2,161,693) (1,202,529) (959,164)
----------- ----------- -----------
Total stockholders' deficiency (33,516) (319,960) 286,444
Total Liabilities & Stockholders Deficiency $ 235,034 $ 126,839 108,195
=========== =========== ===========
</TABLE>
See Accompanying notes
<PAGE>
Capita Research Group, Inc.
Statements of Operations for the Nine Months Ended
Sept 30, 1997 and 1998
(Development Stage Company)
<TABLE>
<CAPTION>
(UNAUDITED)
Nine Months Ended
Sept 30
1998 1997
---- ----
<S> <C> <C>
Revenue $ 85,500 $ 86,804
Cost of Sales 88,202 109,904
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Gross Margin (2,702) (23,100)
Selling, Technical, General & Admin
Selling Cost 37,400 47,921
Technical Cost 151,045 60,375
Administrative Compensation 370,673 114,988
Other General & Administrative 388,490 295,930
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Total S.G.&A 947,608 519,214
Other Income (Expense)
Interest expense (8,854) (14,589)
Loss Before Interest and Taxes $ (959,164) $ (556,903)
Provision for Income Taxes -- --
------------ ------------
Net Loss $ (959,164) $ (556,903)
============ ============
Net Loss Per Share, Basic and Diluted (0.09) (0.31)
Weighted Average Shares Outstanding 10,675,763 1,782,938
</TABLE>
See Accompanying notes
<PAGE>
Capita Research Group, Inc.
Statements of Operations for the Three Months Ended
Sept 30, 1997 and 1998
(Development Stage Company)
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Ended
Sept 30
1998 1997
---- ----
<S> <C> <C>
Revenue $ 47,500 $ --
Cost of Sales 41,988 --
------------ ------------
Gross Margin 5,512 --
Selling, Technical, General & Admin
Selling Cost 9,898 --
Technical Cost 9,787 11,500
Administrative Compensation 42,747 31,050
Other General & Administrative 127,328 64,580
------------ ------------
Total S.G.&A 189,760 107,130
Other Income (Expense)
Interest expense (2,654) (13,296)
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Loss Before Interest and Taxes (186,902) (120,426)
Provision for Income Taxes -- --
------------ ------------
Net Loss $ (186,902) (120,426)
============ ============
Net Loss Per Share, Basic and Diluted (0.01) (0.08)
Weighted Average Shares Outstanding 12,717,610 1,464,157
</TABLE>
See Accompanying notes
<PAGE>
Capita Research Group, Inc.
Statements of Cash Flows for the Nine Months Ended
(Development Stage Company)
<TABLE>
<CAPTION>
(UNAUDITED)
Nine Months Ended
September 30
1998 1997
---- ----
Operating Activities
<S> <C> <C>
Net Loss $(959,164) $(556,942)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued for salaries and
consulting 377,708 --
Depreciation 17,105 12,982
Changes in Operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (23,000) (44,848)
Other assets 6,872 (4,936)
PrePaid Expenses (3,984) --
Accounts payable & Accrued Expenses 7,542 235,544
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Net cash used in operating activities (576,921) (358,200)
Investing Activities
Purchase of equipment (28,993) (15,076)
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Net cash used in investing activities (28,993) (15,076)
Financing Activities
Proceeds from issuance of common stock 691,075 350,500
Proceeds (Repayment) from other loans -- (8,300)
Proceeds (Repayment) of Stockholder loans (8,966) 33,226
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Net cash provided by financing activities 682,109 375,426
Net Increase ( Decrease) in cash 76,195 2,150
Cash, Beginning 15,190 639
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Cash, Ending $ 91,385 $ 2,789
========= =========
</TABLE>
Supplemental Disclosure of Noncash Financing Activities :
Note Payable converted into common stock $ 60,000
Stockholder loans converted into common stock $ 116,825
<PAGE>
Note to Consolidated Financial Statements
The accompanying consolidated financial statements of Capita Research
Group, Inc. and its subsidiary reflect all adjustments and disclosures, which
are, in the opinion of management, necessary for a fair presentation of interim
results. The financial information has been prepared in accordance with Capita's
customary accounting practices and has not been audited.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission (SEC) rules and regulations. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make certain estimates and assumptions that
affect the amount reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. These interim financial
statements should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the financial
statements and notes thereto included in Capita's Form 10-SB/A for the year
ended December 31, 1997.
