U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-QSB
[x] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1999
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.
---------------------------
(Exact name of Registrant as specified in its charter)
Nevada 88-072350
---------------------- -----------------------
(State of incorporation) (IRS Employer ID Number)
591 Skippack Pike, Blue Bell, PA 19422 19422
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(215) 619-7777
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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
--- ---
The number of shares outstanding of the registrant's common stock as of
September 30, 1999 was 20,295,946.
<PAGE>
<TABLE>
<CAPTION>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
BALANCE SHEETS AS OF DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
(DEVELOPMENT STAGE COMPANY)
ASSETS
September 30, December 31,
CURRRENT ASSETS 1999 1998
--------------- ------------ -----------
<S> <C> <C>
Cash $ 159,596 $ 19,301
Accounts receivable 13,750 1,000
Interest receivable 16,053 --
Prepaid expenses 22,538 9,508
------------ -----------
Total current assets 211,937 29,809
------------ -----------
EQUIPMENT, NET 153,873 92,511
------------ -----------
OTHER ASSETS
------------
Notes and other receivables 34,435 15,534
------------ -----------
Deposits -- 3,560
------------ -----------
Total other assets 34,435 19,094
------------ -----------
$ 400,245 $141,414
------------ -----------
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
- -------------------
Accounts payable and accrued expenses $ 147,626 $186,052
Current portion of obligations capital leases 22,639 14,261
Loan Payable 300,000 --
Due to Stockholders -- 100,000
------------ -----------
Total current liabilities 470,265 300,333
------------ -----------
Long-term obligations under capital leases, 25,377 9,614
net of current portion ------------ -----------
STOCK HOLDER'S DEFICIENCY
-------------------------
Common Stock, Capita Research Group, Inc,
$0.001 par value, 100,000,000 shares
authorized; Issued and outstanding,
20,295,946 shares September 30, 1999,
13,562,900 shares, December 31, 1998 20,296 13,563
Additional paid-in capital 3,857,663 2,181,114
Deficit accumulated during development stage (3,135,787) (2,363,210)
------------ -----------
742,171 (168,533)
Stock subscription receivable (837,568) --
------------ -----------
Total stockholders' deficiency (95,397) (168,533)
------------ -----------
$ 400,245 $141,414
------------ -----------
</TABLE>
See Accompanying notes
2
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED
SEPTEMBER 30, 1999 and 1998
(DEVELOPMENT STAGE COMPANY)
Three Months Ended
September 30
1999 1998
------------ ------------
REVENUES $ 22,750 $ 47,500
COST OF SALES 67,091 41,988
------------ ------------
GROSS PROFIT LOSS (44,341) 5,512
------------ ------------
OPERATING EXPENSES
Selling 5,155 9,898
Technical 45,389 9,787
Research 13,932
Administrative 41,899 42,747
Other general & administrative 194,292 127,328
------------ ------------
TOTAL OPERATING EXPENSES 300,667 189,760
------------ ------------
OTHER INCOME (EXPENSE)
Interest Income 12,533 --
Interest expense (1,118) (2,654)
------------ ------------
Total other Income (expense) 11,415 (2,654)
------------ ------------
LOSS BEFORE INCOME TAXES (333,593) (186,902)
------------ ------------
Provision for Income Taxes -- --
------------ ------------
NET LOSS $ (333,593) $ (186,902)
NET LOSS PER SHARE, BASIC AND DILUTED $(0,02) $ (0.01)
------------ ------------
WEIGHTED AVERAGE SHARES OUTSTANDING 19,821,545 12,717,610
------------ ------------
See Accompanying notes
3
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 and 1998
(DEVELOPMENT STAGE COMPANY)
Nine Months Ended
September 30
1999 1998
------------ ------------
REVENUES $ 55,000 $ 85,500
COST OF SALES 126,063 88,202
------------ ------------
GROSS PROFIT LOSS (71,063) (2,702)
------------ ------------
OPERATING EXPENSES
Selling 18,716 37,400
Technical 89,940 151,045
Research 33,836 --
Administrative 142,312 370,673
Other general & administrative 420,583 388,490
------------ ------------
TOTAL OPERAT1NG EXPENSES 705,387 947,608
------------ ------------
OTHER INCOME (EXPENSE)
Interest Income 16,546 --
Interest expense (12,673) (8,854)
------------ ------------
Total other Income (expense) 3,873 (8,854)
------------ ------------
LOSS BEFORE INCOME TAXES (772,577) (959,164)
Provision for Income Taxes -- --
------------ ------------
NET LOSS $ (772,577) $ (959,164
NET LOSS PER SHARE, BASIC AND DILUTED (0.05) (0.09)
------------ ------------
WEIGHTED AVERAGE SHARES OUTSTANDING 16,244,218 10,675,763
------------ ------------
See Accompanying notes
4
<PAGE>
<TABLE>
<CAPTION>
CAPITA RESEARCH GROUP, INC. AND
SUBSIDIARY
STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 and 1998
(DEVELOPMENT STAGE COMPANY)
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(772,577) $(772,262)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock Issued for salaries, rent
consulting and fixed assets 271,488 331,170
Depreciation 55,164 10,149
Amortization -- 19,638
Changes In Operating assets and liabilities:
(Increase) decrease In:
Accounts receivable (12,750) (10,027)
Interest receivable (16,053) --
Other assets 3,560 (2,707)
Prepaid expenses (13,030) --
Increase (decrease) In:
Accounts payable and accrued expenses (10,060) (7,491)
--------- ---------
Net cash used In operating activities (494,257) (431,530)
--------- ---------
INVESTING ACTIVITIES
Purchase of equipment (81,695) (22,355)
Advances to (payment from) stockholder (18,901) (8,966)
--------- ---------
Net cash used in investing activities (100,596) (31,321)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 445,858 456,890
Proceeds (repayment) of stockholder loans 300,000 --
Repayment of capital lease obligations (10,710) --
--------- ---------
Net cash used in Investing activities 735,148 456,890
--------- ---------
NET INCREASE (DECREASE) IN CASH 140,295 (5,961)
CASH, BEGINNING 19,301 15,190
--------- ---------
CASH, ENDING $ 159,596 $ 9,229
--------- ---------
SUPPLMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
3,350,273 shares of common stock were
sold to Officers and Directors In
exchange for a subscription note receivable $ 837,568 $ --
--------- ---------
Conversion of notes and Accounts payable to common stack $ 128,366 $ 176,825
--------- ---------
Capital lease obligations Incurred relateds to the
acquisition of equipment $ 34,831 --
--------- ---------
</TABLE>
5
<PAGE>
Notes 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.
1. Certain information and note 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 amounts 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 10K-SB for the year ended
December 31, 1998.
2. Results of operations for the three-month and nine-month periods
ended September 30, 1999, are not necessarily indicative of the
results to be expected for the full year.
3. 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 a currently
estimated $7,500,000 in equity capital. In connection therewith,
the Company paid Quaker $10,000 in cash, $15,000 in common stock
and agreed to pay a percentage of capital raised. In addition, as
of August 14, 1999, an agreement for a short-term note in the
amount of $400,000 had been executed with an investor, with the
first three installments totaling $300,000 being received by
September 30, 1999. The Company received the fourth installment of
$100,000 on October 18, 1999. This loan is convertible into common
stock at a price of $0.25 per share. In addition the lender was
granted warrants to purchase 300,000 shares of common stock at a
price of $0.25 per share. This loan was obtained in order to meet
the working capital needs of Capita as it seeks out additional
equity financing.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30, 1999 and 1998
- ----------------------------------------------------------------------------
All statements contained herein that are not historical facts are based upon
current expectations. These statements are forward-looking in nature and involve
a number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause actual results to differ materially are the
following: the availability of sufficient capital to finance Capita's business
plans, the market acceptance of Capita's services and competitive factors.
Capita wishes to caution readers not to place undue reliance on any such
forward-looking statements, which statements are made pursuant to the Private
Litigation Reform Act of 1995 and as a result, are pertinent only as of the date
made.
Capita is, and has been a development stage company during the three-month
periods ended September 30, 1999 and 1998. As a development stage company it has
been testing and further developing its Engagement Index System sm (EI sm),
which has been licensed exclusively to Capita by the National Aeronautics and
Space Administration (NASA). The system measures electrical activity using an
electroencephalogram (EEG) reading from the human brain and processing the
results through the computer using an algorithm developed by NASA to correlate
those results with the level of "involvement" by the test subject with measured
activity.
Capita is using this EI sm System to measure and research communication
effectiveness. Its objective is to become the leading commercial provider of
customized, high performance technology systems and services, including analysis
and technical support, for the real-time, objective measurement of engagement
(attentiveness) for use in multiple markets.
