Elephant & Castle Group Inc · 10-K · For 12/30/01

Filed On 3/28/02   ·   SEC File 1-12134   ·   Accession Number 912057-2-12257

Annual Report   ·   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         61    241K 

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 Form 10-K
 ---------

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 FOR THE FISCAL YEAR ENDED DECEMBER 30, 2001
 COMMISSION FILE NO. 1-12134
 CUSIP NO. 286199-20-3

ELEPHANT & CASTLE GROUP INC.
 (Name of Small Business Issuer)
 -------------------------------

Province of British Columbia                        Not Applicable              
----------------------------                        --------------              
(State or other jurisdiction of                     (IRS Employer Identification
incorporation)                                      Number)                     

1190 Hornby Street                                                              
Vancouver, B.C. CANADA                               V6Z 2K5                    
----------------------                               -------                    
(Address of principal execucutive                    (Zip Code)                 
offices)                                                                        

Registrant's telephone number including area code: (604) 684-6451               

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 13 months (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to filing requirements 
for the past 90 days.  YES  X    NO                                             
-----    -----              

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of Registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]                                                                   

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Issuer's revenues during the fiscal year ended December 30, 2001: CDN           
$46,833,000 (converts at applicable exchange rates to U.S. $30,238,000).        

Aggregate market value of voting stock held by non-affiliates of the Registrant 
as at March 15, 2002: U.S. $2,275,000 (CDN $3,628,000).                         

Number of shares outstanding of Issuer's Common Stock as of December 30, 2001:  
5,169,604.                                                                      

Securities registered pursuant to Section 12(b) of the Act:                     

None.                                                                 

Securities registered pursuant to Section 12(g) of the Act:                     

                              OTCBB        Number of
Title of Each Class                   Symbol   Shares Outstanding   
-------------------                   ------   ------------------   
Common Stock, without par value             PUBSF      5,169,604 (a)            

(a) Calculated as of March 15, 2002                                             

FORWARD-LOOKING STATEMENTS                                                      

    This annual report on Form 10-K contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, including  
statements made with respect to the results of operations and businesses of the 
Company. Words such as "may," "should," "believe," "anticipate," "estimate,"    
"expect," "intend," "plan" and similar expressions are intended to identify     
forward-looking statements. These forward-looking statements are based upon     
management's current plans, expectations, estimates and assumptions and are     
subject to a number of risks and uncertainties that could significantly affect  
current plans, anticipated actions and the Company's financial condition and    
results of operations. Factors that may cause actual results to differ          
materially from those discussed in such-forward looking statements include,     
among other, the following possibilities: (i) fluctuations in foreign currency  
exchange rates; (ii) heightened competition, the entry of new competitors; (iii)
the inability to carry out development plans or to do so without delays; (iv)   
loss of key executives; and (v) general economic and business conditions. The   
Company does not intend to update these cautionary statements.                  

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ITEM 1   DESCRIPTION OF BUSINESS                                                

a.   GENERAL                                                                    

The Company owns and operates pub and casual dining restaurants in the
United States and Canada and is actively engaged in restaurant franchising      
activities. As of the date of this report, the Company currently owns and       
operates a chain of 19 full-service casual dining restaurants and pubs, 12 of   
which are located in Canada and 7 of which are located in the United States.    

Seventeen of the Registrant's restaurants are operated under the name 
"Elephant & Castle", an English pub concept, six of which are in the United     
States. In addition to the owned and operated units, there are 6 Elephant &     
Castle franchises, of which 3 are in Canada and 3 are in the United States.     
Three of these franchises were opened during 2001.                              

   The Company also owns and operates an "Alamo Steakhouse & Grill" red meat
steakhouse at the Mall of America, Bloomington, Minnesota. The Company intends  
to expand its chain of Alamo Steakhouse & Grill steakhouse restaurants through  
franchising. The first Alamo Steakhouse & Grill franchise was opened in January 
2000 in Atlanta and was de-branded in August 2001. Three additional franchised  
restaurants were opened during 2001.                                            

During the year 2001, the Company terminated its last activities with 
respect to Canadian Rainforest Restaurants, Inc. ("CRRI") by closing the        
Vancouver (Metrotown) Restaurant in September, 2001. Previously, CRRI was a     
joint venture between the Company and Rainforest Cafe Inc. for the development  
of Rainforest Cafe Restaurants in Canada. CRRI opened three restaurants, between
June of 1998 and the summer of 1999, and entered into one sub-franchise         
agreement for a restaurant in Niagara, Canada. After Rainforest Cafe Inc. was   
acquired by Landry's Seafood Restaurants Inc. (NYSE-LNY), as part of a          
restructuring of the CRRI joint venture, in anticipation of its complete        
termination, the Company acquired the Vancouver (Metrotown) Rainforest Cafe     
Restaurant.                                                                     

2001 RESULTS OF OPERATIONS                                            

In 2001, the Company's sales were CDN $46,833,000 compared to CDN     
$50,084,000 for 2000. Sales increases in the Elephant & Castle restaurants were 
more than offset by termination of operations of the Canadian Rainforest Cafe   
restaurants.                                                                    

   During the fiscal year ended December 30, 2001, the Company generated net
income of CDN $297,000 compared to a net loss of                                

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CDN $11,816,000 for the corresponding period in 2000.                           

     General and administrative expenses increased from 5.8% of sales in 2000 to
6.4% of sales in 2001, primarily as a result of the loss of revenues from the   
Canadian Rainforest Cafe restaurants. Interest on long term debt decreased to   
CDN $1,404,000 in 2001 from CDN $1,874,000 in 2000 as a result of the           
restructuring of substantially all of the Company's convertible debt.           

During 2001 the Company opened one Company-owned Elephant & Castle    
restaurant in Chicago, and six franchised restaurants - three Elephant & Castle 
restaurants, in Harrisburg PA, Cherry Hill NJ and Vancouver, BC, and three Alamo
Grill restaurants, in Sarasota, FL, Anaheim, CA and Colorado Springs, CO.       

FINANCINGS                                                                      

During 2001, the Company and its principal lender, General Electric   
Investment Private Placement Partners ("GEIPPPII") agreed to a restructuring of 
the Company's indebtedness to GEIPPP II. Under this Agreement, the Company      
issued 2,600,000 Shares of Common Stock and issued U.S. $5,000,000 of Senior    
Notes plus U.S. $5,000,000 of Junior Notes in exchange for the cancellation of  
the U.S. $9,000,000 of Secured Subordinated Convertible Notes, referred to      
above, and U.S. $1,000,000 of other Notes, referred to below, and the           
forgiveness of approximately U.S. $600,000 of interest. The Senior Notes are    
repayable in quarterly installments over five years and bear interest at 6%     
per annum. The Junior Notes are convertible into Common Stock at agreed         
conversion prices, subject to certain performance criteria, mature on           
September 1, 2005, and also bear interest at 6% per annum. As a consequence     
of such restructuring, GEIPPP II is currently the owner of 62% of the           
Company's Common Shares, and holds certain warrants and conversion rights to    
increase its ownership percentage. GEIPPP II currently has two                  
representatives on the Company's Board of Directors, and the capacity to        
elect a majority of the members of the Board.                                   

   The Company first entered into a financial relationship with GEIPPP II in
1995. GEIPPP II invested U.S. $1,000,000 in the Company's Common Shares, and    
ultimately provided U.S. $9,000,000 in exchange for subordinated convertible    
notes. In October, 1999 the Company granted a security interest to GEIPPP II    
over substantially all of its assets in exchange for a waiver of certain        
interest payments, waiver of existing defaults and a relaxation of certain      
financial covenants.                                                            

   OTHER FINANCING. In February of 1999, the Company completed an additional
private placement equity financing with a group of U.S. investors. In total the 
Company raised U.S. $3,265,000                                                  

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(CDN $4,897,500) from the sale and issuance of additional Subordinated          
Convertible Notes (the "'99 Notes"). The '99 Notes, as issued, have a five year 
term, bear interest at 8% per annum payable quarterly in arrears commencing on  
June 30, 1999, in cash or Common Shares, to the extent fully registered Common  
Shares of the Company are available, at the option of the Company. All of the   
'99 Notes unpaid and not converted by December 31, 2003 are immediately due and 
payable on such date, together with a 25% premium on the unpaid principal amount
thereof.                                                                        

     U.S. $1,582,000 of the '99 Notes were converted into Common Stock at $2 per
Share (after adjustment for the 1 for 2 stock consolidation) in exchange for the
waiver of penalties associated with the delay in registration of the underlying 
securities and adjustment to the one year warrants to the terms noted below.    
GEIPPP II participated in the '99 Financing, and purchased U.S. $2,000,000      
additional of the 1999 Notes, U.S. $1,000,000 of which was subsequently         
converted into 500,000 Common Shares (adjusted for the 1 for 2 stock            
consolidation). The balance U.S. $1,000,000 of '99 Notes held by GEIPPP II were 
exchanged in the reorganization of the financing.                               

