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 March 28, 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 March 31, 1999:
3,392,797
<PAGE>
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Canadian Dollars)
(In Thousands of Dollars)
(Unaudited)
March 28/99 March 29/98 December 27, 1998
----------- ----------- -----------------
<S> <C> <C> <C>
ASSETS
Current
Cash .............................. $ 2,129 $ 3,449 $ 2,468
Accounts Receivable ............... 724 763 557
Inventory ......................... 855 617 808
Deposits & Prepaids ............... 397 761 517
Pre-Opening Costs ................. 984 395 891
-------- -------- --------
5,089 5,985 5,241
Fixed Assets ......................... 22,241 14,713 21,291
Goodwill ............................. 2,028 2,105 2,053
Other Assets ......................... 2,616 1,409 2,212
-------- -------- --------
31,974 24,212 30,797
-------- -------- --------
LIABILITIES
Current
Accounts Payable .................. 6,445 4,275 5,931
Current Portion of Long Term Debt . 273 443 105
-------- -------- --------
6,718 4,718 6,036
Long Term Debt ....................... 18,532 9,723 16,500
-------- -------- --------
25,250 14,441 22,536
-------- -------- --------
SHAREHOLDERS' EQUITY
Capital Stock ........................ 13,197 11,228 12,982
Other Paid-In Capital ................ 0 2,421 844
Deferred Exchange Adjustment ......... (1,114) 0 (1,051)
Retained Earnings .................... (5,359) (3,878) (4,514)
-------- -------- --------
6,724 9,771 8,261
-------- -------- --------
$ 31,974 $ 24,212 $ 30,797
-------- -------- --------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian Dollars)
(In Thousands of Dollars)
(Unaudited)
Thirteen Weeks Ended
March 28, March 29,
1999 1998
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME (LOSS) .................................. ($ 704) ($ 438)
Add: Items not involving cash ................... 1,049 565
------- -------
345 127
------- -------
CHANGES IN NON-CASH WORKING CAPITAL
Accounts receivable .......................... (168) (92)
Inventory .................................... (47) 66
Deposits and prepaid expenses ................ 120 (169)
Accounts payable and accrued liabilities ..... 514 142
------- -------
419 (53)
------- -------
764 74
------- -------
INVESTING ACTIVITIES
Acquisition of fixed assets ..................... (1,620) (478)
Acquisition of other assets, including pre-
opening costs ........................... (514) (132)
------- -------
(2,134) (610)
------- -------
FINANCING ACTIVITIES
Deferred finance charges ........................ (436) 0
Proceeds from long-term debt .................... 1,899 0
Repayment of long-term debt ..................... (432) (112)
------- -------
1,031 (112)
------- -------
(DECREASE) IN CASH DURING PERIOD ................... (339) (648)
CASH AT BEGINNING OF PERIOD ........................ 2,468 4,097
------- -------
CASH AT END OF PERIOD .............................. $ 2,129 $ 3,449
------- -------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Canadian Dollars)
(In Thousands of Dollars)
(unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended
March 28, March 29,
1999 1998
----------- -----------
<S> <C> <C>
SALES .................................... $ 12,205 $ 9,282
----------- -----------
RESTAURANT EXPENSES
Food and Beverage Costs ................ 3,476 2,672
Restaurant operating expenses
Labour ............................... 3,933 3,092
Occupancy and other .................. 3,121 2,431
Depreciation and Amortization .......... 916 553
----------- -----------
11,446 8,748
----------- -----------
INCOME FROM RESTAURANT OPERATIONS ........ 759 534
GENERAL AND ADMINISTRATIVE EXPENSES ...... 956 771
INTEREST ON LONG TERM DEBT ............... 507 201
----------- -----------
NET LOSS FOR THE PERIOD .................. ($ 704) ($ 438)
----------- -----------
Average number of shares outstanding ..... 3,345,155 3,044,630
Loss per share ........................... ($ 0.21) ($ 0.14)
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ELEPHANT & CASTLE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Canadian Dollars)
(In Thousands of Dollars)
(Unaudited)
Thirteen Weeks Ended
March 28, March 29,
1999 1998
-------- --------
<S> <C> <C>
Balance at beginning of period ............... $ 8,261 $ 10,209
Convert other paid-in capital to
convertible debentures ............... (928) 0
Issue of shares on
conversion of debentures ............. 195 0
Currency translation adjustment ........... 21 0
Redemption premium ........................ (121) 0
Net loss .................................. (704) (438)
-------- --------
Balance at end of period ..................... $ 6,724 $ 9,771
-------- --------
</TABLE>
See notes to financial statements
<PAGE>
ELEPHANT & CASTLE GROUP INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED MARCH 28, 1999 and MARCH 29, 1998
(Canadian Dollars)
(In Thousands of Dollars)
(Unaudited)
1. The accompanying interim financial statements for the thirteen week periods
ended March 28, 1999 and March 29, 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
March 28, 1999 March 29, 1998
<S> <C> <C>
NET LOSS - CANADA .................... ($ 704) ($ 438)
ADJUSTMENTS:
Amortization of leasehold
improvement costs ............... (15) (11)
Pre-opening costs .................... (95) 0
Dividend on paid-in capital .......... (7) (36)
Recognition of non-capital
loss carry forwards ............. 242 146
----------- -----------
NET LOSS - United States ............. ($ 579) ($ 339)
----------- -----------
NET LOSS PER COMMON SHARE
Canada ............................... ($ 0.21) ($ 0.14)
United States ........................ ($ 0.17) ($ 0.11)
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING: ................ 3,345,155 3,044,630
</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 March 28, 1999, US $240 (CDN $360)
had been repaid and US $130 (CDN $195) 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>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended March 28, 1999 (unaudited) vs. Thirteen Weeks Ended March
29, 1998 (unaudited)
Net Income
For the thirteen weeks ended March 28, 1999, the Company's net loss was CDN
$704,000 compared to CDN $438,000 for the corresponding period in 1998. Loss per
share for the current period was CDN ($0.21), compared to CDN ($0.14) in 1998.
