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 March 31, 2000
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 May 1,
2000 was 22,279,748.
1
Capita Research Group, Inc. and Subsidiary
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999
(Development Stage Company)
ASSETS
March 31, December 31,
Current Assets 2000 1999
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Cash $ 105,144 $ 4,840
Prepaid expenses 34,463 20,424
Accounts and other receivables 42,597 28,094
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Total Current Assets 182,204 53,358
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Property and Equipment
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Property and Equipment - Net 207,578 209,687
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Other Assets
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Due from stockholder 55,535 40,235
Deposits 11,442 1,493
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Total Other Assets 66,977 41,728
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Total Assets $ 456,759 $ 304,773
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LIABILITIES and STOCKHOLDERS' DEFICIENCY
Current Liabilities
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Accounts payable and accrued expenses $ 376,404 $ 369,918
Current portion of obligations under capital leases 15,957 20,007
Due to stockholders 400,000 420,000
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Total Current Liabilities 792,361 809,925
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Long-term obligations under capital leases, 20,434 23,386
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, 21,705,946 shares March 31, 2000, 21,706 20,296
20,295,946 shares, December 31, 1999
Additional paid-in capital 4,645,435 3,855,663
Deficit accumulated during
development stage (4,185,609) (3,566,929)
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481,532 309,030
Stock subscription receivable (837,568) (837,568)
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Total stockholders' deficiency (356,036) (528,538)
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Total Liabilities & Stockholders Deficiency $ 456,759 $ 304,773
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See Accompanying Notes
2
Capita Research Group, Inc. and Subsidiary
Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999
(Development Stage Company)
Three Months Ended
March 31
2000 1999
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Revenue $ -- $ 4,750
Cost of Revenues 14,109 18,300
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Gross profit (loss) (14,109) (13,550)
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Operating expenses
Selling 45,000 9,691
Technical 98,676 19,903
Production 18,577 --
Administrative and General 80,815 55,266
Other 352,846 117,159
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Total Operating expenses 595,914 202,019
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Other Income (Expense)
Interest income 16,595 --
Interest expense (25,252) (4,054)
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(8,657) (4,054)
Loss Before Interest and Taxes (618,680) (219,623)
Provision for Income Taxes -- --
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Net Loss $ (618,680) (219,623)
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Net Loss Per Share, Basic and Diluted $ (0.03) $ (0.02)
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Weighted Average Shares Outstanding 21,496,057 13,926,615
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See Accompanying notes
3
Capita Research Group, Inc. and Subsidiary
Consolidated Statements of Cash Flows for the Three Months Ended
(Development Stage Company)
Three Months Ended
March 31
2000 1999
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Operating Activities
Net Loss $(618,680) $(219,623)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued for salaries, rent
consulting and fixed assets 119,500 102,012
Depreciation 23,508 14,550
Changes in Operating assets and liabilities:
(Increase) decrease in:
Accounts and other receivable (14,503) (6,390)
Other assets (25,249) 4,059
Prepaid Expenses (14,039) (26,172)
Increase (decrease) in:
Accounts payable and accrued expenses 6,486 57,963
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Net cash used in operating activities (522,977) (73,601)
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Investing Activities
Purchase of equipment (21,399) (39,764)
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Net cash used in investing activities (21,399) (39,764)
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Financing Activities
Proceeds from issuance of common stock 671,682 98,068
Repayment of capital lease obligations (7,002) (3,570)
Proceeds from (repayment of) stockholder loans (20,000) --
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Net cash provided by financing activities 644,680 94,498
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Net Increase ( Decrease) in cash 100,304 (18,867)
Cash, Beginning 4,840 19,301
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Cash, Ending $ 105,144 $ 434
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See Accompanying Notes
4
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 10-KSB for the year ended December 31, 1999.
2. Results of operations for the three-month period ended March
31, 2000, are not necessarily indicative of the results to be
expected for the full year.
3. In March 1999, we entered into an agreement with Quaker
Capital Markets Group, Inc. to solicit equity funding on our
behalf on a best efforts basis. Since that time, Quaker has
been successful in obtaining bridge loan financing during the
fall of 1999 in an amount totaling $400,000 from a private
investor. The agreement with Quaker expired on March 12, 2000.