U.S. $683,000 in face amount of the '99 Notes remain outstanding. The 
Company has a right of optional redemption of the remaining '99 Notes at 100%   
of par, plus accrued and unpaid interest, from time to time, if the market      
price for the Company's Common Shares equals or exceeds 150% of the conversion  
price of U.S. $4.00 for fifteen (15) consecutive trading days.                  

RESTAURANTS IN OPERATION                                                        

    Elephant & Castle. At the Elephant & Castle restaurants, the Company seeks
to distinguish itself from competitive restaurants by its distinctive British   
style and Tudor decor, and by featuring a wide variety of menu items including a
large number of English-style dishes. The Company's restaurants offer a broad   
menu at popular prices. The menu is regularly updated to keep up with current   
trends in customers' tastes. The average check per customer, including beverage,
was approximately CDN $14.00 during 2001, a number which has more or less been  
static since 1992. Although all of the Company's restaurants provide full liquor
service, alcoholic beverages are primarily served to complement meals.          

HOTEL RESTAURANTS. The Company has agreements for the operation of    
restaurants in 7 hotel locations in Canada and the United States. The Winnipeg  
Delta Elephant & Castle restaurant was opened on May 18, 1994. The Philadelphia 
Crowne Plaza unit was                                                           

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opened on February 28, 1995, and the San Diego Holiday Inn was opened on July 1,
1996. The Boston Club Quarters, and Seattle West Coast Grand restaurants were   
added in 1997. The Company opened its Chicago Club Quarters restaurant in April 
of 2001 and hopes to build additional hotel restaurant units at first-class     
hotels over the next several years. In the opinion of management, the three key 
ingredients in the selection of hotel based units are: (1) the control of       
occupancy costs; (2) the capacity to work synergistically with a hotel          
management seeking to divorce itself from direct involvement in food and        
beverage operations; and (3) the Company's ability to control the menu, kitchen 
and restaurant amenities. The location of the hotel in the vicinity of other    
drivers of restaurant business is a key consideration.                          

MALL RESTAURANTS. The Company's mall restaurants average approximately
5,000 square feet, with a typical seating capacity of 220. The restaurants are  
open 7 days a week for lunch, dinner and late-night dining. Average unit sales  
are approximately CDN $1,200,000 with a sales mix of approximately 60% food and 
approximately 40% alcoholic beverages. Due to their location at major downtown  
and suburban malls and office complexes, the Elephant & Castle restaurants cater
to both shoppers and office workers.                                            

   ALAMO STEAKHOUSE & GRILL. In October of 1996, the Company acquired all of
the capital stock of Alamo Grill, Inc. ("Alamo"), a one unit restaurant business
located at the Mall of America, Bloomington, Minnesota. The acquisition provided
the Company with a "red meat" concept restaurant. The single unit Alamo has been
operated successfully by the Company since its acquisition. The Mall of America 
lease expires in early 2003, and may not be continued at the same location, or  
in the Mall, thereafter. Meanwhile, the Company has been, and continues to,     
franchise new "Alamo Steakhouse & Grill" restaurants as casual steakhouse       
restaurants with a distinctive southwestern design and theme. They are intended 
to be located by franchisees primarily in U.S. hotels. The menu is positioned to
deliver an average spend of U.S. $14-16 Dollars for food at dinner. Each        
restaurant is planned to be up to 6,500 square feet with up to a 240-seat       
capacity. See also Franchising.                                                 

    FRANCHISING. Management of the company believes that the Company's "brand"
identification is a valuable asset. Six franchised locations of the Elephant &  
Castle brand are now open, including three that opened during 2001, one in      
association with a Holiday Inn in Harrisburg, PA, one in association with a     
Clarion hotel in Cherry Hill, NJ and one in association with a Delta hotel in   
Vancouver, BC.                                                                  

  In 1999 the Company signed an exclusive franchise agreement with Holiday
Inn Hotels, whereby Holiday Inn Hotels and its                                  

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franchises have the exclusive right to franchise the Alamo Steakhouse & Grill   
brand in hotel locations in the United States. In consideration for this        
exclusivity, Holiday Inn Hotels undertook to promote the brand to its           
franchisees as the exclusively endorsed steakhouse restaurant. The first such   
franchise opened in a Holiday Inn hotel in College Park, near Atlanta,          
Georgia, and has since been de-branded. Three additional franchises were        
opened during 2001, in Sarasota, Florida; Colorado Springs, Colorado; and       
Anaheim, California.                                                            

   The Company signed a sub-franchise agreement with Canadian Niagara Hotels
for the right to develop a Rainforest Cafe in Niagara, Ontario. This unit opened
in May, 2001.                                                                   

 Future activities are intended to include an expansion of the Company's
franchising activities for both the Alamo Grill and the Elephant & Castle brand.
No further sub-franchises of the Rainforest Cafe brand are currently            
anticipated.                                                                    

    THE CANADIAN RAINFOREST RESTAURANT VENTURE. As of May 1, 1997, the Company
signed agreements with Rainforest Cafe, Inc. ("RCI") relating to the Canadian   
Rainforest Joint Venture. The agreements provided for the establishment of a    
jointly-owned Canadian corporation, Canadian Rainforest Restaurants, Inc.       
("CRRI"). Three restaurants were developed under the joint venture, in Vancouver
BC, Scarborough, Ont., and Yorkdale, Ont., and one further restaurant was       
developed in Niagara Ont., under a sub-franchise agreement. The venture failed  
to meet performance expectations and was obliged to close the Scarborough       
restaurant in early 2001. The Company made full provision against its investment
in 2000.                                                                        

  Subsequent to the closure of the Scarborough Rainforest Cafe restaurant,
the Company and Landry's restructured their agreements. The Company acquired the
Vancouver Metrotown restaurant and Landry's acquired the Yorkdale restaurant and
the Niagara sub-franchise agreement. The Company closed the Vancouver Metrotown 
restaurant in September 2001.                                                   

FUTURE COMPANY GROWTH. The Company's strategy for future growth of its
Elephant & Castle and Alamo Steakhouse & Grill concepts involves both           
development of company owned and operated locations and franchises. These will  
be predominantly hotel-based or in high traffic, urban centre locations. The    
Company's intention is to cluster restaurants in prime locations in chosen      
geographic regions. Key points for consideration include the need for           
consistency in use and revenues resulting therefrom. Future                     

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developments will be out of internally generated cash flow plus bank borrowings 
to the extent they are available and permitted under existing agreements.       

ADDITIONAL INFORMATION                                                

a.   FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.                             

