As filed with the Securities and Exchange Commission on October 31, 1997
File No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ELEPHANT & CASTLE GROUP INC.
(Exact name of Registrant as specified in its charter)
Province of British Columbia Not Applicable
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
856 Homer Street
Vancouver, British Columbia, Canada V6B 2W5
(604) 684-6451
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JEFFREY M. BARNETT, President
856 Homer Street
Vancouver, British Columbia, Canada V6B 2W5
(604) 684-6451
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
MICHAEL D. DiGIOVANNA, Esq.
PARKER DURYEE ROSOFF & HAFT
529 Fifth Avenue
New York, New York 10017
(212) 599-0500
Approximate date of proposed sale to the public: From time to time
after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share(1) Offering Price(1) Registration Fee
------------ ----------- -------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock,
without par value 577,421 shs.(2) $8.5625 $4,944,167 $1,498.23
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the bid and asked prices
of the Common Stock on The Nasdaq Small Cap Market on October 29, 1997.
(2) Includes 281,125 shares of Common Stock issuable upon exercise of certain
Warrants and 296,296 shares of Common Stock issuable upon conversion of
certain Debentures. Additional shares of Common Stock issuable in the
future upon exercise of the Warrants and conversion of the Debentures
pursuant to certain anti-dilution adjustments are also being registered
hereunder.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
577,421 Shares
ELEPHANT & CASTLE GROUP INC.
Common Stock
The 577,421 shares of common stock, without par value (the "Common
Stock"), to which this Prospectus relates (the "Shares") are being offered, from
time to time, on behalf of and for the account of certain stockholders (the
"Selling Stockholders") of Elephant & Castle Group Inc. (the "Company") as
identified herein under "Selling Stockholders." Shares in the aggregate amount
of 296,296 are issuable upon conversion of certain 6% convertible debentures
(the "Debentures") and Shares in the aggregate amount of 281,125 upon exercise
of certain common stock purchase warrants (the "Warrants") issued to the Selling
Stockholders by the Company. The distribution of the Shares by the Selling
Stockholders, or by pledgees, donees, distributees, transferees or other
successors in interest, may be affected from time to time by underwriters who
may be selected by the Selling Stockholders and/or broker-dealers, in one or
more transactions (which may involve crosses and block transactions) on
over-the-counter markets or, in special offerings, exchange distributions or
secondary distributions pursuant to and in accordance with rules of such
over-the-counter markets or exchanges, in negotiated transactions or otherwise,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Company has agreed to
indemnify the Selling Stockholders, underwriters who may be selected by the
Selling Stockholders and certain other persons against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Selling Stockholders" and "Plan of Distribution."
----------------------
These securities involve a high degree of risk. See "Risk Factors"
commencing on page 6.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The Company has agreed to pay all expenses of registration in
connection with this offering but will not receive any of the proceeds from the
sale of the Shares being offered hereby other than proceeds upon the exercise of
the Warrants. All brokerage commissions and other similar expenses incurred by
the Selling Stockholders will be borne by such Selling Stockholders. The
aggregate proceeds to the Selling Stockholders from the sale of the Shares will
be the purchase price of the Shares sold, less the aggregate brokerage
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne by the Company.
<PAGE>
The Common Stock being offered hereby by the Selling Stockholders has
not been registered for sale under the securities laws of any state or
jurisdiction as of the date of this Prospectus. Brokers or dealers effecting
transactions in the Common Stock should confirm the registration thereof under
the securities law of the state in which such transactions occur, or the
existence of any exemption from registration.
The Common Stock is listed for trading on The Nasdaq SmallCap Market.
On October 29, 1997, the closing bid price of the Common Stock as reported by
The Nasdaq SmallCap Market was $8.125 per share.
The date of this Prospectus is __________, 1997.
<PAGE>
TABLE OF CONTENTS
Available Information
Incorporation of Certain Documents by Reference
The Company
Risk Factors
Use of Proceeds
Selling Stockholders
Plan of Distribution
Legal Matters
Experts
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus or
incorporated by reference to this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or by the Selling Stockholders. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. The delivery
of this Prospectus at any time does not imply that the information contained
herein is correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
therewith, the Company files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the
Commission at 7 World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60621. Copies of such
material may be obtained from the Public Reference Section of the Commission at
prescribed rates by writing to the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or from the Commission's web site at http://www.sec.gov.
The Common Stock is traded on The Nasdaq SmallCap Market and reports and other
information concerning the Company may be inspected and copied at The Nasdaq
Stock Market, Inc. at 1735 K Street, N.W., Washington, DC 20006.