The average number of shares outstanding increased from 3,044,630 in 1998 to
3,345,155 for the current period.
Sales
Sales increased 31.5% during the thirteen weeks ended March 28, 1999 to CDN
$12,205,000 from CDN $9,282,000 for the comparable period in 1998. The 1999
figure includes sales for three new locations: Rainforest - Vancouver BC (opened
June 12, 1998); Philadelphia PA (opened November 13, 1998); and Rainforest -
Toronto (Scarborough) ON (opened February 4, 1999). The company disposed of its
London, Ontario location, by way of a franchise agreement with two of its
location managers, on September 28, 1998.
For the thirteen Canadian locations open throughout both periods, sales for the
thirteen weeks ended March 28, 1999 totaled CDN$4,785,000 and were up 2.1%
compared to the thirteen weeks ended March 29, 1998. This was the fifth
consecutive quarter of same store sales growth in Canada. For the six US
locations open throughout both periods, sales for the 1999 period were
US$3,137,000 and were 1.0% down from the 1998 period.
Sales at the two Rainforest Cafe locations - Vancouver and Toronto - have met or
exceeded expectations. Early sales performance at the new Philadelphia `twin'
location has been disappointing.
Food and Beverage Costs
Overall, food and beverage costs, as a percentage of sales, improved to 28.5%
for the thirteen weeks ended March 28, 1999 compared to 28.8% for the thirteen
weeks ended March 29, 1998. The improvement is a continuation of a trend the
Company has been experiencing for the past nine quarters.
Labour and Benefits Costs
Labour and benefits decreased from 33.3% of sales in 1998 to 32.2% for the
current period. Again, this is the continuation of a downward cost trend, driven
by improved cost management techniques as well as the opening of higher volume
stores.
Occupancy and Other Operating Costs
Occupancy and other operating expenses decreased as a percentage of sales from
26.2% in 1998 to 25.6% for the current period. Per store occupancy costs have
risen as a result of opening larger Rainforest facilities in high traffic, high
profile sites.
<PAGE>
Depreciation and Amortization Expense
Depreciation and amortization costs increased to 7.5% of sales for the current
period from 6.0% last year. Amortization of pre-operating costs for new
restaurants, which is effected over the twelve months following opening, is the
major driver of the cost increase. In dollar terms, depreciation and
amortization increased to CDN $916,000 in 1999 from CDN $553,000 in 1998 as the
company continues to opens new locations.
General and Administrative Costs
General and administrative costs decreased from 8.3% of sales in 1998 to 7.8% in
the current period. Scale economies are now being achieved as new restaurants
are opened without commensurate increases in general and administrative costs.
The Company believes this trend will continue and its long term general and
administrative expense percentage will be brought down to under 7.0%.
Interest on Long Term Debt
During 1998 the Company completed two US $2,000,000 (CDN $3,000,000 each, for a
total of CDN $6,000,000 at current conversion rates) financings with General
Electric Investment Private Placement Partners, II, a U.S. based limited
partnership with which it had previously arranged US $7,000,000 (CDN
$10,500,000, also at current conversion rates) financing. The former US
$2,000,000 (CDN $3,000,000) was drawn down against a previously negotiated US
$9,000,000 (CDN $13,500,000) facility. The latter US $2,000,000 (CDN $3,000,000)
was a bridge loan, which was converted into a convertible debenture as part of a
new financing (see below).