     During each of the last three years, the Company considers that it has been
substantially engaged in a single line of business - the ownership and operation
of casual dining restaurants - and does not separately segment its financial    
results.                                                                        

b.   NARRATIVE DESCRIPTION OF THE BUSINESS.                                     

    i.   PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS.  See Description of
the Business - General.                                                         

ii.  DISTRIBUTION METHODS.  The Company focuses on the casual dining  
segment. The Company has not set out to establish its restaurants as            
"destination locations". Instead, it relies primarily on its high-traffic,      
convenient downtown and suburban mall, and most recently, high-occupancy hotel  
locations, consumer satisfaction and reputation to attract new and repeat       
customers.                                                                      

   The Company conducts many local promotions and loyalty programs geared to
the neighborhoods and markets the restaurants serve, and supports these with    
print and direct mail advertising. During fiscal 2001, the Company's            
expenditures for advertising and promotional activities were approximately 2% of
its revenues.                                                                   

    iii. STATUS OF NEW DEVELOPMENTS.  The Company is constantly in the process
of examining, evaluating and undertaking various new restaurant opportunities.  
At the present time the Company has no committed expansion or new development   
projects, but is most actively seeking to duplicate the success of its owned    
Chicago, Illinois based Elephant & Castle restaurant at the Club Quarters Hotel.

     iv.  RELATIONSHIP WITH HOTEL OPERATORS.  The Registrant's relationship with
hotel operators is predicated on (i) shared investment in significant physical  
improvements to the facility at the onset of the occupancy; (ii) costs of       
occupancy measured by a percentage of the unit's revenues; (iii) adequate time  
to recruit and train a restaurant staff of Registrant's selection; and (iv)     
reliance upon restaurant operator's control of the physical environment and menu
selections. In addition to its Holiday Inn                                      

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locations in San Diego, California and Philadelphia, Pennsylvania, the          
Registrant currently operates hotel restaurants at the Delta Hotel (Winnipeg,   
Canada), Club Quarters Hotels (Boston, Massachusetts and Chicago, Illinois),    
West Coast Grand Hotel on Fifth (Seattle, Washington) and Rosedale Hotel        
(Vancouver, Canada). Management considers its relationship with Hotel Operators 
currently to be satisfactory.                                                   

   v.   COMPETITORS AND COMPETITIVE BUSINESS CONDITIONS.  The restaurant and
food service industry is highly competitive and fragmented. There are an        
uncountable number of restaurants and other food and beverage service operations
that complete directly and indirectly with the Company. In addition, many       
restaurant chains have significantly greater financial resources and higher     
sales volumes than the Company. Restaurant revenues are affected by changing    
consumer tastes and discretionary spending priorities, local economic           
conditions, demographic trends, traffic patterns, the ability of business       
customers to deduct restaurant expenses, the increasing trend towards           
prohibition of smoking in restaurants and the type, number and location of      
competing restaurants. In addition, factors such as inflation and increased     
food, liquor, labor and other employee compensation costs can adversely affect  
profitability. The Company believes that its ability to compete effectively and 
successfully will depend on, among other things, management's ability to        
continue to offer quality food for moderate prices, management's ability to     
control labor costs, and ultimately on the executive determinations as to       
extensions of the brand (i.e., selection of sites for new locations and related 
strategies).                                                                    

vi.  SUPPLIERS.  Food products and related restaurant supplies are    
purchased both through home office purchasing programs and already at the       
restaurant level from specified food producers, independent wholesale food      
distributors and manufacturers. This process enables the Company to ensure      
quality companies. Management believes all essential food and beverage products 
are available from multiple sources in all of the locations it serves, and that 
it is not dependent on any one of a limited number of suppliers.                

vii. DEPENDENCE ON CUSTOMERS.  Elephant & Castle appeals to a diverse 
customer base, including business and professional people who occupy offices in 
the vicinity of the restaurants, shoppers from the malls, downtown tourists, and
others. The Company's locations and broad menu attract traffic from lunch       
through mid-afternoon, dinner and into the evening hours. Most all of the       
Company's restaurants are open seven days and evenings, each week. All items on 
the menu are available for take-out, although take-out customers account for    
less than 2% of total restaurant sales.                                         

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 viii. TRADEMARKS; LICENSES.  The Company has registered "The Elephant &
Castle Pub & Restaurant" with the Canadian Trademarks Office, and with the      
United States Patent and Trademark Office. The Company acquired "The Elephant & 
Castle" trademark in the United States. The Company agreed to pay U.S. $50,000  
(CDN $75,000), plus a one-time fee of U.S. $5,000 (CDN $7,500) per location for 
the first ten locations for the mark. The Company regards its "Elephant &       
Castle" trademark as having substantial value and as being an important factor  
in the marketing of its restaurants. The Company is not aware of any infringing 
uses that could materially affect its business or any prior claim to the        
trademarks in its business.                                                     

ix.  GOVERNMENTAL LICENSES AND APPROVALS.  The Company is subject to  
various rules, regulations and laws affecting its business. Each of the         
Company's restaurants is subject to licensing and regulations by a number of    
governmental authorities, including alcoholic beverage control and health,      
safety and fire agencies in the state, province or municipality in which the    
restaurant is located. Difficulties in obtaining or failure to obtain the       
required licenses or approvals could prevent or delay the development of a new  
restaurant in a new location. Management believes the Company is in compliance  
in all material respects with all relevant regulations. The Company has never   
experienced unusual difficulties or delays in obtaining the required licenses or
approvals required to open a new restaurant.                                    

 Various Canadian federal and provincial labor laws govern the Company's
relationship with its employees, including such matters as minimum wage         
requirements, overtime and other working conditions. Significant additional     
government-imposed increases in minimum wage, paid leaves of absences and       
mandated health benefits, or increased tax reporting and tax payment            
requirements for employees who receive gratuities, may impose significant       
burdens on the Company. The Company's restaurants in the United States are      
subject to similar requirements.                                                

Alcoholic beverage control regulations require each of the Company's  
restaurants to apply to a state authority and, in certain locations, county and 
municipal authorities, for a license and permit to sell alcoholic beverages in  
the premises. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate  
to numerous aspects of the daily operations of the Company's restaurants. The   
Company has not encountered any material problems related to alcoholic beverage 
licensing to date. The failure to receive or retain, or a delay in obtaining a  
liquor license in a particular location could adversely affect the Company's    
ability to obtain such a license elsewhere.                                     

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     x.   EFFECT OF EXISTING AND PROBABLE GOVERNMENTAL REGULATIONS.  The Company
is subject to "dram-shop" statutes in California, Pennsylvania and Washington   
and may become subject to similar proposed legislation in Canada. "Dram-shop"   
statutes generally provide a person injured by an intoxicated person the right  
to recover damages from an establishment which wrongfully served alcoholic      
beverages to such a person. The Company carries liquor liability coverage which 
it believes to be consistent with the coverage carried by other entities in the 
restaurant industry. Even though the Company is covered by insurance, a judgment
against the Company under a "dram-shop" statute in excess of the Company's      
liability coverage could have a material adverse effect on the Company. The     
Company has never been the subject of a "dram-shop" claim.                      

    xi.  RESEARCH AND DEVELOPMENT.  The Company places significant emphasis on
the design and interior decor of its restaurants.                               

The Company's Elephant & Castle unit designs requires somewhat higher 
capital costs and furniture and fixtures investment to open a new restaurant    
than is typical in the industry. Landlord contributions defray a part or a      
substantial part of interior design and decor at a typical new restaurant. The  
Company believes that its design and decor features enhance the dining          
experience. Each restaurant typically features large, airy dining areas.        
Additionally, several offer patio seating, which adds substantially to seasonal 
capacity, revenues and profits. Table layouts are flexible, permitting          
re-arrangement of seating to accommodate large groups and effective utilization 
of maximum seating capacity.                                                    

     The Company also believes that the location of a restaurant is important to
its success. In general, significant time and resources are spent in determining
whether a prospective site is acceptable. Traditional Elephant & Castle         
restaurants were located at high-profile sites at malls/office complexes within 
larger metropolitan areas. In selecting future sites, the Registrant intends to 
analyze demographic information for each prospective site, hotel occupancy,     
hotel uses, and factors such as visibility, traffic patterns, accessibility,    
proximity of shopping areas, offices, parks, tourist attractions, and           
competitive restaurants.                                                        

    xii. COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS.  The Company
is not aware of, and does not anticipate any significant costs related to       
compliance with environmental laws.                                             

   xiii.  NUMBER OF TOTAL EMPLOYEES AND FULL-TIME EMPLOYEES.  As of December
30, 2001, the Company employed approximately 800-persons on                     

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a full-time and part-time basis. 20 of such persons serve in administrative or  
executive capacities, approximately 70 serve as restaurant management personnel 
and the remainder are hourly workers in the Company's restaurant operations. The
Company believes that its working conditions and compensation packages are      
competitive with those offered by its competitors. Management considers the     
Company's relations with its employees to be good, and its rate of employee     
turnover to be low in relation to industry standards. The Company has an        
agreement with the union which represented the former workers at the predecessor
restaurant located at the Holiday Inn unit in Philadelphia which requires the   
Registrant to seek new hires first from among the pool of available union hiring
hall personnel. The Company's service personnel at the San Diego Elephant &     
Castle unit and Rosie's on Robson are unionized.                                