<PAGE>
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement, copies of which can be obtained from the
Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference are the following documents filed by
the Company with the Commission (File No. 1-12134) under the Exchange Act:
(a) The Company's Annual Report on Form 10-KSB for its fiscal year
ended December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-QSB for its fiscal
quarters ended March 31, 1997 and June 30, 1997; and
(c) The Company's Registration Statement on Form 8-A for a description
of the Common Stock.
All documents filed by the Company with the Commission pursuant to
Sections 13, 14 and 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of this offering, shall be deemed to be incorporated herein by
reference and to be a part hereof from their respective dates of filing. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owners, to whom a copy of this Prospectus is delivered, upon the
written and oral request of any such person, a copy of any or all of the
documents referred to above which have been incorporated into this Prospectus by
reference (other than the exhibits to such documents). Requests for such copies
should be directed to Jeffrey M. Barnett, President, 856 Homer Street,
Vancouver, British Columbia, Canada V6B 2W5, telephone number (604) 684-6451.
THE COMPANY
General
The Company operates a chain of 19 full-service dining restaurants and
pubs, 14 of which are located in Canada and four of which are located in the
United States. Prior to the initial public offering of the Company's securities
in June of 1993, the Company operated 12 restaurants under the name "The
Elephant & Castle Pub & Restaurant" all located in major shopping malls and
office complexes from Victoria, B.C. to Ottawa, Ontario. At that time, the
Company's only U.S. based restaurant, also operated under the "Elephant &
Castle" name, was located in a large suburban mall near the United
States/Canadian border in Bellis Fair, Washington.
<PAGE>
The Company remains in the early stages of a previously announced
business plan which contemplates a major expansion/refocusing of its restaurant
operations. The Company intends to shift most of its restaurants to (i) major
hotel or other urban high traffic locations; (ii) many of which will be in the
United States; and (iii) adding alternative menu formats, not limited to the
Elephant & Castle English-pubs concept.
Of the 19 restaurants currently operated by the Company, five are now
based in the United States (including the E&C at Bellis Fair, Washington) and
two more are under construction in the United States; five, three in the U.S.
and two in Canada, are within the four walls of major hotel operations, and an
additional unit under construction is a planned hotel restaurant operations; and
two of the units have introduced alternative menu concepts, Rosie's (a New York
style Deli) at Rosedale Hotel in Vancouver, British Columbia and the Alamo (a
red meat steakhouse) at the Mall of America, Bloomington, Minnesota.
The Company was incorporated in British Columbia on December 14, 1992,
as a holding corporation for is theretofore existing separate restaurant
corporations, which had been owned and operated by the founders of the Company
for a number of years. Effective October 1, 1997, the Company's executive
offices are located at 856 Homer Street, Vancouver B.C., Canada V6B 2W5; its
telephone number is (604) 684-6451.
Unless the context otherwise requires, references to the "Company"
contained in this Prospectus include all subsidiaries of the Company.
Recent Developments
Effective as of March 17, 1997, the Company entered into agreements
with Rainforest Cafe, Inc. ("Rainforest"), with respect to the ownership and
operation of a new jointly-owned entity, Canadian Rainforest Restaurants, Inc.
("CRRI"). Rainforest, a U.S. corporation, has developed a unique restaurant
concept, having a rainforest theme and incorporating a retail shop offering
consumer merchandise reflecting such theme and related items. The Company formed
CRRI to be jointly owned by the Company and Rainforest and to undertake the
development of Rainforest restaurants within Canada.
Rainforest granted to the Company, and the Company assigned to CRRI,
the exclusive right to develop rainforest-themed restaurants in the territory of
Canada. The agreements require CRRI to have a total of five Rainforest
restaurants opened in the territory by March 17, 2001, the first of which is
required to be opened by March 17, 1998, and one additional restaurant each nine
(9) months thereafter.
The Company agreed to pay a non-refundable development fee of U.S.
$500,000 for the Canadian territorial development rights, of which $250,000 was
paid upon execution of the Agreement, and the remainder is payable in $50,000
installments on or before December 31 of each year, beginning in 1997.
Rainforest agreed to subscribe to the initial $200,000 of capital
contributions for CRRI, and the Company made $100,000 of initial capital
contributions to CRRI. The Company and Rainforest have further agreed to make
equal capital contributions for the development of the Canadian Rainforest
restaurants, anticipating that a maximum of CDN $18 million will be required by
CRRI for the first three restaurants which will be opened directly by CRRI. The
initial directors of the joint venture company are two appointees of each of the
Company and Rainforest, and a fifth "independent" director, nominated by the
Company.