As a development stage company it has limited marketing activity with sales of $
22,750 and $47,500 for the three months ended September 30, 1999 and 1998,
respectively. The sales in both periods were to "early adopters" of Capita's
technology to measure the effectiveness of advertising material. The gross
profit (loss) on these sales increased to a $44,341 loss in 1999 from a $5,521
gain in 1998. This was due to lower sales and the addition of certain fixed
costs included in cost of sales, primarily due to an increase in the
depreciation of testing equipment that was acquired since 1998.
The operating costs of $300,667 in 1999 compared to $189,760 in 1998 increased
due to use of outside advertising and research consultants, increasing staff and
expenditures for expanded technical development of the product, the Company's
research effort, its legal protection of intellectual property, its raising of
equity capital and its development of infrastructure.
6
<PAGE>
Results of Operations for the Nine Months Ended September 30, 1999 and 1998
- ---------------------------------------------------------------------------
Capita is, and has been a development stage company during the nine-month
periods ended September 30, 1999 and 1998. As a development stage company, it
has had limited marketing activity with sales of $55,000and $85,500 for the
nine-months ended September 30, 1999 and 1998 respectively. The gross profit
(loss) on these sales increased to a $71,063 loss in 1999 from a $2,702 loss in
1998. This was due to the addition of certain fixed costs in cost of sales,
primarily an increase in the depreciation of testing equipment that was acquired
since 1998.
The operating costs of $705,387 in 1999 were significantly less than the
operating costs incurred for the nine months ended September 30, 1998 of
$947,608. The decrease of $235,692 was due primarily to several expenditures
incurred in 1998, which did not reoccur in 1999, which were offset in part by
higher operating costs in 1999. These expenses included: approximately $105,000
of 1998 expense which was attributable to legal, accounting and other costs
relating to the reverse acquisition into Royal American and the filing of the
Form 10-SB/A with the SEC and the $100,000 of 1998 product development services
performed by an outside contractor.
Liquidity and Capital Resources at September 30, 1999
- -----------------------------------------------------
With losses expected to continue in the foreseeable future, Capita's ability to
sustain operations is dependent on its ability to raise added investment
capital. The Company has taken the following steps during the nine month ended
September 30, 1999, to improve its liquidity and capital resources:
1. During the nine month ended September 30, 1999 Capita received cash
proceeds of $445,858 from the sale of common stock.
2. The Company converted $100,000 of notes payable and $ 28,367 of other
payables into its common stock.
3. The Company issued $271,488 of common stock in consideration of
services rendered, inculding rent, equipment purchases, ect.
4. In March 1999, Capita entered into an agreement with Quaker Capital
Markets Group, Inc. ("Quaker") in its attempt to raise a currently
estimated $7,500,000. In connection therewith, the Company paid Quaker
$10,000 in cash, $15,000 in common stock and agreed to pay them a
percentage of capital raised.
5. In August 1999, the Company entered into a agreement with an investor
for $400,000 in short-term notes, which can be converted to common
stock. The Company prior to September 30, 1999 received the first three
installments totaling $300,000 and the Company received the fourth
installment of $100,000 in October 1999. This loan was obtained to meet
the working capital needs of Capita as it seeks out additional equity
financing.
7
<PAGE>
At September 30, 1999, the financial condition of the Company remained
impaired with the working capital shortfall being met primarily from the
proceeds of the issuance of common stock and a short-term working capital loan.
The above transactions net of the operating loss had the effect of reducing the
total stockholders' deficiency by $ 73,136 to a deficiency of $ 95,397 at
September 30, 1999.
8
<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, 1999
/s/David B. Hunter
------------------
David B. Hunter
President and
Chief Executive Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 159596
<SECURITIES> 0
<RECEIVABLES> 13750
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 211937
<PP&E> 326563
<DEPRECIATION> (172690)
<TOTAL-ASSETS> 400245
<CURRENT-LIABILITIES> 470265
<BONDS> 0
0
0
<COMMON> 20296
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 400245
<SALES> 55000
<TOTAL-REVENUES> 55000
<CGS> 126063
<TOTAL-COSTS> 126063
<OTHER-EXPENSES> 705387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12673
<INCOME-PRETAX> 3873
<INCOME-TAX> 0
<INCOME-CONTINUING> 3873
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3873
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