  The Company has sought to attract and retain high-quality, knowledgeable
restaurant management and staff. Each restaurant is managed by one general      
manager, and from one to three assistant managers depending on volume. Most     
restaurants, again depending on volume, also have one kitchen manager and one to
three assistant kitchen managers. On average, general managers have about five  
years' experience with the Company. The Company also employs three regional     
managers and may be required to add additional supervisory people as the chain  
expands. As the Company adds new restaurants, its future success may depend in  
part on its ability to continue to attract and train capable additional         
managers. The Company also anticipates that the opening of additional           
restaurants including at hotel sites in the United States will require a        
commensurate increase in employees. The Company does not expect a proportionate 
increase in the number of corporate or administrative personnel. Restaurant     
managers, many of whom have moved up through the ranks, are required to complete
a training program during which they are instructed in areas including food     
quality and preparations, customer service, alcohol service, liquor liability   
avoidance and employee relations. The Company believes its training programs for
managers and other employees are comparable to the training provided for        
managers and other employees at substantially larger restaurant chains.         
Restaurant managers are also provided with operations manuals relating to food  
and beverage standards and other expectations of restaurant operations.         
Management has made a conscious commitment to provide customer service of the   
highest standards. In addition to evaluations made by the customers, the Company
uses a "designated customer" quality control program to independently monitor   
service and operations. "Designated customers" are independent people who test  
the standards of food, beverage and service as customers of the restaurant      
without the knowledge of management or staff. Done on a periodic basis, their   
findings are reported to corporate management. Efficient, attentive and friendly

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service is integral to the Company's overall concept. Any new employee at all   
functional levels is closely supervised after his or her on-the-job training.   
Management regularly solicits employee suggestions concerning operations, and   
endeavors to be responsive to legitimate employee concerns.                     

 The Company believes its commitment to employee morale is also critical
to its long-term success. The Company has compiled a favorable record of        
employee retention. The average tenure of the current restaurant general        
managers in the Elephant & Castle chain is five years. The Company considers    
the quality of its employee interaction with customers to be an important       
element of its business strategy.                                               

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ITEM 2   PROPERTIES                                                             

The Company currently operates 8 mall based restaurants. All of such  
facilities are leased properties. The following table provides opening date,    
square footage and indoor seating capacity information with respect to each of  
the mall based restaurants currently in operation:                              

                                                                [Download Table]

                                                                   Indoor    
City              Mall             Opening Date     Square Feet    Seating(a)
----              ----             ------------     -----------    ----------

                                                                             
Ottawa, Ont.      Rideau Center    Mar. 1983        7,119          280       
West Edm., Alb.   West Edmonton    Jul. 1988        6,500          245       
Edmonton, Alb.    Eaton Center     Sep. 1988        5,939          225       
Victoria, B.C.    Eaton Center     Jun. 1989        5,640          225       
Bellingham, WA    Bellis Fair      May  1990        5,200          220       
Saskatoon, Sask.  Midtown Plaza    Oct. 1990        5,815          225       
Calgary, Alb.     Eaton Center     Dec. 1990        5,851          225       
Bloomington, MN   Mall of America  Oct. 1996        6,750          280       

(a) Outdoor/patio seating is available at a number of the locations, and not    
included herein.                                                        

  All of the restaurants are located on leased sites. The Company owns the
furnishings, fixtures and equipment in each of its mall based restaurants.      
Existing restaurant leases have expirations ranging from 2002 through 2017      
(including existing renewal options). The Company does not anticipate any       
difficulties renewing its existing leases as they expire, should it wish to do  
so. Mall leases typically provide for fixed rent plus payment of certain        
escalations and operating expenses, against a percentage at restaurant sales.   

The Company's hotel restaurant leases are more typically focused on a 
percentage of restaurant sales, against a minimum base rental. Thus, while the  
Company's aggregate annual minimum rent continues to increase, such rent per    
facility and per square foot controlled by the Company is typically declining.  

The Company's facilities at Hotels and other non-mall locations are   
occupied on the following basis:                                                

                                                                [Download Table]

Hotel Locations     Opening Date            Square Ft.     Indoor Seating
---------------     ------------            ----------     --------------

                                                                         
Winnipeg            May. 1994               4,300             180        
Philadelphia        Feb. 1995               7,900             310        
Vancouver           Aug. 1995               5,500             200        
San Diego           Jul. 1996               7,500             300        
Seattle             Aug. 1997               7,600             230        
Boston              Nov. 1997               9,500             200        
Chicago             Apr. 2001               6,000             190        

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                                                                [Download Table]
                                                                 
OTHER NON-MALL LOCATIONS                                         
BCIT                                                             
 (Burnaby,B.C.)     Sep. 1995               4,500             300
Toronto                                                          
 King Street        Oct. 1996               9,200             330
Edmonton            Nov. 1997               5,600             180
Toronto                                                          
 Yonge Street       Dec. 1999               3,200             160

The following table sets forth, for all restaurants by location, the  
earliest expiration date of the leases and the minimum annual rent:             

                                                                [Download Table]

                                  Earliest                                      
Location                       Expiration Date               Minimum Annual Rent
--------                       ---------------               -------------------

                                                                                
Minneapolis, Mall of America        2003                           366,000      
West Edmonton Mall                  2003                           130,000      
Victoria Eaton Center               2004                           176,000      
Winnipeg, Delta Hotel               2004                            60,000      
Saskatoon Midtown Plaza             2005                           200,000      
Bellingham Bellis Fair              2005                           165,000      
Vancouver, Rosedale Hotel           2005                            60,000      
Philadelphia, Holiday Inn           2005                           160,000      
Calgary Eaton Center                2005                           117,000      
San Diego, Holiday Inn              2006                            96,000      
Boston, Club Quarters               2007                            96,000      
Ottawa Rideau Center                2008                           165,000      
Toronto, Yonge Street               2008                           110,000      
Chicago, Club Quarters              2010                           195,000      
Toronto, King Street                2011                           110,000      
Edmonton, Whyte Ave                 2012                            98,000      
Seattle, WestCoast Grand            2012                           144,000      

         TOTAL:                                                 CDN $2,448,000  
                                                                --------------  
                                                                --------------  

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ITEM 3    LEGAL PROCEEDINGS                                                     

  From time to time lawsuits are filed against the Company in the ordinary
course of business. The Company is not currently a party to any litigation which
would, if adversely determined, have a material adverse effect on the Company or
its business and is not aware of any such threatened litigation.                

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ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   

 During 2001, the shareholders approved a restructuring of the Company's
indebtedness to GEIPPP II. Under this agreement the Company issued 2,600,000    
shares of Common Stock and issued U.S. $5,000,000 of Senior Notes plus U.S.     
$5,000,000 of Junior notes in exchange for the cancellation of the U.S.         
$9,000,000 of secured subordinated convertible notes, U.S. $1,000,000 of other  
Notes, and the forgiveness of approximately U.S. $600,000 of interest. The      
Senior Notes are repayable in installments over five years and bear interest at 
6%. The Junior Notes are convertible into Common Stock at agreed conversion     
prices, subject to certain performance criteria, mature on September 1, 2005,   
and also bear interest at 6%.                                                   

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 PART II

ITEM 5    MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED                      
STOCKHOLDER MATTERS                                         

 The Company's Common Stock was traded on NASDAQ - small cap market from
June 29, 1993, until it lost that listing on March 22, 2000 as a result of      
having failed to maintain a minimum bid price of $1.00. The shares continue to  
be traded on the NASD electronic bulletin board OTCBB (PUBSF).                  

     The range of high and low sales prices for the Common Stock from January 1,
2000, to the end of 2001 has been:                                              

                                                                [Download Table]

                                   High                Low 
                                   ----                --- 

                                                           
First Quarter of 2000:            $2.437             $1.437
Second Quarter of 2000:           $2.135             $0.969
Third Quarter of 2000:            $1.313             $0.313
Fourth Quarter of 2000:           $0.656             $0.070

First Quarter of 2001:            $0.460             $0.065
Second Quarter of 2001:           $0.480             $0.260
Third Quarter of 2001:            $0.440             $0.210
Fourth Quarter of 2001:           $0.510             $0.180

   The approximate number of record holders of the Company's common stock as
of January 2002 is 500.                                                         

     The shareholders approved a proposal to consolidate the shares on a 1 for 2
basis at an Extraordinary General Meeting held on March 23, 2000. All figures in
the table above have been adjusted to reflect this consolidation.               