<PAGE>
Under the Area Development Agreement, a license is required for each
restaurant unit. A fixed license fee in the amount of U.S. $100,000 is payable
for each restaurant ($25,000 upon signing a lease and $75,000 on opening the
restaurant). In addition, each restaurant licensee will pay a percentage royalty
based on annual gross revenue from food and beverage sales expected to average
approximately 6% per annum, and a fixed fee of 10% payable on all merchandise
sales. the Company receives a management fee of 1.5% per annum on all sales at
the restaurants.
The cash flow from operations of CRRI will be shared equally by the
Company and Rainforest. Neither party may transfer their shares of CRRI,
otherwise than with the consent of the other. After seven years, Rainforest has
the first option, without the Company's consent, to purchase the Company's
interest in the venture. The option price is five times the average of the
CRRI's EBITDA for the twelve (12) months immediately preceding the exercise of
the option. There is a minimum option price in favor of the Company, equal to a
guaranteed 15% per annum return on capital until the 8th anniversary of the
opening of the first restaurant, declining to a guaranteed 8% per annum return,
until the 15th anniversary of the opening of the first restaurant. There is an
alternative minimum price in the event that CRRI has incurred losses. The
Company has an equivalent right to buy out Rainforest's interest in CRRI after
the 15th year of the venture. No minimum price applies after the 15th year. The
Area Development Agreement terminates, unless renewed, at the 20th anniversary.
Based upon time favorable results of operations which have been
achieved by Rainforest at its U.S. units to date, the Company anticipates that
the addition of the Canadian Rainforest opportunity will significantly impact
upon its future results from operations. In the opinion of management,
negotiations are successfully progressing towards the making of the first leases
for the Canadian Rainforest facilities, the first of which is intended be
located in Vancouver, British Columbia, Canada, and the second of which will
likely be located in a revamped entertainment center at the old Montreal Forum,
Montreal, Canada. Ground breaking on the first of these units is expected to
occur imminently.
In addition to Canadian Rainforest, the Company has started a new U.S.
based subsidiary, Elephant & Castle International, Inc. ("International"), which
will focus on franchising opportunities for the Company's brands and other
brands at hotel and resort properties and other suitable locations, Martin
O'Dowd, the former President of Rainforest, and current President of the
Company's U.S. Operations, heads up the franchising effort. Mr. Colin Stacey,
former President of Keg Restaurants, a privately-held chain of Canadian
mid-sized restaurants, has been added as the Company's Chief Operating Officer.
Both Mr. O'Dowd and Mr. Stacey serve on the Company's Board of Directors.
In July of 1997, the Company completed an additional placement of
$2,000,000 of 6% Convertible Subordinated Debentures (the "Debentures") and
warrants to purchase 20,000 shares of Common Stock with CPR USA, a wholly-owned
subsidiary of the French Bank Compagnie Parisienne de Rescompte and certain
affiliates and subsidiaries thereof (collectively "CPR"). The placement with CPR
was arranged by JW Charles ("JWC") which was compensated in connection
therewith. The Debentures are convertible at the lesser of $10.00 or 85% of the
closing market price for the shares over any five day period immediately prior
to exercise; provided that the maximum number of shares that the Debentures may
be converted into is 296,296. If more shares than 296,296 would have been issued
but for this limitation, the Company will be obligated, at the request of CPR,
to redeem the balance of the Debentures (i.e., $2,000,000 less the product of
296,296 and such closing market price) at 115% of such balance. The Company may
also redeem, at its option, the Debentures being converted at 115% of the amount
of Debentures being converted. The Company is obligated to register a maximlum
of 296,296 shares of Common Stock issuable upon conversion of the Debentures and
the 20,000 shares of Common Stock issuable upon exercise of the warrants. Such
shares have been registered pursuant to a registration statement of which this
Prospectus is a part.
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high degree
of risk. Prospective investors should consider carefully the following risks and
speculative factors, among other things, in making a decision concerning the
purchase of securities offered hereby:
Risks Relating to the Company
Losses from Operations. The Company has incurred losses from operations
during 1995, 1996 and the first six months of 1997. For the year ended December
31, 1996, the Company's net loss was CDN $1,173,198, as compared to a net loss
of CDN $1,578,167 in the prior year. The 1995 figure includes a one-time reserve
of CDN $900,000 for closing costs and legal expenditures in connection with the
closing of three locations. The 1996 loss per share was CDN $0.44 compared to
CDN $0.63 in the prior year. During the six months ended June 30, 1997, the
Company's net loss was CDN $749,490 (CDN $.26 per Share) against CDN $794,042
(CDN $0.30 per share) in the prior period.
