Filed Pursuant to Rule 424(B3)
with respect to Registration Statement No. 333-30116
CAPITA RESEARCH GROUP, INC.
Supplement No. 1 dated June 9, 2000 to
Prospectus dated May 10, 2000
The Prospectus is hereby supplemented as follows:
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
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
our business plans, the market acceptance of our services and competitive
factors. We wish 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.
We are, and have been, a development stage company during the
three-month periods ended March 31, 2000 and 1999. As a development stage
company, we have been testing and further developing our Engagement Index(TM)
System (EI(TM)), which has been licensed exclusively to us 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.
We are using this EI(TM) System to measure and research communication
effectiveness. Our 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 we have 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.
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We 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. We have gradually been upgrading
the scope of our product and service offerings, as technical innovations and
client feedback have become available. Due to our unique position in the
research industry, we 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. We
expect 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.
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, our research effort, our legal protection of
intellectual property, our raising of equity capital and our development of
infrastructure.
Liquidity and Capital Resources at March 31, 2000
With losses expected to continue in the foreseeable future, our ability
to sustain operations is dependent on its ability to raise added investment
capital. We have taken the following steps to improve our liquidity and capital
resources:
1. During the three months ended March 31, 2000 we received gross cash
proceeds of $705,000 from the sale of common stock and warrants.
2. In April 2000, we entered into a one-year agreement with Charterbridge
Financial Group, Inc. to solicit equity funding and joint venture
arrangements.
At March 31, 2000, our 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 stockholders' deficiency by $ 172,500 to a deficiency of $
356,000 at March 31, 2000.
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FINANCIAL STATEMENTS
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
- -------------- ----------- -----------
Cash $ 105,144 $ 4,840
Prepaid expenses 34,463 20,424
Accounts and other receivables 42,597 28,094
----------- -----------
Total Current Assets 182,204 53,358
----------- -----------
Property and Equipment
- ----------------------
Property and Equipment - Net 207,578 209,687
----------- -----------
Other Assets
- ------------
Due from stockholder 55,535 40,235
Deposits 11,442 1,493
----------- -----------
Total Other Assets 66,977 41,728
----------- -----------
Total Assets $ 456,759 $ 304,773
=========== ===========
LIABILITIES and STOCKHOLDERS' DEFICIENCY
Current Liabilities
- -------------------
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
----------- -----------
Total Current Liabilities 792,361 809,925
----------- -----------
Long-term obligations under capital leases, 20,434 23,386
net of current portion ----------- -----------
Stockholders' Deficiency
- ------------------------
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)
----------- -----------
481,532 309,030
Stock subscription receivable (837,568) (837,568)
----------- -----------
Total stockholders' deficiency (356,036) (528,538)
----------- -----------
Total Liabilities & Stockholders Deficiency $ 456,759 $ 304,773
=========== ===========
See Accompanying notes
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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
------------ ------------
Revenue $ -- $ 4,750
Cost of Revenues 14,109 18,300
------------ ------------
Gross profit (loss) (14,109) (13,550)
------------ ------------
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
------------ ------------
Total Operating expenses 595,914 202,019
------------ ------------
Other Income (Expense)
Interest income 16,595 --
Interest expense (25,252) (4,054)
------------ ------------
(8,657) (4,054)
Loss Before Interest and Taxes (618,680) (219,623)
Provision for Income Taxes -- --
------------ ------------
Net Loss $ (618,680) $ (219,623)
============ ============
Net Loss Per Share, Basic and Diluted $ (0.03) $ (0.02)
============ ============
Weighted Average Shares Outstanding 21,496,057 13,926,615
============ ============
See Accompanying notes
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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
--------- ---------
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
--------- ---------
Net cash used in operating activities (522,977) (73,601)
--------- ---------
Investing Activities
Purchase of equipment (21,399) (39,764)
--------- ---------
Net cash used in investing activities (21,399) (39,764)
--------- ---------
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) --
--------- ---------
Net cash provided by financing activities 644,680 94,498
--------- ---------
Net Increase ( Decrease) in cash 100,304 (18,867)
Cash, Beginning 4,840 19,301
--------- ---------
Cash, Ending $ 105,144 $ 434
========= =========
See Accompanying notes
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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 our
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 our 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, we 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, we have adopted the disclosure only provisions of
SFAS no. 123, "Accounting for Stock-based compensation," but
apply APB opinion No. 25 ("Accounting for Stock Issued to
Employees") in accounting for our stock compensation plan.
Compensation cost that would have been recognized in
accordance with the basis of fair value pursuant to SFAS No.
123, if we had so elected, would have increased our 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 our stock, a risk free
interest rate of 6.49%, a three year term, and no expected
dividend payments.
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5. In the first quarter of 2000, we 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, we record the appropriate expense as
required by SFAS 123. Consulting expense recorded by us 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.