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ITEM 6   SELECTED FINANCIAL DATA                                                

(in thousands of dollars except per share information)        

                                                        [Enlarge/Download Table]

                               2001       2000        1999        1998        1997   
                               ----       ----        ----        ----        ----   
                                                                                     
Sales                         $46,833    $50,084     $50,104     $42,630     $34,231 
Income (loss)                                                                        
 from Restaurant                                                                     
 Operations                     4,711     (7,621)      2,844       3,770       1,883 
Earnings (loss)                                                                      
 before Interest and Taxes     1,701    (10,504)     (2,196)        156        (912) 
Net Income (loss)                 297    (11,816)     (4,262)       (930)     (1,416)
Total Assets                   20,453     19,765      30,028      30,797      24,621 
Shareholder's                                                                        
 Equity                         5,397     (2,963)      6,793       8,621      10,209 
Long Term                                                                            
 Debt                          $9,033    $16,182     $15,792     $16,605     $10,279 
Average                                                                              
 Shares                                                                              
 Outstanding(a)             3,890,000  2,619,000   1,756,000   1,598,000   1,474,000 
Earnings (loss)                                                                      
 Per Share(a)                  $0.08     $(4.51)     $(2.43)     $(0.58)     $(0.96) 

(a) Adjusted for the Company's 1 for 2 stock consolidation on March 23, 2000.   

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ITEM 7    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                     
CONDITION AND RESULTS OF OPERATIONS                         

FIFTY TWO WEEKS ENDED DECEMBER 30, 2001 VS. FIFTY THREE WEEKS ENDED DECEMBER 31,
2000                                                                            

 The Company owns, operates and franchises casual full dining brand name
restaurants in Canada and the United States. Its two principal brands are       
"Elephant and Castle" and "Alamo Steakhouse & Grill." 2001 was most noteworthy  
for a renegotiation of the Company's indebtedness to its principal creditor,    
General Electric Investment Private Placement Partners II, the opening of a     
major new Elephant & Castle Restaurant at the Club Quarters Hotel in Chicago,   
Illinois, and the opening of six (6) franchised restaurants, three (3) Elephant 
& Castle, and three (3) Alamo Steakhouse & Grill.                               

In 2001, the Company also closed its last Canadian Rainforest Cafe    
Restaurant in Vancouver, Canada. This marked the end of an unsuccessful venture 
in Canadian Rainforest Restaurants. Full provision for the write down of the    
Company's investments in Canadian Rainforest Restaurants, as well as a separate 
twin restaurant concept in Franklin Mills Mall, Franklin Mills, Pennsylvania,   
was made in fiscal 2000.                                                        

Restaurant operations were adversely impacted by the economic slowdown
during the 4th quarter of 2001, particularly at its hotel/downtown locations,   
which have a higher dependency on the business traveller and tourism. The US    
stores experienced greater impact than the Canadian stores.                     

NET INCOME                                                                      

    For the fifty two weeks ended December 30, 2001, the Company generated net
income of CDN $297,000 compared to a net loss of CDN ($11,816,000) for the fifty
three week period in 2000. Earnings per share for the current period were CDN   
$0.08 compared to a loss per share of CDN ($4.51) in 2000. The average number of
shares outstanding increased from 2,619,000 in 2000 to 3,890,000 for the current
year.                                                                           

 Included in the year 2000 loss are costs relating to the closure of the
Franklin Mills 'twin' restaurant (CDN $4,787,000) and provision for the         
write-down of the Company's investment in the Canadian Rainforest Cafe          
restaurants joint venture (CDN $4,939,000). There are no similar closure costs  
or provisions in 2001.                                                          

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    The 2000 net income excluding the operating loss of the Franklin Mills and
Canadian Rainforest restaurant ventures and the one-time items mentioned above  
was CDN $49,000 or CDN $0.02 per share.                                         

SALES                                                                           

   Sales decreased during the fifty two weeks ended December 30, 2001 to CDN
$46,833,000 from CDN $50,084,000 in 2000.                                       

For the twelve Canadian E&C Corporate locations open throughout both  
periods, sales for the fifty two weeks ended December 30, 2001 totaled CDN      
$21,476,000 and were down 1.2% compared to the fifty three weeks ended December 
31, 2000. Without the fifty-third week in 2000, sales were up approximately 1%  
in 2001 over the prior period.                                                  

  For the six U.S. Corporate locations open throughout both periods, sales
for the 2001 period were U.S. $11,597,000 and were down 7.7% compared to the    
prior year. The fifty-third week in 2000 accounted for approximately 2% of the  
decrease. Weaker than expected sales at the Minneapolis and Philadelphia        
locations and sales declines during the second half of the year offset solid    
gains early in 2001.                                                            

     The Company's share of sales for Rainforest Cafe restaurants was $3,571,000
compared with $7,861,000 for 2000.                                              

FOOD AND BEVERAGE COSTS                                                         

 Overall, food and beverage costs, as a percentage of sales, improved to
28.2% for the fifty two weeks ended December 30, 2001, compared to 29.0% for the
fifty three weeks ended December 31, 2000. Excluding the Rainforest and Franklin
Mills locations, the food and beverage percentage would have been 28.7% a year  
ago compared to 28.2% in 2001.                                                  

LABOUR AND BENEFITS COSTS                                                       

   Labour and benefits decreased from 33.1% of sales in 2000 to 32.3% in the
current period. Excluding Rainforest and Franklin Mills, the labour and benefits
rate in 2000 would have been 32.3% compared to 32.1% in 2001.                   

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OCCUPANCY AND OTHER OPERATING COSTS                                             

   Occupancy and other operating expenses decreased as a percentage of sales
from 28.0% in 2000 to 25.6% in the current period. Excluding Rainforest and     
Franklin Mills, the rate in 2000 would have been 23.4% compared to 24.6% in     
2001. The increase in the current rate is largely attributable to increased     
energy costs.                                                                   

RESTAURANT CLOSING COSTS                                                        

  Included in the 2000 results is a provision of CDN $9,726,000 to reflect
the costs associated with the closure of the 'twin' restaurant in Franklin      
Mills, PA, and the restructuring of the Canadian Rainforest Cafe restaurants    
joint venture.                                                                  

There are no similar closure costs or provisions in 2001.             

DEPRECIATION AND AMORTIZATION EXPENSE                                           

Depreciation and amortization costs decreased to 3.9% of sales for the
current period from 5.7% last year. Without Rainforest and Franklin Mills, the  
depreciation and amortization rate in 2000 was 4.3% of sales compared to 4.2% in
2001.                                                                           

INCOME FROM RESTAURANT OPERATIONS                                               

   The Company generated income from restaurant operations of CDN $4,711,000
compared to a loss of CDN $(7,621,000) for 2000.                                

   The impact of Rainforest and Franklin Mills in 2000 was disproportionate.
Excluding the results from these locations, and the one-time provision for      
closing costs, income from restaurant operations for the fifty-three weeks ended
December 31, 2000 was CDN $4,567,000.                                           

GENERAL AND ADMINISTRATIVE COSTS                                                

  General and administrative costs increased from 5.8% of sales in 2000 to
6.4% in the current period, primarily as a result of the drop in sales from     
Rainforest and Franklin Mills. In dollar terms, general and administrative costs
increased from CDN $2,883,000 for 2000 to CDN $3,010,000 for 2001.              

INTEREST ON LONG TERM DEBT                                                      

     Interest on long term debt was CDN $1,404,000 for the fifty two weeks ended
December 30, 2001, compared to CDN $1,874,000 in 2000. The decrease is          
attributable to the renegotiation of the debt held by General Electric          
Investment Private Placement Partners II (GEIPPP II).                           