No Assurance of Future Growth. The Company currently operates a chain
of 19 full service restaurants. The Elephant & Castle chain was developed and
expanded relatively slowly over a geographically wide and economically diverse
area principally in Canada and at mall locations, prior to the Company's initial
public offering of securities in mid-1993. Since mid-1993, the Company has
sought to expand by changing its focus from mall locations to hotel and resort
food and beverage operations and related facilities. The Company's ability to
open additional restaurants depends upon a number of factors, including
relationships with hotel and resort operators, the availability of suitable
locations, the hiring and training of appropriate personnel, and adequate
restaurant financing on favorable terms. Although the Company believes that the
move away from malls has been appropriate, there can be no assurance that the
Company will be able to build or acquire new restaurants in desired locations at
an acceptable pace, or if such units are built or acquired, that such
restaurants will be able to be operated successfully over the long term.
Hotel and Resort Food and Beverage Operations. Although the Company's
management is broadly experienced in restaurant development and management, the
application of its operating and administrative skills to food and beverage
services at hotels and resorts presents different challenges. The Company's
initial venture into hotel operations, with Shilo Hotel resort operations in
Yuma, Arizona and Pomona, California, was unsuccessful and resulted in
termination of the leases and litigation, which is continuing. On the other
hand, the Company's initial two restaurants with Holiday Inn at facilities in
Winnipeg, Canada and Philadelphia, Pennsylvania have been favorably received.
The Company has also recently opened restaurants at the Holiday Inn in San
Diego, California, in the theater district in Toronto, Canada, and at a separate
hotel location in Seattle, Washington.
Significant Assets in Canada. All but five of the existing restaurants
owned by the Company are currently located in Canada. The Company will also be
investing substantially in Canada in the future through its 50% interest in
Canadian Rainforest Restaurants, Inc., a joint venture company owned with
Rainforest Cafe, Inc. (See "New Developments".) Certain adverse changes in
economic conditions in Canada have disproportionately affected the Company in
the past. In addition, since consumer tastes change from region to region and
locale to locale, there is a risk that any new markets (whether in the United
States or otherwise) may not be as receptive to the Elephant & Castle format and
menu, as have been pre-existing locations.
<PAGE>
Exchange Rates. The Company publishes its consolidated financial
statements in Canadian dollars (CDN $), including the translation of results
from U.S. operations into Canadian currency. The exchange rate between Canadian
dollars and United States dollars varies from time to time based upon, among
other factors, economic conditions and interest rates in each country.
Fluctuations in exchange rates are not expected to be material to the Company's
business in the future. However, such fluctuations cannot be fully predicted or
planned for with certainty.
New Food Formats. The Company's traditional menu at its Elephant &
Castle restaurants has emphasized popular English-style dishes with a broad
range of typical North American foods, such as burgers and pasta. As the Company
undertakes additional hotel and resort operations, it is facing business issues
relating to food formats. The Company only recently started a "deli"-concept
restaurant: "Rosie's at Rosedale on Robson," and a "red meat" concept of Alamo
Grill in the Mall of America, Minneapolis, Minnesota, and will be utilizing the
"Rainforest" food presentations at the Canadian Rainforest Restaurants. A
diverse set of food formats presents risks relating to retaining and controlling
the quality and costs of service.
Executive Management: Need for Additional Managers. The Company
believes that the development of its business has been, and will continue to be,
influenced by the special skills and services of its executive management.
Jeffrey M. Barnett, the Chief Executive Officer, President and Chairman of the
Board of the Company, and George W. Pitman, Vice President, Design and
Development, co-founded the Company in 1977. Both have five-year employment
agreements with the Company which expire in 1998. Peter J. Barnett, another
founder of E&C, recently left the employ of the Company, but remains active as a
director and consultant to the Company. In August of 1997, the Company hired two
senior executives, Mr. Martin O'Dowd, former President of Rainforest Cafe, Inc.,
as the Company's President U.S. Operations and Mr. Colin Stacey, former
President of Keg Restaurants, as the Company's Chief Operating Officer.
The Company will need additional middle level managers and
administrators in order to accomplish its planned growth, specifically through
its hotel food and beverage operations, development and administration of the
Canadian Rainforest Restaurants, and other developing aspects of the business.
The specific personnel necessary for the tasks to be undertaken have not yet
been identified, nor has any formal search been commenced to find specific
individuals. Experienced restaurant and hotel food and beverage management
personnel are in competitive demand. There is no assurance that such personnel
can be attracted to the Company or retained by the Company on favorable terms.
