U.S. 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 June 30, 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 88-072350
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(State of incorporation) (IRS Employer ID Number)
591 Skippack Pike, Blue Bell, PA 19422 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 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
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The number of shares outstanding of the registrant's common stock as of June 30,
1999 was 18,789,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended June 30, 1999 and 1998
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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 June 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 $
27,500 in the three months ended June 30, 1999 and $38,000 in the three months
ended June 30, 1998. The sales in both periods were to "early adopters" of
Capita's technology to measure the effectiveness of advertising material. The
gross margin (loss) on these sales increased to a $13,172 loss in 1999 from a
$1,923 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 $202,701 in 1999 compared to $234,680 in 1998 were
comparable. Capita continued its technical development of the product, its
research effort, its legal protection of intellectual property, its raising of
equity capital and its development of infrastructure.
<PAGE>
Results of Operations for the Six Months Ended June 30, 1999 and 1998
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Capita is, and has been, a development stage company during the six-month
periods ended June 30, 1999 and 1998. As a development stage company, it has had
limited marketing activity with sales of $32,250 in the six-months ended June
30, 1999 and $38,000 in the six- months ended June 30, 1998. The gross margin
(loss) on these sales increased to a $26,722 loss in 1999 from an $8,214 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 $404,720 in 1999 were significantly less than the
operating costs of $761,356 in the same period of 1998. The decrease of $356,636
was due primarily to three expenditures incurred in 1998, which did not reoccur
during 1999. They were:
1. Approximately $105,000 of 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.
2. Product development services performed by an outside contractor, in the
amount of $100,000.
3. Costs associated with an outside consultant for the technical and
marketing development of the TV product line incorporating Capita's EI
sm technology, in the amount of $130,000.
Liquidity and Capital Resources at June 30, 1999
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With losses expected to continue in the foreseeable future, Capita's ability to
sustain operations is dependent on its ability to raise additional investment
capital. During the six-month period ended June 30, 1999 Capita received cash
proceeds of $310,754 from the sale of its common stock. In consideration of
technical, management and other services, Capita issued common stock of
$158,317. At June 30, 1999 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 $30,088 to a deficit of $138,455
at June 30, 1999.
On June 21, 1999 Capita sold 3,350,273 shares of Capita Common Stock to its
officers and directors at $0.25 per share. The stock was paid for by notes
issued to the Company of $837,568.
In March 1999 Capita entered into an agreement with Quaker Capital Markets
Group, Inc. ("Quaker") in its attempt to raise additional equity capital. Quaker
will seek to raisebetween $10,000,000 and $15,000,000 of equity capital for
Capita in the near future. In addition as of August 14, 1999 a short-term loan
of $300,000 has been executed with an investor, with the first $100,000
installment having been received on August 6, 1999. This loan is convertible
into common stock at a price of $0.25 per share and the lender was granted
warrants to purchase 300,000 share of common stock at a price of $ 0.25 per
share. This loan was obtained to meet the working capital needs of Capita as it
seeks out additional equity financing.
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Balance Sheets as of December 31, 1998 and June 30, 1999
(Development Stage Company)
<CAPTION>
ASSETS
June 30, December 31,
CURRENT ASSETS 1999 1998
-------------- ----------- -----------
<S> <C> <C>
Cash $ 35,748 $ 19,301
Accounts receivable 18,000 1,000
Interest receivable 4,013 --
Prepaid expenses 40,288 9,508
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Total current assets 98,049 29,809
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EQUIPMENT, NET 107,305 92,511
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OTHER ASSETS
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Notes and other receivables 19,435 15,534
Deposits -- 3,560
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Total other assets 19,435 19,094
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$ 224,789 $ 141,414
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LIABILITIES and STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
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Accounts payable and accrued expenses $ 242,980 $ 186,052
Current portion of obligations capital leases 13,671 14,281
Due to stockholders 103,500 100,000
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Total current liabilities 360,151 300,333
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Long-term obligations under capital leases,
net of current portion 3,084 9,614
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STOCK HOLDERS' DEFICIENCY
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Common Stock, Capita Research Group, Inc.