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INCOME/(LOSS) BEFORE TAXES                                                      

   The Company generated income before income taxes of CDN $297,000 for 2001
compared to a loss of CDN ($12,378,000) for 2000. As discussed above, the       
Company experienced a negative impact from its Franklin Mills location and the  
Canadian Rainforest Restaurants joint venture in 2000. The losses at these      
locations and the CDN $9,726,000 in one-time costs related to closure of the    
Franklin Mills location and write-down of the investment in CRRI resulted in the
large loss for that year.                                                       

INCOME TAXES                                                                    

   The Company generated income of CDN $297,000 in the fifty two week period
ended December 30, 2001. The Company has loss carry-forwards that eliminate any 
tax liability arising from this net income and will reduce its effective tax    
rate in future periods.                                                         

NET INCOME (LOSS)                                                               

   For the fifty two weeks ended December 30, 2001, the Company's net income
was CDN $297,000 compared to a net loss of CDN ($11,816,000) for the fifty three
week period in 2000. Earnings per share for the current period was CDN $0.08,   
compared to a loss of CDN ($4.51) in 2000. The average number of shares         
outstanding increased from 2,619,000 in 2000 to 3,890,000 for the current year. 
On a diluted basis, net income per share in 2001 would be decreased to $0.05.   

   The 2000 net income, excluding the operating losses at the Rainforest and
Franklin Mills locations, the closing costs related to Rainforest and Franklin  
Mills and the one-time items mentioned above was CDN $49,000 or CDN $0.02 per   
share.                                                                          

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FIFTY THREE WEEKS ENDED DECEMBER 31, 2000 VS. FIFTY TWO WEEKS ENDED DECEMBER 26,
1999                                                                            

    Since its first restaurant was opened in 1976, the Company has focused its
operations on single concept units of its brand, principally British style pub  
restaurants (its Core business). Recently the company entered into two ventures 
(Canadian Rainforest Restaurants and a "twin" restaurant concept in Franklin    
Mills Mall in Pennsylvania). Neither of these ventures performed up to          
expectations and full provision for the write-down of both investments has been 
made. The unsatisfactory results from these two ventures are of sufficient      
magnitude to mask the underlying health of the Company's Core business. The     
following discussion and analysis include, where appropriate, comments on the   
Core business, as well as discussion on the entire business.                    

NET INCOME                                                                      

   For the fifty three weeks ended December 31, 2000, the Company's net loss
was CDN ($11,816,000) compared to CDN ($4,262,000) for the fifty two week period
in 1999. Loss per share for the current period was CDN ($4.51) compared to      
($2.43) in 1999. The average number of shares outstanding increased from        
1,756,000 in 1999 to 2,619,000 for the current year.                            

   Included in the year 2000 losses are costs relating to the closure of the
Franklin Mills 'twin' restaurant (CDN $4,787,000) and provision for the         
write-down of the Company's investment in the Canadian Rainforest Cafe          
restaurants joint venture (CDN $4,939,000). The prior year's results include    
costs associated with the resolution of certain disputes and corporate          
restructuring (CDN $1,892,000).                                                 

    The 2000 net income excluding the operating loss of the Franklin Mills and
Canadian Rainforest restaurant ventures and the one-time items mentioned above  
was CDN $49,000 or CDN $0.02 per share.                                         

SALES                                                                           

    Sales remained static during the fifty three weeks ended December 31, 2000
at CDN $50,084,000 from CDN $50,104,000 in 1999.                                

   For the twelve Canadian E&C locations open throughout both periods, sales
for the fifty three weeks December 31, 2000 totaled CDN $19,903,000 and were up 
4.4% compared to the fifty two weeks ended December 26, 1999. Approximately 1.7%
of the increase was due                                                         

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to the fifty-third week, with the remaining 2.7% reflecting a strong sales trend
in the majority of the Canadian stores.                                         

    For the six U.S. locations, excluding Franklin Mills, open throughout both
periods, sales for the 2000 period were U.S. $12,565,000 and were down 0.7%     
compared to the prior year. Weaker than expected sales at the Minneapolis and   
Philadelphia locations offset solid gains at the other locations.               

     The Company's share of sales for the three Rainforest Cafe restaurants were
$7,861,000, compared with $8,929,000 for 1999. The increase in the number of    
trading weeks at both the Scarborough and Yorkdale restaurants was more than    
offset by the decline in sales at all three locations.                          

FOOD AND BEVERAGE COSTS                                                         

Overall, food and beverage costs, as a percentage of sales, increased 
marginally to 29.0% for the fifty three weeks ended December 31, 2000, compared 
to 28.8% for the fifty two weeks ended December 26, 1999. Excluding the         
Rainforest and Franklin Mills locations, the food and beverage percentage would 
have been 28.7%, compared to 28.6% on the same basis a year ago.                

LABOUR AND BENEFITS COSTS                                                       

   Labour and benefits increased from 32.0% of sales in 1999 to 33.1% in the
current period. The disappointing sales at the Franklin Mills location led to   
unacceptably high labour rates at that location and influenced the overall rate.

     Excluding Rainforest and Franklin Mills, the labour and benefits rate would
have been 32.2%, a 1.5% increase over the comparable period in 1999. The        
increase was being driven by two locations that saw significant deterioration in
their labour percentages. Steps have been taken, including replacement of       
restaurant management, to remedy these situations.                              

OCCUPANCY AND OTHER OPERATING COSTS                                             

   Occupancy and other operating expenses increased as a percentage of sales
from 25.5% in 1999 to 28.0% in the current period. Excluding Rainforest and     
Franklin Mills, the rate would have been 23.4%, compared to 22.0% in 1999.      

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RESTAURANT CLOSING COSTS                                                        

  Included in the 2000 results is a provision of CDN $9,726,000 to reflect
the costs associated with the closure of the 'twin' restaurant in Franklin      
Mills, PA, and the restructuring of the Canadian Rainforest Cafe restaurants    
joint venture.                                                                  

    The Company reached agreement with its landlord in Franklin Mills to close
the 'twin' Elephant & Castle/Alamo Grill restaurant and to terminate the lease  
in exchange for the surrender of substantially all of the assets at that        
locations, and the payment of up to fifteen months' rent. The Company made full 
provision for the disposal of assets, and the cost of lease and employee        
terminations. These amounted to $4,787,000.                                     

  Subsequent to the year-end and the closure of the Scarborough Rainforest
Cafe restaurant, the Company and Landry's have been engaged in the negotiation  
of a restructuring of the joint venture. The Company made full provision against
its investment in CRRI and its receivable from the joint venture company,       
resulting in a charge to earnings in 2000 of CDN $4,939,000.                    

  Included in the results for 1999 was a provision of CDN $250,000 for the
costs of closure of an older Canadian mall-based restaurant.                    

DEPRECIATION AND AMORTIZATION EXPENSE                                           

Depreciation and amortization costs decreased to 5.7% of sales for the
current period from 7.6% last year. Amortization of pre-opening costs for new   
restaurants, which is effected over the twelve months following opening, was the
major driver of the 1999 rate. The combination of low sales and high development
costs at Rainforest and Franklin Mills had a significant impact on the rate.    
Without Rainforest and Franklin Mills, the depreciation and amortization rate   
was 4.3% of sales.                                                              

INCOME FROM RESTAURANT OPERATIONS                                               

     As a result of the above factors, particularly the Restaurant Closing Costs
and unsatisfactory results from Rainforest and Franklin Mills, the Company      
incurred a loss from restaurant operations of CDN $(7,621,000) for 2000. This   
compared to income of CDN $2,844,000 in 1999.                                   

     The impact of Rainforest and Franklin Mills was disproportionate. Excluding
the results from these locations, and the one-time provision for closing costs, 
income from restaurant operations for the fifty-three weeks ended December 31,  
2000 was CDN $4,567,000 compared to CDN $5,085,000 in 1999. The 1999 figure     

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included a CDN $250,000 provision for closing costs of an unprofitable Canadian 
location, plus the operating results from that location.                        

GENERAL AND ADMINISTRATIVE COSTS                                                

  General and administrative costs decreased from 6.8% of sales in 1999 to
5.8% in the current period. In dollar terms, general and administrative costs   
decreased from CDN $3,398,000 for 1999 to CDN $2,883,000 for 2000.              

INTEREST ON LONG TERM DEBT                                                      

 Interest on long term debt was CDN $1,874,000 for the fifty three weeks
ended December 31, 2000, compared to CDN $2,056,000 for the comparable period in
1999. The decrease is attributable to the conversion of $1,265,000 of           
convertible debt into equity early in 2000.                                     

