UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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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 March 31, 1999
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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.)
591 Skippack Pike, Suite 300, Blue Bell, Pennsylvania 19422
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(Address of Principal Executive Offices) (Zip Code)
(215) 619-7777
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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
March 31, 1999 was 14,371,000.
<PAGE>
Capita Research Group, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three month periods end March 31, 1999 and 1998
Forward - Looking Statements
This report contains forward-looking statements (within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended), representing
the Company's current expectations and beliefs concerning future events. When
used in this report, the words "believes," "estimates," "plans," "expects,"
"intends," "anticipates," and similar expressions as they relate to the Company
or its management are intended to identify forward-looking statements. The
actual results of the Company could differ materially from those indicated by
the forward-looking statements because of various risks and uncertainties
related to and including, without limitation, the Company's ability to obtain
sufficient financing, market acceptance of the Company's technology, competition
from well-established and well-funded competitors, the recruitment and retention
of qualified personnel, the achievement by the Company and its suppliers and
customers of year 2000 compliance in a timely and cost efficient manner, general
economic conditions, changes in governmental rules and regulations applicable to
the Company, and other risks set forth in this report and in the Company's other
filings with the Securities and Exchange Commission. These risks and
uncertainties are beyond the ability of the Company to control, in many cases,
and the Company cannot predict the risks and uncertainties that could cause
actual results to differ materially from those indicated by the forward-looking
statements.
Results of Operations for the Three Months Ended March 31, 1999 and 1998
During the first three 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 technical
development, creation of corporate infrastructure, and initiation of a sales
solicitation program among prospective media and advertising company prospects.
Results of Operations for the quarters ended March 31, were as follows. In the
three month period ended March 31, 1998, Capita did not complete a sale of its
copy testing service. Similarly, Capita's expenses of $519,996 reflect its
start-up of testing operations along with legal, accounting, and other costs
related to the reverse acquisition into Royal American and the filing of form
10-SB with the SEC. In the three month period ended March 31, 1999, Capita was
actively involved in further technical development and testing of its system.
Revenue for the quarter was $4,750. Total expenses of $202,019 reflect ongoing
development of the product and legal, accounting and other expenses, which
include investor and public relations costs. Expenses of $202,019 in 1999 were
$317,577 less than 1998, which were $519,596. In 1998 the expenses were higher
due to the expenses of registering with the SEC and the Company issuing common
stock to employees and service providers for services.
Liquidity and Capital Resources at March 31, 1999
With start-up losses expected to continue, the Company's ability to sustain
operations is dependent on its ability to raise added investment capital. During
the three months ended March 31, 1999, the Company received cash proceeds of $
<PAGE>
98,000 from the sale of common stock. In addition, the Company issued common
stock for services in the amount of $102,000. These transactions combined with
operating losses had the effect of increasing the stockholder deficit by $19,543
to a deficit of $188,000 at March 31, 1999, versus a deficit of $168,000 at
December 31, 1998.
Revenue
The Company has been developing its professional research staffing and
infrastructure to support large-scale sales volume. While the Company has had
media research staff available, it was determined in the last quarter of 1998
that a substantial upgrade of its research staff was necessary, in order to
properly position the Company's advanced technology in the media industry.
Starting in September 1998, the Company embarked on a program of recruiting the
most technologically advanced researchers. This culminated in the hiring of a
new research director during the last week of February 1999. Simultaneous to
that event, the Company interviewed, and subsequently retained, three of the
leading experts in media research, television copy-testing, and internet
research, to structure the Company's product offerings, pricing and
deliverables, as well as to determine the optimal methodology for integrating
Engagement IndexSM measurement with traditional research deliverables.
At this time, such staffing is available and has developed sufficient know-how
for expanded marketing efforts to commence. The Company is currently in
discussions with a number of major television networks, multi-brand companies,
as well as other research companies on research projects employing the Company's
Engagement Testing System(TM). The Company expects to record an incidental
amount of revenues from these activities during the second quarter, but an
amount exceeding that of the first quarter. During the third quarter 1999, the
Company expects a further increase in revenues, but that amount is not presently
determinable. At present, the Company is either planning projects ordered or
bidding on a number of media research and copy-testing projects for various
clients and prospects. It is not known what revenues may ensue from such
activities.
Gross Margin
The Company realized a gross loss during the quarter due to a lack of testing
activity, and due to the fact that overhead allocation is not being fully
absorbed. The Company expects that it can realize a gross margin upon the
performance of significant revenues, due to that fact that the production of
research services has an inherent gross margin on a variable cost basis. Once
the Company can reach a benchmark of sales, overhead allocation can be fully
absorbed, producing a positive gross margin overall.