Risks Relating to the Industry
Competition. The restaurant and food service industry is highly
competitive and fragmented. There are innumerable restaurants and other food
service operations that compete directly and indirectly with the Company. Many
existing restaurant chains have significantly greater financial resources and
higher total sales volume than does the Company. The restaurant business is
often affected by changes in consumer taste and discretionary spending
priorities, local economic conditions, demographic trends, traffic patterns in
the vicinity of each restaurant, employee availability, and the type, number and
location of directly competing restaurants.
<PAGE>
Government Regulation. The Company's business is subject to extensive
provincial, state and local government regulation in the various jurisdictions
in which its restaurants and its licensed-outlet-type operations are located,
including regulations relating to alcoholic beverage control, public health and
safety, and fire codes. The failure to obtain or retain food and liquor licenses
could adversely affect the operation of the Company's restaurants. While the
Company has never experienced and does not anticipate any problems in obtaining
required licenses, permits or approvals, any difficulties, delays or failures in
obtaining such licenses, permits or approvals in the future could adversely
interfere with the operation of one or more restaurants in a particular area.
General Risks
Control by Directors and Officers. The Company's directors, officers
and 10% or greater shareholders, including a major investment fund, and their
affiliates beneficially own in excess of 43% of the shares of the Company's
outstanding Common Stock. Consequently, these stockholders will have a
substantial influence on the outcome of any matters submitted to the Company's
stockholders for approval, including the election of directors. Such
concentration of ownership may also have the effect of preventing a change in
control of the Company.
Possible Volatility of Stock Price. The Common Stock of the Company is
listed on The Nasdaq SmallCap Market and on the Pacific Stock Exchange. The
market for the shares held by the public stockholders is limited, and only a
limited number of brokerage firms are known to be making a market in such
shares. As a consequence, future announcements concerning the Company or its
competitors, including variations in financial results, changes in general
market conditions, governmental regulations, reimbursement changes or other
developments may have a significant impact on the market price of the Company's
securities and could cause the market price of the Company's securities to
fluctuate significantly. In addition, broad market fluctuations and general
economic or political conditions may adversely affect the market price of the
Company's securities, regardless of the Company's actual performance.
Dividend Policies. The Company plans to retain future earnings for use
in its business and, accordingly, the Company does not anticipate paying
dividends in the foreseeable future. Payment of dividends is within the
discretion of the Company's Board of Directors and will depend, among other
factors, upon the Company's earnings, financial condition and capital
requirements.
Dilutive Effect of Warrants and Options. The Company has reserved for
issuance 2,286,254 shares of Common Stock upon the respective conversion or
exercise of authorized outstanding convertible debt, options and warrants,
including the 577,421 shares reserved for issuance upon the respective
conversion or exercise of the Debentures and the Warrants. At least 1,295,000
shares of Common Stock issuable upon exercise of such convertible debt, options
and warrants (not including the Debentures and the Warrants) is exercisable at
$8.00 per share or higher. If the options and warrants are exercised, the
percentage of Common Stock then held by the existing stockholders will be
reduced. These options and warrants can be expected to be exercised at a time
when the Company would be able to obtain funds from the sale of Common Stock or
other securities at a price higher than the exercise price thereof.
USE OF PROCEEDS
The Shares of Common Stock being offered hereby are for the account of
the Selling Stockholders. Accordingly, the Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders. See "Selling
Stockholders."
<PAGE>
The Company will receive an aggregate of U.S. $1,871,080 as payment for
the exercise of the Warrants underlying the 281,125 Shares offered hereby
(assuming no adjustment to the exercise price of the Warrants, as provided
therein). These proceeds will be used by the Company for working capital.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
Selling Stockholders. The number of Shares that may actually be sold by each of
the Selling Stockholders will be determined by each such Selling Stockholder,
and may depend upon a number of factors, including, among other things, the
market price of the Common Stock. The table below sets forth information as of
September 30, 1997, concerning the beneficial ownership of Common Stock of each
of the Selling Stockholders. All information concerning beneficial ownership has
been furnished by the Selling Stockholders.
<TABLE>
<CAPTION>
Shares of Common
Shares of Common Shares of Common Stock Owned
Stock Owned Stock Owned in the After Sale of All
Before Offering Offering Shares (9)
----------------------------- ------------------ ---------------------
Name of Stockholder Number(1) Percent(2) Number Number Percent
------------------- --------- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
CPR (USA) Inc. 189,778 6.0% 189,778 (3) 0 0
Libertyview Plus Fund 94,889 3.1% 94,889 (4) 0 0
Libertyview Fund, LLC 31,629 1.0% 31,629 (5) 0 0
LHIP Acquisition Company, 34,500 1.1% 34,500 (6) 0 0
LLC
Colman Abbe 20,000 * 20,000 (6) 0 0
Jeffrey Berman 7,250 * 7,250 (6) 0 0
Richard Abbe 7,250 * 7,250 (6) 0 0
Ceaser Fraschilla 1,000 * 1,000 (6) 0 0
David Stetson 17,500 * 17,500 (6) 0 0
Jeffrey Supinsky 17,500 * 17,500 (6) 0 0
Securities Trading Services 75,000 2.5% 75,000 (7) 0 0
Inc.