In February, 1999, the Company completed a US $1,265,000 (CDN $1,898,000)
convertible debenture financing with a group of private investors. The US $
2,000,000 (CDN $3,000,000) bridge loan from GEIPPP II was rolled into
convertible debentures on identical terms, to give a total of US $ 3,265,000
(CDN $4,898,000) new debentures.
The funds raised were used primarily to construct the new Canadian Rainforest
Cafe operations, plus the new Elephant & Castle/Alamo twin operation in
Philadelphia, PA.
As a result of this additional long term debt, interest expense in the 1999
period was substantially higher than 1998, and will continue to be higher than
the comparable quarters for the rest of 1999.
(Loss) before Taxes
The Company incurred a loss before income taxes of CDN ($704,000) for the 1999
period compared to a loss of CDN ($438,000) for the 1998 period. As discussed
above, the Company realized positive impacts from higher sales and its key
operating cost ratios, partially offset by higher pre-operating costs,
contributing to an increase in Income from Restaurant Operations to CDN $759,000
for the 1999 period from CDN $534,000 in 1998. This was offset by higher general
and administrative costs and interest expense, resulting in the overall increase
in the net loss for the period.
<PAGE>
Income Taxes
The Company incurred a loss in the thirteen week period ended March 28, 1999 and
therefore has no tax liability. The Company also has loss carry-forwards that
will reduce its effective tax rate in future periods.
Liquidity and Capital Resources
Changes in non-cash working capital items resulted in a net source of funds of
CDN $419,000 in the thirteen week period ended March 28, 1999, compared to a net
use of funds of CDN $53,000 in the thirteen week period ended March 29, 1998.
The principal source in 1999 was an increase in accounts payable related to the
two newest locations.
The Company's cash balance as of March 28, 1999 was CDN $2,129,000 compared to
CDN $3,449,000 on March 29, 1998. The Company invested CDN $1,620,000 in fixed
assets during the 1999 period, principally in the Rainforest Joint Venture. New
financing, net of financing costs and repayments of debt, generated CDN
$1,031,000 of funds. The Company's current cash position, together with the cash
being generated from its restaurant operations, will be sufficient to fund its
1999 capital expansion program.
YEAR 2000
The Company continues to address its state of readiness with regards to the Year
2000 (Y2K) problem. It does not foresee any material negative impacts related to
Y2K. The Company is following these steps to ensure a smooth transition:
- all new computer hardware and software being purchased is
certified as Y2K compliant.
- Point of Sale equipment has been assessed. Replacement systems
will be installed in two locations in the second quarter of 1999,
at a cost estimated not to exceed CDN $50,000 in total. Work is
proceeding on schedule on minor upgrades on other systems (at
costs ranging from less than CDN $500 to a high of CDN $3,000) and
will be completed in the second quarter of 1999.
- Banks and other service providers have given assurances of Y2K
readiness.
- Payroll service providers have certified Y2K compliance.
- Key suppliers have given assurances of readiness.
The Company does not foresee any extraordinary disruption to its business
related to Y2K.
Thirteen Weeks Ended March 29, 1998 (unaudited) vs. Three Months Ended March 31,
1997 (unaudited)
Net Income
For the thirteen weeks ended March 29, 1998, the Company's net loss was CDN
$438,000 compared to CDN $377,000 for the corresponding period in 1997. Loss per
share for the 1998 period was CDN ($0.14), compared to CDN ($0.13) in 1997. The
average number of shares outstanding increased from 2,843,633 in 1997 to
3,044,630 in 1998.
<PAGE>
Sales
Sales increased 18.5% during the thirteen weeks ended March 29, 1998 to CDN
$9,282,000 from CDN $ 7,834,000 for the comparable period in 1997. The 1998
figure included sales for three new locations: Seattle, WA (opened August 29,
1997); Boston, MA (opened November 4, 1997); and Edmonton, AB (opened November
20, 1997). The Company closed a Vancouver, BC location during the corresponding
period (February 28, 1997) and closed its Thunder Bay, ON location on August 31,
1997.
For the thirteen Canadian locations open throughout both periods, sales for the
thirteen weeks ended March 29, 1998 totaled CDN $4,810,000 and were up 2.1%
compared to the three month period ended March 31, 1997. For the four U.S.
locations open throughout both periods, sales for the 1998 period were CDN
$2,655,000 and were down 2.3% from the 1997 period.
For the new Seattle location, sales were at the lower end of the expected range.
The new Boston location continued to exceed sales expectations by a significant
amount. Sales at the new Edmonton location were increasing month over month
since opening and recent sales were close to expectations.
Food and Beverage Costs
Overall, food and beverage costs, as a percentage of sales, improved to 28.8%
for the thirteen weeks ended March 29, 1998 compared to 29.1% for the three
months ended March 31, 1997. The improvement was a continuation of a trend the
Company had been experiencing for the past five quarters. Further improvements
were expected as the results of its purchasing procedures review took full
effect.