On April 18, 2000, we entered into a one-year agreement with
Charterbridge Financial Group, Inc. to solicit equity funding
and joint venture arrangements. There can be no assurance that
we will be successful in obtaining any such equity funding or
joint venture arrangements.
4. In February 2000, the Company issued 1,225,000 Incentive Stock
Options and Non-Statutory Stock Options to employees, officers
and/or directors. The exercise price of the options ranges
from $.98 to $1.08 per share. With respect to stock options
granted, the Company has adopted the disclosure only
provisions of SFAS no. 123, "Accounting for Stock-based
compensation," but applies APB opinion No. 25 ("Accounting for
Stock Issued to Employees") in accounting for its stock
compensation plan. Compensation cost that would have been
recognized in accordance with the basis of fair value pursuant
to SFAS No. 123, if the Company had so elected, would have
increased the Company's net loss in the first quarter by
approximately $784,000, or a $.04 loss per share. The method
of determining proforma compensation cost for the first
quarter was based on certain assumptions, including the past
trading ranges of the Company's stock, a risk free interest
rate of 6.49%, a three year term, and no expected dividend
payments.
5
5. In the first quarter of 2000, the Company issued 144,000
non-statutory stock options to outside consultants in exchange
for services. The exercise price of the options ranges from
$.89 to $.95 per share. With respect to stock options granted
to non-employees, the Company records the appropriate expense
as required by SFAS 123. Consulting expense recorded by the
Company in the first quarter of fiscal year 2000, was
calculated using similar assumptions to those disclosed above,
with the exception of a 5 year term. Such expense was
approximately $70,000 and had an immaterial effect on loss per
common share.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations for the Three Months Ended March 31, 2000 and 1999
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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 March 31, 2000 and 1999. As a development stage company it has
been testing and further developing its Engagement Index(TM) System (EI(TM)),
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(TM) 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 no
reported sales for the three months ended March 31, 2000 and sales of $4,750 for
the three months ended March 31, 1999. The gross profit (loss) on these sales
for the three months ended March 31, 2000 approximates the loss for the same
period during 1999. This loss is due to the lack of adequate sales, and the
inclusion of certain fixed costs associated with the cost of sales.
Capita had incidental revenues during the two years that the product has been
offered in the market. Many projects conducted for clients in these early stages
were performed without compensation, with Capita paying for all costs, in order
to get the technology into distribution. Capita has gradually been upgrading the
scope of its product and service offerings, as technical innovations and client
feedback have become available. Due to its unique position in the research
industry, the Company completed non-revenue producing projects for R&D purposes,
for marketing promotion to launch the technology into additional fields, or to
make available pro bono engagement research for publication by leading
marketing, Internet or research trade organizations in new fields of use. The
Company expects to increase revenue-producing projects conducted over time,
although there is no assurance that this can be achieved. It is the position of
management that these ongoing non-paid projects help promote the market
penetration of the technology over time. The limited progress in producing
meaningful revenues to date is generally due to the lack of adequate capital to
fund expansion of operations, marketing and staffing in a highly complex line of
business.
7
The operating cost of $596,000 for the three months ended March 31, 2000,
increased from $202,000 for the same three months in 1999. This increase of
$394,000 over 1999 was due to the increased use of outside marketing and
advertising consultants, increased 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.
Liquidity and Capital Resources at March 31, 2000
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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 added investment
capital. The Company has taken the following steps to improve its liquidity and
capital resources:
1. During the three months ended March 31, 2000 Capita received
gross cash proceeds of $705,000 from the sale of common stock
and warrants.
2. In April 2000, Capita entered into a one-year agreement with
Charterbridge Financial Group, Inc. to solicit equity funding
and joint venture arrangements.
At March 31, 2000, 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. The above transactions net of the
operating loss had the effect of reducing the total stockholders' deficiency by
$ 172,500 to a deficiency of $ 356,000 at March 31, 2000.
8
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: May 15, 2000
By: /s/David B. Hunter
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David B. Hunter
President and
Chief Executive Officer