Richard Galterio 50,000 1.6% 50,000 (7) 0 0
Steven Bramson 25,000 * 25,000 (7) 0 0
Barclay Capital Corporation 6,125 * 6,125 (8) 0 0
TOTAL 577,421 16.2% 577,421 0 0%
- ----------------------
* Less than 1.0%
</TABLE>
<PAGE>
(1) Represents those shares of Common Stock held by the Selling
Stockholder, if any, together with those shares that such Selling Stockholder
has the right to acquire within 60 days from the date of this Prospectus. Each
of the Selling Stockholders specifically disclaims beneficial ownership of the
shares of Common Stock held (or acquirable upon exercise or conversion of any
derivative securities held) by the other Selling Stockholders and, as such, the
number of shares of Common Stock represented hereby does not reflect any shares
of Common Stock beneficially owned by any other Selling Stockholder.
(2) The percentages indicated are based on 2,985,447 shares of Common
Stock issued and outstanding as of September 30, 1997.
(3) Represents a maximum of 177,778 Shares acquirable upon conversion
of the Debentures and 12,000 Shares acquirable upon exercise of the Warrants.
(4) Represents a maximum of 88,889 Shares acquirable upon conversion of
the Debentures and 6,000 Shares acquirable upon exercise of the Warrants.
(5) Represents a maximum of 29,629 Shares acquirable upon conversion of
the Debentures and 2,000 Shares acquirable upon exercise of the Warrants.
(6) Represents Shares acquirable upon exercise of certain Warrants (or
replacement warrants) issued to such Selling Stockholder in connection with the
initial public offering of the Company's Common Stock.
(7) Represents Shares acquirable upon exercise of certain Warrants
issued by the Company in connection with advisory services related to certain
debt financing.
(8) Represents Shares acquirable upon exercise of certain Warrants
issued by the Company in connection with its 1996 acquisition of the Alamo Grill
Restaurant.
(9) Assumes all of the Shares being offered will be sold. Because each
of the Selling Stockholders may sell all, some or none of the Shares that each
holds, and because the offering contemplated by this Prospectus is not now a
"firm commitment" underwritten offering, the actual number of Shares that will
be held by each of the Selling Stockholders upon or prior to termination of this
offering may vary. See "Plan of Distribution."
The Selling Stockholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Shares since the date on which
they provided the information regarding their Common Stock in transactions
exempt from the registration requirements of the Securities Act. Additional
information concerning the above listed Selling Stockholders may be set forth
from time to time in prospectus supplements to this Prospectus. See "Plan of
Distribution."
Pursuant to the terms of that Registration Rights Agreement dated July
14, 1997 (the "Registration Rights Agreement"), the Company has agreed to file
the Registration Statement to which this Prospectus forms a part for the purpose
of registering the potential resale of the Shares and to maintain the
effectiveness of such Registration Statement until ________, 1999 or until the
Shares have otherwise been sold or are available for resale pursuant to Rule 144
promulgated under the Securities Act, in each case, as contemplated by the
Registration Rights Agreement. In addition, the Company and the Selling
<PAGE>
Stockholders agreed to indemnify each other and certain affiliated parties from
and against any losses or claims arising out of, among other things, (1) any
alleged untrue statement of a material fact or (2) any material omission
contained or referred to in the Registration Statement. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company, pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable. All of the
registration and filing fees, printing expenses, blue sky fees, if any, and fees
and disbursements of counsel for the Company will be paid by the Company;
provided, however, that any underwriting discounts and selling commissions will
be borne by the Selling Stockholders.
Except as specifically set forth herein, none of the Selling
Stockholders has, or within the past three years has had, any position, office
or other material relationship with the Company or any of its predecessors or
affiliates.
