UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 27, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________________ to _______________________
Commission file number 33-60612
ELEPHANT & CASTLE GROUP INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA NOT APPLICABLE
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 500, 856 Homer Street, Vancouver, BC, Canada V6B 2W5
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number) (604) 684-6451
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Shares at June 27, 1999:
3,544,709
<PAGE>
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
Consolidated Balance Sheets
June 27, 1999
Canadian Dollars
June 27/99 June 28/98 December 27, 1998
ASSETS
Current
<S> <C> <C> <C>
Cash ............................ 1,345,000 3,709,000 2,468,000
Accounts Receivable ............. 737,000 778,000 557,000
Inventory ....................... 868,000 757,000 808,000
Deposits & Prepaids ............. 486,000 639,000 517,000
Pre-Opening Costs ............... 636,000 405,000 891,000
------------ ------------ ------------
4,072,000 6,288,000 5,241,000
Fixed Assets ....................... 22,596,000 17,129,000 21,291,000
Goodwill ........................... 2,003,000 2,089,000 2,053,000
Other Assets ....................... 2,628,000 1,992,000 2,212,000
------------ ------------ ------------
31,299,000 27,498,000 30,797,000
------------ ------------ ------------
LIABILITIES
Current
Accounts Payable ................ 7,631,000 5,435,000 5,931,000
Current Portion of Long Term Debt 71,000 443,000 105,000
------------ ------------ ------------
7,702,000 5,878,000 6,036,000
Long Term Debt ..................... 18,411,000 12,349,000 16,500,000
------------ ------------ ------------
26,113,000 18,227,000 22,536,000
------------ ------------ ------------
SHAREHOLDERS' EQUITY
Capital Stock ...................... 13,652,000 11,235,000 12,982,000
Other Paid-In Capital .............. 0 2,421,000 844,000
Deferred Exchange Adjustment ....... (939,000) 0 (1,051,000)
Retained Earnings .................. (7,527,000) (4,385,000) (4,514,000)
------------ ------------ ------------
5,186,000 9,271,000 8,261,000
------------ ------------ ------------
$ 31,299,000 $ 27,498,000 $ 30,797,000
------------ ------------ ------------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Elephant & Castle Group Inc.
Consolidated Statements of Income
Canadian Dollars
(unaudited)
Thirteen Weeks Ended Twenty Six Weeks Ended
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES .............................. $ 11,875,000 $ 9,675,000 $ 24,080,000 $ 18,957,000
------------ ------------ ------------ ------------
RESTAURANT EXPENSES
Food and Beverage Costs .......... 3,422,000 2,796,000 6,898,000 5,468,000
Restaurant operating expenses
Labour ......................... 3,894,000 3,187,000 7,827,000 6,279,000
Occupancy and other ............ 3,220,000 2,538,000 6,341,000 4,969,000
Depreciation and Amortization .... 957,000 582,000 1,873,000 1,135,000
------------ ------------ ------------ ------------
11,493,000 9,103,000 22,939,000 17,851,000
------------ ------------ ------------ ------------
INCOME FROM RESTAURANT OPERATIONS .. 382,000 572,000 1,141,000 1,106,000
GENERAL AND ADMINISTRATIVE EXPENSES 1,029,000 877,000 1,985,000 1,648,000
RETIRING ALLOWANCES ................ 887,000 0 887,000 0
INTEREST ON LONG TERM DEBT ......... 550,000 201,000 1,057,000 402,000
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES ........... (2,084,000) (506,000) (2,788,000) (944,000)
INCOME TAX (RECOVERY) .............. 0 0 0 0
NET LOSS FOR THE PERIOD ............ ($ 2,084,000) ($ 506,000) ($ 2,788,000) ($ 944,000)
------------ ------------ ------------ ------------
Average number of shares outstanding 3,467,000 3,114,000 3,406,000 3,079,000
Earnings per share ................. ($ 0.60) ($ 0.16) ($ 0.82) ($ 0.31)
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian Dollars)
(Unaudited)
Twenty Six Weeks Ended
June 27, June 28,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME (LOSS) ............................ (2,788,000) (944,000)
Add: Items not involving cash ............. 2,218,000 1,135,000
----------- -----------
(570,000) 191,000
----------- -----------
CHANGES IN NON-CASH WORKING CAPITAL
Accounts receivable .................... (180,000) (107,000)