(LOSS) BEFORE TAXES                                                             

  The Company incurred a loss before income taxes of CDN ($12,378,000) for
2000 compared to a loss of CDN ($4,252,000) for 1999. As discussed above, the   
Company experienced a negative impact from its Franklin Mills location and the  
Canadian Rainforest Restaurants joint venture. The losses at these locations    
and the CDN $9,726,000 in one-time costs related to closure of the Franklin     
Mills location and write-down of the investment in CRRI resulted in the         
increased loss for the year.                                                    

INCOME TAXES                                                                    

   The Company incurred a loss in the fifty three week period ended December
31, 2000 and therefore has no current tax liability. The Company also has loss  
carry-forwards that will reduce its effective tax rate in future periods.       
Included in 1999 is a provision of CDN $125,000 representing the Company's      
current estimate of the cost of settling a dispute that dates back to 1984.     

NET INCOME                                                                      

   For the fifty three weeks ended December 31, 2000, the Company's net loss
was CDN ($11,816,000) compared to CDN ($4,262,000) for the corresponding period 
in 1999. Loss per share for the current period was CDN ($4.51), compared to     
($2.43) in 1999. The average number of shares outstanding increased from        
1,756,000 in 1999 to 2,619,000 for the current year (after giving effect to the 
1 for 2 share consolidation).                                                   

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    Included in the 1999 year are certain costs associated with the resolution
of certain disputes and corporate restructuring.                                

   The 2000 net income, excluding the operating losses at the Rainforest and
Franklin Mills locations, the closing costs related to Rainforest and Franklin  
Mills and the one-time items mentioned above was CDN $49,000 or CDN $0.02 per   
share, compared to a loss of CDN ($872,000) in 1999 (CDN ($1.36) per share) when
calculated on the same basis.                                                   

FINANCIAL CONDITION AND OTHER ITEMS                                             

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company currently has cash balances slightly in excess of CDN $1.0
million. The Company's growth strategy is to focus on strengthening the         
profitability of existing operations and leveraging the brands' strength through
franchising and through corporate store growth to the extent deliverable from   
internally generated cash flow.                                                 

    The Company re-negotiated its debt with its principal lender, GEIPPP II to
permit a repayment schedule which allows for corporate store growth, and other  
possible expansions of the Company's business activities.                       

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING    
PRINCIPLES (CDN AND U.S. GAAP)                                                  

    The Company prepares its financial statements in accordance with CDN GAAP.
(The reader is referred to Note 15 of the Consolidated Financial Statements for 
the year ended December 30, 2001 for additional explanation.) The Financial     
statements, if prepared in accordance with U.S. GAAP would have differed as     
follows:                                                                        

     Net income for the year ended December 30, 2001 would have decreased by CDN
  $357,000 comprised of primarily of dividends on convertible subordinated
debentures that would have been treated as interest expense under U.S.
   GAAP. Net loss for the year ended December 31, 2000 would be decreased by
   CDN $106,000 comprised of pre-opening costs that would have been expensed
in 1999 under U.S. GAAP, offset by amortization expense resulting from
 exclusion of the first option period in calculating the amortization of
     certain leasehold improvements. The impact of these adjustments would be to

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    decrease the net income per share in 2001 from CDN $0.08 under CDN GAAP to
   a loss of CDN ($0.02) under U.S. GAAP. For 2000, the loss per share would
decrease from CDN ($4.51) per share to CDN ($4.47) per share.         

Shareholders' Equity at December 30, 2001 would be decreased from CDN 
$5,397,000 under CDN GAAP to a deficit of CDN ($1,356,000) under U.S. GAAP due  
primarily to the exclusion of CDN $6,869,000 of convertible subordinated        
debentures which would have been shown as long term debt under U.S. GAAP.       
Shareholders' Equity [Deficit] at December 31, 2000 under U.S. GAAP would have  
been improved to CDN ($2,857,000) compared to CDN ($2,963,000) under CDN GAAP.  

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ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            

Intentionally omitted.                                                

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ITEM 8    FINANCIAL STATEMENTS                                                  

The Company's consolidated financial statements and the report of the 
independent accountants thereon appear beginning at page F-2. See index to      
consolidated Financial Statements on page F-1.                                  

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ITEM 9    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                         
ON ACCOUNTING AND FINANCIAL DISCLOSURE                      

None. Not applicable.                                                 

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PART III

ITEM 10   The information required by PART III will be                          
ITEM 11   incorporated by reference from Registrant's                           
ITEM 12   definitive proxy statement or definitive                              
ITEM 13   information statement, provided such definitive                       
proxy statement or definitive information statement         
is filed not later than 120 days after the end of           
the fiscal year covered by the Form 10-K, or by an          
amendment to the Form 10-K, not later than the end          
of such 120 day period.                                     

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 PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON                
FORM 8-K                                                    

(a)  See Index to Exhibits, attached.                                 
(b)  During the last quarter of the period covered by this report, the
Registrant filed no reports on Form 8-K.                    

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ELEPHANT & CASTLE GROUP INC.                                  

CONSOLIDATED FINANCIAL STATEMENTS                             
DECEMBER 30, 2001                                             
(CANADIAN DOLLARS)                                            

      INDEX                                                           PAGE
      -----                                                           ----

         MANAGEMENT REPORT                                                   F-1

         INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS                    F-2

CONSOLIDATED FINANCIAL STATEMENTS                             

         Consolidated Balance Sheets                                         F-3

         Consolidated Statements of Operations                               F-4

         Consolidated Statements of Shareholders' Equity (Deficit)           F-5

         Consolidated Statements of Cash Flows                               F-6

         Notes to Consolidated Financial Statements                   F-7 - F-21

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MANAGEMENT REPORT                                                               

Management is responsible for preparing the Company's consolidated financial    
statements and the other information that appears in this annual report.        
Management believes that the consolidated financial statements fairly reflect   
the form and substance of transactions and reasonably present the Company's     
consolidated financial condition and results of operations in conformity with   
Canadian generally accepted accounting principles. Management has included in   
the Company's consolidated financial statements amounts that are based on       
estimates and judgments, which it believes are reasonable under the             
circumstances.                                                                  

The Company maintains a system of internal accounting policies, procedures and  
controls intended to provide reasonable assurance, at appropriate cost, that    
transactions are executed in accordance with Company authorization and are      
properly recorded and reported in the financial statements and that assets are  
adequately safeguarded.                                                         

Pannell Kerr Forster audits the Company's financial statements in accordance    
with auditing standards generally accepted in the United States of America and  
provides an objective, independent review of the Company's internal controls and
the fairness of its reported financial condition and results of operations.     

Elephant & Castle Group Inc's Board of Directors has an Audit Committee composed
of non-management Directors. The Committee meets with financial management and  
the independent auditors to review internal accounting controls and accounting, 
auditing and financial reporting matters.                                       

"Richard Bryant"                                                                

President and Chief Executive Officer                                           

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INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF ELEPHANT & CASTLE GROUP INC.                             

We have audited the consolidated balance sheets of Elephant & Castle Group Inc. 
as at December 30, 2001 and December 31, 2000 and the consolidated statements of
operations, shareholders' equity (deficit) and cash flows for the three years in
the period ended December 30, 2001. These financial statements are the          
responsibility of the Company's management. Our responsibility is to express an 
opinion on these consolidated financial statements based on our audits.         