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Balance Sheets as of December 31, 1998 and Mar 31, 1999
(Development Stage Company)
ASSETS
<CAPTION>
March 31, December 31,
Current Assets 1999 1998
-------------- ----------- -----------
<S> <C> <C>
Cash $ 434 $ 19,301
Accounts Receivable 7,390 1,000
Prepaid Expenses 35,680 9,508
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Total Current Assets 43,504 29,809
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Equipment
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Equipment - Net 117,725 92,511
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Other Assets
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Notes Receivable 15,035 15,534
Deposits -- 3,560
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Total Other Assets 15,035 19,094
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Total Assets $ 176,264 $ 141,414
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LIABILITIES and STOCKHOLDERS' DEFICIENCY
Current Liabilities
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Accounts payable, Accrued Expenses & A/P Lease $ 244,015 $ 186,052
Current portion of obligations (capital leases) 14,281 14,281
Due to stockholders 100,000 100,000
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Total Current Liabilities 358,296 300,333
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Long-term obligations under capital leases, 6,044 9,614
net of current portion ----------- -----------
Stockholders' Deficiency
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Common Stock, Capita Research Group, Inc.
$0.001 par value, 100,000,000 shares authorized;
issued & outstanding, 14,371,000 March 31, 1999, 14,371 13,563
13,562,900 shares, December 31, 1998
Additional paid-in capital 2,380,386 2,181,114
Deficit accumulated during
development stage (2,582,833) (2,363,210)
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Total stockholders' deficiency (188,076) (168,533)
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Total Liabilities & Stockholders Deficiency $ 176,264 $ 141,414
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</TABLE>
See Accompanying notes
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Statements of Operations for the Three Months Ended
March 31, 1999 and 1998
(Development Stage Company)
<CAPTION>
Three Months Ended
Mar 31
1999 1998
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<S> <C> <C>
Revenue $ 4,750 $ --
Cost of Sales 18,300 6,291
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Gross profit (loss) (13,550) (6,291)
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Operating expenses
Selling Cost 9,691 5,304
Technical Cost 19,903 7,221
Administrative Compensation 55,266 63,020
Other General and Administrative 117,159 444,051
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Total operating expenses 202,019 519,596
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Other Income (Expense)
Interest expense (4,054) (3,571)
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Loss Before Interest and Taxes (219,623) (529,458)
Provision for Income Taxes -- --
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Net Loss $ (219,623) $ (529,458)
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Net Loss Per Share, Basic and Diluted $ (0.02) $ (0.07)
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Weighted Average Shares Outstanding 13,926,615 7,368,974
============ ============
</TABLE>
See Accompanying notes
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Statements of Cash Flows for the Three Months Ended
(Development Stage Company)
<CAPTION>
Three Months Ended
Mar 31
1999 1998
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<S> <C> <C>
Operating Activities
Net Loss $(219,623) $(529,458)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued for salaries, rent
consulting and fixed assets 102,011 75,675
Depreciation 14,550 8,400
Writeoff of organization cost -- 19,637
Changes in Operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (6,390) 2,000
Other assets 4,059 1,328
PrePaid Expenses (26,172) --
Accounts payable and Accrued Expenses 57,963 (28,592)
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Net cash used in operating activities (73,601) (451,010)
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Investing Activities
Purchase of equipment (39,764) (9,509)
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Net cash used in investing activities (39,764) (9,509)
Financing Activities
Proceeds from issuance of common stock 98,068 455,885
Repayment of capital lease obligations (3,570) --
Repayment of loans -- (6,000)
Net cash provided by financing activities 94,498 449,885
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Net Increase ( Decrease) in cash (18,867) (10,634)
Cash, Beginning 19,301 15,190
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Cash, Ending $ 434 $ 4,556
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Supplemental Disclosure of Noncash Financing Activities 1998:
Note Payable converted into common stock $ 60,000
Stockholder loans converted into common stock $ 116,825
</TABLE>
See Accompanying notes
<PAGE>
Capita Research Group, Inc. and Subsidiary
( a development stage company )
Note to Consolidated Financial Statements
Three month periods end March 31, 1999 and 1998
1. 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.
2. 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 Annual Report Form 10 KSB for
the year ended December 31, 1998.
3. Results of operations for the three-month period ended March 31, 1999, are
not necessarily indicative of the results to be expected for the full year.
4. On March 10, 1999, the Company entered into an agreement with Quaker Capital
Markets Group, Inc. ("Quaker"), to render advisory services to the Company in
its attempt to raise up to $5,000,000 in equity capital. In connection
therewith, the Company agreed to pay Quaker $10,000 in cash, $15,000 in common
stock and a percentage of equity capital raised.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
theRegistrant has duly caused this report to be signed on its behalf by
theundersigned thereunto duly authorized.
CAPITA RESEARCH GROUP, INC.
Registrant
Dated: May 13, 1999 /s/ David B. Hunter
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David B. Hunter President and
Chief Executive Officer
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