Results of operations for the nine-month period ended September 30,
1998, are not necessarily indicative of the results to be expected for the full
year.
<PAGE>
Capita Research Group, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations for the Nine Months Ended September 30, 1998 and 1997
As disclosed in Form 10-SB/A filed in July 1998, Media Solutions International
(MSII) (a predecessor of Capita Research) licensed the rights from Media
Solutions (a predecessor of Capita Research) to continue the development and
selling of MediaLink. MediaLink is a software system used by marketers to manage
Direct Response Television, "DRTV", advertising campaigns. During the first nine
months of 1997, MSII was actively engaged in marketing its product and providing
technical support to its clients. As also disclosed in the Form 10-SB/A, during
the first nine months of 1998, having previously sold the MediaLink line of
business, and having obtained the rights to commercialize the NASA software,
Media Solutions was engaged in developing and launching a new line of business
directed towards advertising and media copy testing. In addition to validating
its testing system for commercial use, this involved substantial ongoing
technical development, creation of corporate infrastructure, and initiation of a
sale solicitation program among prospective media and advertising company
prospects. Currently, the company is devoting substantially all its efforts in
establishing the advertising and media copy testing business and cannot predict
when these planned principal operations will commence.
For these reasons, substantially all of the material changes from period to
period in the respective Consolidated Statements of Operations for the nine
months ended September 30, 1998, reflect a basic change of business operations
and not a change in comparable operating results. Accordingly, in the period
ended September 30, 1997 Media Solutions and MSII generated revenue of $86,804
from sales of its MediaLink software product. Total expenses of $643,707 were
incurred largely in connection with system sales and support activities. In the
nine-month period ended September 30, 1998 Capita Research Group, Inc. "Capita"
had sales of $ 85,500 of its copy testing service. This accounts for the entire
period-to-period change in revenue. The gross margin for the nine months ended
September 30, 1998 was a negative $2,706 (3% negative), however, as our testing
process has improved the gross margin for the three months ended September 30,
1998 was a positive $5,512 (12 % positive). Further gains in gross margin are
expected with anticipated sales increases and further technical and operational
improvements to the testing process. Capita's expenses of $1,038,679 reflect the
technical development of the product, development of an infrastructure, and the
start-up of testing operations. General and administrative expenses include
costs of approximately $104,490 expense which are attributable to legal,
accounting, and other costs related to the reverse acquisition into Royal
American and the filing of the Form 10-SB/A with the SEC.
Liquidity and Capital Resources at September 30, 1998
With losses expected to continue in the foreseeable future, the Company's
ability to sustain operations is dependent on its ability to raise added
investment capital. During the nine months period ended September 30, 1998 the
company received cash proceeds of $691,075 from the sale of its common stock. In
consideration of technical and management services, the Company issued common
stock of $337,708 and issued $176,825 of common stock in exchange for
shareholder loans. At September 30, 1998 the financial condition remained
impaired with the working capital shortfall being met primarily from the
proceeds of the issuance of common stock. The above transactions net of the
operating loss had the effect of reducing the total stockholder deficiency by
$286,444 to a deficit of $33,516 at September 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITA RESEARCH GROUP, INC.
Registrant
Dated: November 12, 1998 /s/ David B. Hunter
- ------------------------ -------------------
David B. Hunter
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 91384
<SECURITIES> 0
<RECEIVABLES> 25000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 120368
<PP&E> 190137
<DEPRECIATION> (93166)
<TOTAL-ASSETS> 235034
<CURRENT-LIABILITIES> 268550
<BONDS> 0
0
0
<COMMON> 13297
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 235034
<SALES> 85500
<TOTAL-REVENUES> 85500
<CGS> 0
<TOTAL-COSTS> 88202
<OTHER-EXPENSES> 947608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8854
<INCOME-PRETAX> (959164)
<INCOME-TAX> 0
<INCOME-CONTINUING> (959164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (959164)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