PLAN OF DISTRIBUTION
Sales of the Shares may be made from time to time by the Selling
Stockholders, or, subject to applicable law, by pledgees, donees, distributees,
transferees or other successors in interest. Such sales may be made on
over-the-counter markets, on a national securities exchange (any of which may
involve crosses and block transactions), in privately negotiated transactions or
otherwise or in a combination of such transactions at prices and at terms then
prevailing or at prices related to the then current market price, or at
privately negotiated prices. In addition, any Shares covered by this Prospectus
which qualify for sale pursuant to Section 4(1) of the Securities Act or Rule
144 promulgated thereunder may be sold under such provisions rather than
pursuant to this Prospectus. Without limiting the generality of the foregoing,
the Shares may be sold in one or more of the following types of transactions:
(a) a block trade in which the broker-dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) an exchange distribution in accordance with the rules of such exchange; (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (e) face-to-face transactions between sellers and purchasers
without a broker-dealer. In effecting sales, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate in
the resales.
The Selling Stockholders may enter into option or other transactions
with broker-dealers which require the delivery to the broker-dealer of the
Shares registered hereunder, which the broker-dealer may resell pursuant to this
Prospectus. The Selling Stockholders may also pledge the Shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer may
effect sales of the pledged Shares pursuant to this Prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders in amounts to be
negotiated in connection with the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.
<PAGE>
If one or more Selling Stockholders engages an underwriter or
underwriters, information concerning such underwriters, the compensation to be
received by such underwriters and the compensation to be received by other
broker-dealers, in the event the compensation of such other broker-dealers is in
excess of usual and customary commissions, will, to the extent required, be set
forth in a supplement to this Prospectus (the "Prospectus Supplement"). Any
dealer or broker participating in any distribution of the Shares may be required
to deliver a copy of this Prospectus, including the Prospectus Supplement, if
any, to any person who purchases any of the Shares from or through such dealer
or broker.
The Company has advised the Selling Stockholders that during such time
as they may be engaged in a distribution of the Shares included herein they are
required to comply with Regulation M promulgated under the Exchange Act. In
general, Regulation M precludes any Selling Shareholder, any affiliated
purchasers and any broker-dealer or other person who participates in such
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. A "distribution" is defined in the
rules as an offering of securities that is distinguished from ordinary trading
activities and depends on the "magnitude of the offering and the presence of
special selling efforts and selling methods." Regulation M also prohibits any
bids or purchases made in order to stabilize the price of a security in
connection with the distribution of that security.
It is anticipated that the Selling Stockholders will offer all of the
Shares for sale. Further, because it is possible that a significant number of
Shares could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a depressive effect on the market price of the Company's
Common Stock.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Parker Duryee Rosoff & Haft, New
York, New York 10017.
EXPERTS
The consolidated financial statements of Elephant & Castle Group Inc.
and subsidiaries included in the Company's annual report on Form 10-KSB for the
year ended December 31, 1996 incorporated herein by reference have been audited
by Pannell Kerr Foster, independent auditors, as indicated in their report with
respect thereto, and are incorporated herein by reference in reliance upon the
report of said firm given upon their authority as experts in accounting and
auditing.
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates of the expenses
to be incurred by it in connection with the Common Stock being offered hereby:
SEC Registration Fee $ 1,498
Printing registration statement and other documents......... 3,500*
Legal fees and expenses..................................... 10,000*
Accounting fees and expenses................................ 1,000*
Miscellaneous expenses...................................... 1,002*
------
$17,000*
=======
* Estimated
Item 15. Indemnification of Directors and Officers.
Article 21.1 of the Company's Articles of Association provides, with
respect to the indemnification of directors and officers, that the Company shall
indemnify, subject to the [Company Act], any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether or not brought by the Company or by a corporation or other
legal entity or enterprise and whether civil, criminal or administrative, by
reason of the fact that such person is or was a director, manager, or officer of
the Company, against all costs, charges and expenses, including legal fees and
any amount paid to settle the action or proceeding or satisfy a judgment, if
such person acted honestly and in good faith with a view to the best interests
of the Company, if such person exercised the care, diligence and skill of a
reasonably prudent person, and, with respect to any criminal or administrative
action or proceeding, such person had reasonable grounds for believing that his
or her conduct was lawful. The provisions of Article 21.1 are deemed to be a
term of every contract of employment or office of every director, manager, and
officer of the Company.
Article 21.2 of the Company's Articles of Association provides that,
subject to the Company Act, the Company may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether or not brought by the Company or by a
corporation or other legal entity or enterprise and whether civil, criminal or
administrative, by reason of the fact that he is or was an employee or agent of
the Company or is or was serving in any other capacity on behalf of the Company
at its request including, but without limiting the generality of the foregoing,
serving at the request of the Company as a director, manager, officer, employee
or agent of another corporation, a partnership, joint venture, trust or other
enterprise, against all costs, charges and expenses, including legal fees and
any amount paid to settle the action or proceeding or satisfy a judgment, if he
acted honestly and in good faith with a view to the best interests of the
Company or other corporation or other legal entity or enterprise as aforesaid,
and, with respect to any criminal or administrative action or proceeding, if he
had reasonable grounds for believing that his conduct was lawful. The provisions
of Article 21.2 shall not be part of any contract or agreement between any
aforesaid person and the Company unless expressly made so by the terms of the
contract or agreement with the Company.