Inventory .............................. (60,000) (74,000)
Deposits and prepaid expenses .......... 31,000 (47,000)
Accounts payable and accrued liabilities 1,700,000 1,309,000
----------- -----------
1,491,000 1,081,000
----------- -----------
----------- -----------
921,000 1,272,000
----------- -----------
INVESTING ACTIVITIES
Acquisition of fixed assets ............... (2,632,000) (3,634,000)
Acquisition of other assets, including pre-
opening costs ..................... (443,000) (540,000)
----------- -----------
(3,075,000) (4,174,000)
----------- -----------
FINANCING ACTIVITIES
Deferred finance charges .................. (436,000) 0
Proceeds from long-term debt .............. 1,899,000 2,740,000
Repayment of long-term debt ............... (432,000) (226,000)
----------- -----------
1,031,000 2,514,000
----------- -----------
(DECREASE) IN CASH DURING PERIOD ............. (1,123,000) (388,000)
CASH AT BEGINNING OF PERIOD .................. 2,468,000 4,097,000
----------- -----------
CASH AT END OF PERIOD ........................ $ 1,345,000 $ 3,709,000
----------- -----------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Elephant & Castle Group Inc.
Condensed Consolidated Statements of Shareholders' Equity
Canadian Dollars
(Unaudited)
Twenty Six Weeks Ended
June 27, June 28,
1999 1998
<S> <C> <C>
Balance at beginning of period ........... $ 8,261,000 $ 10,209,000
Convert other paid-in capital to
convertible debentures ........... (928,000) 0
Issue of shares on
conversion of debentures ......... 518,000 0
Issue of shares for interest .......... 152,000 0
Issue of shares for directors' fees ... 0 6,000
Currency translation adjustment ....... 92,000 0
Redemption premium .................... (121,000) 0
Net loss .............................. (2,788,000) (944,000)
------------ ------------
Balance at end of period ................. $ 5,186,000 $ 9,271,000
------------ ------------
</TABLE>
See notes to financial statements
<PAGE>
ELEPHANT & CASTLE GROUP INC.
NOTES TO FINANCIAL STATEMENTS
TWENTY SIX WEEKS ENDED JUNE 27, 1999 and JUNE 28, 1998
(Canadian Dollars)
(In Thousands of Dollars)
(Unaudited)
1. The accompanying interim financial statements for the twenty six week
periods ended June 27, 1999 and June 28, 1998 have been prepared by
management and have not been audited. In the opinion of management, these
interim financial statements include all adjustments, consisting only of
normal recurring adjustments, considered necessary for a fair presentation
in Canada. Operating results for the interim periods are not indicative of
the results of any other interim periods or for the full year.
2. Financial statement presentation differs in certain respects between Canada
and the United States. Reconciliation of Canadian earnings and U.S.
earnings is as follows (the reader is referred to the Company's Form 10K
for the Year Ended December 27, 1998, as filed with the Securities and
Exchange Commission):
<TABLE>
<CAPTION>
Thirteen weeks ended Twenty six weeks ended
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET LOSS - CANADA ......... ($ 2,084) ($ 506) ($ 2,788) ($ 944)
ADJUSTMENTS:
Amortization of leasehold
improvement costs .... (15) (11) (30) (22)
Pre-opening costs ......... 255 0 160 0
Dividend on paid-in capital (0) (36) (0) (72)
Recognition of non-capital
loss carry forwards .. 553 166 797 311
----------- ----------- ----------- -----------
NET LOSS - United States .. ($ 1,291) ($ 387) ($ 1,861) ($ 727)
----------- ----------- ----------- -----------
NET LOSS PER COMMON SHARE
Canada .................... ($ 0.60) ($ 0.16) ($ 0.82) ($ 0.31)
United States ............. ($ 0.37) ($ 0.12) ($ 0.55) ($ 0.24)
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING: ..... 3,467,000 3,114,000 3,406,000 3,079,000
</TABLE>
<PAGE>
3. On February 1, 1999 the Company completed a US $1,265 (CDN $1,898)
convertible debenture financing with a group of private investors. The
debentures have a five year term, bear interest at 8%, payable in shares at
the Company's option, and are convertible into shares of the Company at US
$2.00 (CDN $3.00) per share. At the same time, the US $2,000 (CDN $3,000)
bridge loan due to General Electric Private Placement Partners II, due in
June 2000 was converted to convertible debentures on identical terms.