$0.001 par value, 100,000,000 shares authorized;
issued and outstanding, 18,789,377 shares June 30, 1999,
13,562,900 shares, December 31, 1998 18,789 13,563
Additional paid-in capital 3,482,527 2,181,114
Deficit accumulated during development stage (2,802,193) (2,363,210)
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699,123 (168,533)
Stock subscription receivable (837,568) --
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Total stockholders' deficiency (138,445) (168,533)
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$ 224,789 $ 141,414
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</TABLE>
See Accompanying notes
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Statements of Operations for the Six Months Ended
June 30, 1999 and 1998
(Development Stage Company)
<CAPTION>
Six Months Ended
June 30
1999 1998
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<S> <C> <C>
REVENUES $ 32,250 $ 38,000
COSTS OF SALES 58,972 46,214
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GROSS LOSS (26,722) (8,214)
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OPERATING EXPENSES
Selling cost 13,561 27,502
Technical cost 44,551 141,258
Research compensation 19,904 15,000
Administrative compensation 137,336 327,926
Other general and administrative 189,367 249,670
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TOTAL OPERATING EXPENSES 404,720 761,356
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OTHER INCOME (EXPENSE)
Interest income 4,013 --
Interest expense (11,555) (2,692)
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TOTAL OTHER INCOME (EXPENSE) (7,542) (2,692)
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LOSS BEFORE INCOME TAXES (438,984) (772,262)
PROVISION FOR INCOME TAXES -- --
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NET LOSS $ (438,984) $ (772,262)
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NET LOSS PER SHARE, BASIC AND DILUTED $ (0.03) $ (0.08)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 14,433,483 9,591,332
============ ============
</TABLE>
See Accompanying notes
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Statements of Operations for the Three Months Ended
June 30, 1999 and 1998
(Development Stage Company)
<CAPTION>
Three Months Ended
June 30
1999 1998
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<S> <C> <C>
REVENUES $ 27,500 $ 38,000
COSTS OF SALES 40,672 39,923
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GROSS LOSS (13,172) (1,923)
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OPERATING EXPENSES
Selling cost 3,870 22,198
Technical cost 24,648 34,037
Research compensation 19,904 7,500
Administrative compensation 82,070 82,406
Other general and administrative 72,208 88,539
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TOTAL OPERATING EXPENSES 202,701 234,680
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OTHER INCOME (EXPENSE)
Interest income 4,013 --
Interest expense (7,501) (6,200)
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TOTAL OTHER INCOME (EXPENSE) (3,488) (6,200)
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LOSS BEFORE INCOME TAXES (219,361) (242,803)
PROVISION FOR INCOME TAXES -- --
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NET LOSS $ (219,361) (242,803)
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NET LOSS PER SHARE, BASIC AND DILUTED $ (0.01) $ (0.02)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 15,012,906 11,431,661
============ ============
</TABLE>
See Accompanying notes
<PAGE>
<TABLE>
Capita Research Group, Inc. and Subsidiary
Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998
(Development Stage Company)
<CAPTION>
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(438,984) $(772,262)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued for salaries, rent
consulting and fixed assets 158,317 331,170
Depreciation 39,532 10,149
Writeoff of organization cost -- 19,638
Changes in Operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (17,000) (10,027)
Interest receivable (4,013) --
Other assets (341) (2,707)
Prepaid expenses (30,780) --
Accounts payable and accrued expenses 60,428 (7,491)
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Net cash used in operating activities (232,841) (431,530)
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INVESTING ACTIVITIES
Purchase of equipment (54,326) (22,355)
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Net cash used in investing activities (54,326) (22,355)
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FINANCING ACTIVITIES
Proceeds from issuance of common stock 310,754 456,890
Repayment of capital lease obligations (7,140) --
Proceeds (Repayment) of Stockholder loans -- (8,966)
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Net cash provided by financing activities 303,614 447,924
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NET INCREASE (DECREASE) IN CASH 16,447 (5,961)
CASH, BEGINNING 19,301 15,190
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CASH, ENDING $ 35,748 $ 9,229
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Supplemental Disclosure of Noncash Financing Activities 1998 :
3,350,273 shares of common stock were sold to Officers and Directors
in exchange for note receivable $ 837,568
Note Payable converted into common stock $ 60,000
Stockholder loans converted into common stock $ 116,825
</TABLE>
See Accompanying notes
<PAGE>
Notes to Consolidated Financial Statements
The accompanying consolidated financial statements of Capita Research
Group, Inc. and its subsidiaries, 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 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.
2. Results of operations for the three-month and six-month periods
ended June 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 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 and a percentage of
equity capital raised.
<PAGE>
SIGNATURES
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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: August 13, 1999
/s/David B. Hunter
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David B. Hunter
President and
Chief Executive Officer
<TABLE> <S> <C>
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