<PAGE>
Article 21.4 provides that the Company may indemnify any person, other
than a director, in respect of any losses, damages, costs or expenses whatsoever
incurred by him while acting as an officer, employee or agent for the Company,
unless such losses, damages, costs or expenses shall arise out of failure to
comply with instructions, willful act or default or fraud by such person, and in
any of such events the Company shall only indemnify such person if the
directors, in their absolute discretion, so decide. The provisions of this
Article 21.4 shall not be part of any contract or agreement between any
aforesaid person and the Company unless expressly made so by the terms of the
contract or agreement with the Company.
Article 21.6 provides that the Company may give indemnities, on such
terms and conditions as it deems appropriate, to any director, officer,
employee, agent or other person who has undertaken or is about to undertake any
liability on behalf of the Company or any corporation controlled by it. The
provisions of Article 21.6 shall not be part of any contract or agreement
between any aforesaid person and the Company unless expressly made so by the
terms of the contract or agreement with the Company.
Article 21.7 provides that, subject to the Company Act and other
applicable laws and statutes, no director, officer, employee or agent for the
time being of the Company shall be liable for the acts, receipts, neglects or
defaults of any other director, officer, employee or agent or for joining in any
receipt or act for conformity, or for any loss, damage or expense happening to
the Company through the insufficiency or deficiency of title to any property
acquired by order of the Board, or for the insufficiency or deficiency of any
security in or upon which any of the moneys of or belonging to the Company shall
be invested or for any loss or damages arising from the bankruptcy, insolvency,
or tortious act of any person, firm or corporation with whom or with which any
moneys, securities or effects shall be lodged or deposited or for any loss
occasioned by any error of judgment or oversight on his part or for any other
loss, damage or misfortune whatever which may happen in the execution of the
duties of his respective office or trust or in relation thereto unless the same
shall happen by or through his own willful act or omission, default, negligence,
breach of trust or breach of duty.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit
Number Description of Exhibit
------ ----------------------
4.01 -- Specimen Certificate representing the Common Stock (1)
5.01* -- Opinion of Parker Duryee Rosoff & Haft
23.01 -- Consent of Pannell Kerr Forster
23.02* -- Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.01
hereof)
24.01 -- Power of attorney (included in the signature page of Part II of
this Registration Statement)
- ---------------
* To be filed by amendment
(1) Such Exhibit was filed with the Company's Registration Statement (File No.
33-60612) declared effective June 30, 1993 and is hereby incorporated by
reference.
<PAGE>
Item 17. Undertakings.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in the Registration Statement, shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to Item 15 of Part II of the Registration Statement, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, Province of British Columbia, on October
27, 1997.
ELEPHANT & CASTLE GROUP INC.
By: \s\Jeffrey M. Barnett
---------------------
Jeffrey M. Barnett
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey M. Barnett and Daniel DeBou, and each of
them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and the documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
\s\Jeffrey M. Barnett Chairman of the Board, President and October 27, 1997
- --------------------- Director (Principal Executive Officer)
Jeffrey M. Barnett
\s\George W. Pitman Vice President and Director October 27, 1997
- -------------------
George W. Pitman
\s\Daniel DeBou Principal Financial Officer and Principal October 27, 1997
- --------------- Accounting Officer
Daniel DeBou
\s\Martin O'Dowd President of U.S. Operations and Director October 27, 1997
- ----------------
Martin O'Dowd
<PAGE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
\s\ Colin Stacey Chief Operating Officer and Director October 27, 1997
- ----------------
Colin Stacey
\s\Peter J. Barnett Director October 27, 1997
- -------------------
Peter J. Barnett
\s\William McEwen Director October 27, 1997
- -----------------
William McEwen
- -----------------
David Wiederecht Director
- -----------------
Anthony Mariani Director
</TABLE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated April 10, 1997, which
appears in the annual report on Form 10-KSB of Elephant & Castle Group Inc. and
subsidiaries for the year ended December 31, 1996 and to the reference to our
firm under the caption "Experts" in the Prospectus.
/s/ Pannell Kerr Forster
- ------------------------
Pannell Kerr Forster
Vancouver, Canada
October 29, 1997