4. In March, 1999 the Company reached an agreement with the holders of its 6%
convertible subordinated debentures (recorded as "other paid-in capital) to
settle the balance not already converted into Common Shares. The terms of
repayment are US $240 (CDN $360) repayable in 1999, US $320 (CDN $480)
repayable in 2000 and the balance in 2001, subject to earlier conversion at
US $2.00 (CDN $3.00) per share. As of June 27, 1999, US $240 (CDN $360) had
been repaid and US $345 (CDN $518) had been converted into Common Shares.
5. The financial statements include the results of operations for new
locations in Vancouver BC (joint venture Canadian Rainforest Cafe, opened
June 12, 1998); Philadelphia PA (twin Elephant & Castle/Alamo Grill, opened
November 13, 1998); and Scarborough (Toronto) ON (joint venture Canadian
Rainforest Cafe, opened February 4, 1999). The comparative figures include
results of operations for London ON (franchised to existing location
managers on September 28, 1998).
6. Certain comparative figures have been reclassified to conform to the
current period's presentation.
<PAGE>
ELEPHANT & CASTLE GROUP INC.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
On February 1, 1999 the Company completed a US $1,265,000 (CDN
$1,897,500) convertible debenture financing with a group of private
investors. The debentures have a five year term, bear interest at 8%,
payable in shares at the Company's option, and are convertible into
shares of the Company at US $2.00 (CDN $3.00) per share. At the same
time, the US $2,000,000 (CDN $3,000,000) bridge loan due to General
Electric Private Placement Partners II, due in June 2000 was converted
to convertible debentures on identical terms.
In March, 1999 the Company reached an agreement with the holders of its
6% convertible subordinated debentures (recorded as "other paid-in
capital) to settle the balance not already converted into Common
Shares. The terms of repayment are US $240,000 (CDN $360,000) repayable
in 1999, US $320,000 (CDN $480,000) repayable in 2000 and the balance
in 2001, subject to earlier conversion at US $2.00 (CDN $3.00) per
share. As of June 27, 1999, US $240,000 (CDN $360,000) had been repaid
and US $345,000 (CDN $518,000) had been converted into Common Shares.
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of matters to a vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
None
Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ELEPHANT & CASTLE GROUP INC.
----------------------------
(Registrant)
Date August 10, 1999 /s/ Martin O'Dowd
--------------- -----------------
Martin O'Dowd, President
Date August 10, 1999 /s/ Richard Bryant
--------------- ------------------
Richard H. Bryant, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-27-1999
<CASH> 1,345,000
<SECURITIES> 0
<RECEIVABLES> 737,000
<ALLOWANCES> 0
<INVENTORY> 868,000
<CURRENT-ASSETS> 4,072,000
<PP&E> 33,219,000
<DEPRECIATION> 10,623,000
<TOTAL-ASSETS> 31,299,000
<CURRENT-LIABILITIES> 7,702,000
<BONDS> 18,411,000
0
0
<COMMON> 13,652,000
<OTHER-SE> (8,466,000)
<TOTAL-LIABILITY-AND-EQUITY> 31,299,000
<SALES> 24,080,000
<TOTAL-REVENUES> 24,080,000
<CGS> 6,898,000
<TOTAL-COSTS> 16,041,000
<OTHER-EXPENSES> 2,872,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,057,000
<INCOME-PRETAX> (2,788,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,788,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,788,000)
<EPS-BASIC> (.82)
<EPS-DILUTED> (.82)
</TABLE>