Labour and Benefits Costs
Labour and benefits decreased from 33.8% of sales in 1997 to 33.3% in 1998. Of
the seventeen stores open throughout both periods, thirteen showed improved or
steady labour percentages.
Occupancy and Other Operating Costs
Occupancy and other operating expenses decreased as a percentage of sales from
27.0% in 1997 to 26.2% for the 1998 period. The decrease was the result of lower
occupancy rates at the Company's new locations. The Company's strategy continued
to be to drive occupancy percentages down by opening new facilities at locations
with controlled and favourable occupancy rates.
Depreciation and Amortization Expense
Depreciation and amortization costs decreased to 6.0% of sales for the 1998
period from 6.3% in 1997. In dollar terms, depreciation and amortization
increased to CDN $553,000 in 1998 from CDN $496,000 in 1997 as the company
continued to open new locations.
General and Administrative Costs
General and administrative costs increased from 7.3% of sales in 1997 to 8.3% in
the 1998 period. During the second half of 1997 the Company hired three new
executives as it developed the infrastructure necessary to allow the Company to
expand and return to profitability. The Company also embarked on a franchise
<PAGE>
development program in 1997. The reader is referred to the Company's annual
report for the year ended December 31, 1997 for additional details. These
initiatives resulted in higher general and administrative costs. The Company
believes its long term general and administrative expense percentage will be
brought down to under 7.0% as new stores are added without incurring
proportionate additional costs.
Interest on Long Term Debt
During 1997 the Company completed two US $2,000,000 (CDN $2,740,000 each, for a
total of CDN $5,480,000) convertible subordinated debenture financings with
General Electric Investment Private Placement Partners, II, a U.S. based limited
partnership with which it had previously arranged a similar US $3,000,000 (CDN
$4,110,000) financing. As a result, interest on long term debt in the 1998
period was substantially higher than 1997.
(Loss) before Taxes
The Company incurred a loss before income taxes of CDN ($438,000) for the 1998
period compared to a loss of CDN ($377,000) for the 1997 period. As discussed
above, the Company realized positive impacts from higher sales, improved food
and beverage margins, lower labour percentages and reduced occupancy costs as a
percentage of sales, all of which contributed to an increase in Income from
Restaurant Operations to CDN $534,000 for the 1998 period from CDN $293,000 in
1997. This was offset by higher general and administrative costs and higher
interest expense, resulting in the overall increase in the net loss for the
period.
Income Taxes
The Company incurred a loss in the thirteen week period ended March 29, 1998 and
therefor had no tax liability. The Company also had loss carry-forwards that
will reduce its effective tax rate in future periods.
Liquidity and Capital Resources
Changes in non-cash working capital items resulted in a net use of funds of CDN
$53,000 in the thirteen week period ended March 29, 1998, compared to a net use
of funds of CDN $742,000 in the three month period ended March 31, 1997. The
principal usage in 1997 was to reduce accounts payable. The 1998 accounts
payable balance included commitments related to the Rainforest Joint Venture,
which had the effect of offsetting the normal seasonal reduction of accounts
payable for the 1998 period.
The Company's cash balance as of March 29, 1998 was CDN $3,449,000 compared to
CDN 2,837,000 on March 31, 1997. The Company invested CDN $478,000 in fixed
assets during the 1998 period, principally in the Rainforest Joint Venture. The
Company would need additional financing to fund its planned capital requirements
for the balance of 1998, again principally for the Rainforest Joint Venture. The
Company anticipated it would be successful in raising the necessary funds.
<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 March 28, 1999, US $240,000 (CDN $360,000) had been repaid and US
$130,000 (CDN $195,000) 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 May 11, 1999
/s/Martin O'Dowd
-----------------
Martin O'Dowd,
President & C.E.O.
Date May 11, 1999 /s/ Richard Bryant
------------------
Richard H. Bryant,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-28-1999
<CASH> 2,129,000
<SECURITIES> 0
<RECEIVABLES> 724,000
<ALLOWANCES> 0
<INVENTORY> 855,000
<CURRENT-ASSETS> 5,089,000
<PP&E> 32,172,000
<DEPRECIATION> 9,931,000
<TOTAL-ASSETS> 31,974,000
<CURRENT-LIABILITIES> 6,718,000
<BONDS> 18,532,000
0
0
<COMMON> 13,197,000
<OTHER-SE> (6,473,000)
<TOTAL-LIABILITY-AND-EQUITY> 31,974,000
<SALES> 12,205,000
<TOTAL-REVENUES> 12,205,000
<CGS> 3,476,000
<TOTAL-COSTS> 7,970,000
<OTHER-EXPENSES> 956,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 507,000
<INCOME-PRETAX> (704,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (704,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (704,000)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