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and       
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An 
audit also includes assessing the accounting principles used and significant    
estimates made by management, as well as evaluating the overall financial       
statement presentation.                                                         

In our opinion, these consolidated financial statements present fairly, in all  
material respects, the financial position of Elephant & Castle Group Inc. as at 
December 30, 2001 and December 31, 2000 and the results of its operations and   
its cash flows for the three years in the period ended December 30, 2001 in     
accordance with generally accepted accounting principles in Canada applied on a 
consistent basis. Accounting principles generally accepted in Canada differ in  
certain significant respects from accounting principles generally accepted in   
the United States of America and are discussed in Note 15 to the consolidated   
financial statements.                                                           

"Pannell Kerr Forster"                                                          

Chartered Accountants                                                           

Vancouver, Canada                                                               
March 20, 2002                                                                  

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ELEPHANT & CASTLE GROUP INC.                                                    
CONSOLIDATED BALANCE SHEETS                                                     
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS)                                                       

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------------------------
                                                                             DECEMBER 30,        DECEMBER 31,      
                                                                                 2001                2000          
-------------------------------------------------------------------------------------------------------------------

                                                                                                                   
ASSETS (note 6)                                                                                                    
CURRENT                                                                                                            
  Cash and term deposits                                                      $  1,051             $  1,725        
  Accounts receivable (note 13(c))                                                 452                  670        
  Inventory                                                                        549                  507        
  Deposits and prepaid expenses                                                    580                  368        
  Pre-opening costs                                                                 55                    0        
-------------------------------------------------------------------------------------------------------------------
                                                                                 2,687                3,270        
FIXED (note 3)                                                                  11,873               10,907        
GOODWILL                                                                         1,815                1,882        
FUTURE INCOME TAX BENEFITS (note 12)                                             2,722                2,722        
OTHER (note 4)                                                                   1,356                  984        
-------------------------------------------------------------------------------------------------------------------
                                                                              $ 20,453             $ 19,765        
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

LIABILITIES                                                                                                        
CURRENT                                                                                                            
  Accounts payable and accrued liabilities (note 5)                           $  5,572             $  6,546        
  Current portion of long-term debt (note 6)                                       914                1,739        
-------------------------------------------------------------------------------------------------------------------
                                                                                 6,486                8,285        
LONG-TERM DEBT (note 6)                                                          8,119               14,443        
OTHER LIABILITIES (note 7(a)(v))                                                   451                    0        
-------------------------------------------------------------------------------------------------------------------
                                                                                15,056               22,728        
-------------------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY (DEFICIT)                                                                                     
CAPITAL STOCK (note 7)                                                                                             
  Authorized                                                                                                       
      20,000,000 Common shares without par value                                                                   
  Issued                                                                                                           
       5,169,604 (2000 - 2,594,604) Common shares                               17,826               15,966        
OTHER PAID-IN CAPITAL (note 7(a))                                                7,225                  356        
CURRENCY TRANSLATION ADJUSTMENT                                                 (1,021)                (596)       
DEFICIT                                                                        (18,633)             (18,689)       
-------------------------------------------------------------------------------------------------------------------
                                                                                 5,397               (2,963)       
-------------------------------------------------------------------------------------------------------------------

                                                                              $ 20,453             $ 19,765        
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

Contingencies and Commitments (notes 9 and 10)                                  

Approved on behalf of the Board:                                                

"R. Bryant"                                "C. Stacey"                          

......................... Director         .........................  Director
R. Bryant                                  C. Stacey                            

See notes to consolidated financial statements.                                 

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ELEPHANT & CASTLE GROUP INC.                                                    
CONSOLIDATED STATEMENTS OF OPERATIONS                                           
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT NET INCOME (LOSS) PER SHARE)                   

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------------------------
                                                                        2001               2000               1999  
--------------------------------------------------------------------------------------------------------------------

                                                                                                                    
SALES                                                                 $46,833            $ 50,084           $50,104 
--------------------------------------------------------------------------------------------------------------------

RESTAURANT EXPENSES                                                                                                 
  Food and beverage                                                    13,204              14,523            14,418 
  Operating                                                                                                         
      Labour                                                           15,125              16,587            16,026 
      Occupancy and other                                              11,980              14,020            12,760 
  Restaurant closing costs (note 11)                                        0               9,726               250 
  Depreciation and amortization                                         1,813               2,849             3,806 
--------------------------------------------------------------------------------------------------------------------

                                                                       42,122              57,705            47,260 
--------------------------------------------------------------------------------------------------------------------

INCOME (LOSS) FROM RESTAURANT OPERATIONS                                4,711              (7,621)            2,844 
--------------------------------------------------------------------------------------------------------------------

GENERAL AND ADMINISTRATIVE EXPENSES                                     3,010               2,883             3,398 
RETIRING ALLOWANCES AND OTHER COSTS (note 11)                               0                   0               867 
LEGAL SETTLEMENT                                                            0                   0               775 
INTEREST ON LONG-TERM DEBT                                              1,404               1,874             2,056 
--------------------------------------------------------------------------------------------------------------------

                                                                        4,414               4,757             7,096 
--------------------------------------------------------------------------------------------------------------------

INCOME (LOSS) BEFORE INCOME TAXES                                         297             (12,378)           (4,252)
INCOME TAXES (note 12)                                                    100                   0              (125)
UTILIZATION OF LOSSES CARRYFORWARD (note 12)                             (100)                  0                 0 
FUTURE INCOME TAX BENEFIT (note 12)                                         0                 562               115 
--------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS) FOR YEAR                                            $   297            $(11,816)          $(4,262)
--------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS) PER COMMON SHARE                                                                                  
  Basic                                                               $  0.08            $  (4.51)          $ (2.43)
  Diluted                                                             $  0.05                 N/A               N/A 
--------------------------------------------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                                                       
  Basic                                                             3,890,000           2,619,000         1,756,000 
  Diluted                                                           6,164,000                 N/A               N/A 
--------------------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements.                                 

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ELEPHANT & CASTLE GROUP INC.                                                    
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)                       
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS)                                                       

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------------------------
                                                                       2001              2000              1999    
-------------------------------------------------------------------------------------------------------------------

                                                                                                                   
NUMBER OF COMMON SHARES ISSUED                                                                                     
  Beginning balance                                                  2,594,604         1,847,354         1,660,667 
Issue of shares                                                                                                    
    On renegotiation of debenture interest                           2,600,000                 0                 0 
    On conversion of long-term debt                                          0           791,250                 0 
    For settlement of legal matter                                           0                 0            75,000 
    For interest (notes 6 and 13(d))                                         0                 0            16,250 
    For services                                                             0             6,000                 0 
    On conversion of other paid-in capital (note 7(a))                       0                 0            95,437 
    Repurchase and cancellation of shares                              (25,000)          (50,000)                0 
-------------------------------------------------------------------------------------------------------------------
ENDING BALANCE                                                       5,169,604         2,594,604         1,847,354 
-------------------------------------------------------------------------------------------------------------------
COMMON SHARES ISSUED                                                                                               
  Beginning balance                                                   $ 15,966          $ 13,955          $ 12,982 
Issue of shares                                                                                                    
    On renegotiation of debenture interest                               2,017                 0                 0 
    On conversion of long-term debt                                          0             2,374                 0 
    For settlement of legal matter                                           0                 0               303 
    For interest (note 6)                                                    0                 0                98 
    For services                                                             0                15                 0 
    On conversion of other paid-in capital (note 7(a))                       0                                 572 
    Repurchase and cancellation of shares                                 (157)             (378)                0 
-------------------------------------------------------------------------------------------------------------------
  Ending balance                                                        17,826            15,966            13,955 
-------------------------------------------------------------------------------------------------------------------
OTHER PAID-IN CAPITAL                                                                                              
  Beginning balance                                                        356                 0               844 
  Equity portion of convertible notes                                    7,255                 0                 0 
  Paid-in capital converted into shares                                      0               106              (844)
  On renegotiation of debenture interest                                  (386)                0                 0 
  On cancellation of shares                                                  0               250                 0 
-------------------------------------------------------------------------------------------------------------------
  Ending balance                                                         7,225               356                 0 
-------------------------------------------------------------------------------------------------------------------
SUBSCRIPTIONS RECEIVED                                                                                             
  Beginning balance                                                          0             2,374                 0 
Amount reserved to issue shares                                                                0             2,374 
  Shares issued                                                              0             (2,37)                0 
-------------------------------------------------------------------------------------------------------------------
  Ending balance                                                             0                 0             2,374 
-------------------------------------------------------------------------------------------------------------------
CURRENCY TRANSLATION ADJUSTMENT                                                                                    
  Beginning balance                                                       (596)             (618)           (1,051)
  Deferred gain (loss) incurred during year                               (425)               22               433 
-------------------------------------------------------------------------------------------------------------------
  Ending balance                                                        (1,021)             (596)             (618)
-------------------------------------------------------------------------------------------------------------------
DEFICIT                                                                                                            
  Beginning balance                                                    (18,689)           (8,918)           (4,514)
  Adjustment to reflect adoption of liability                                                                      
    method of accounting for future income                                                                         
    tax assets (note 12)                                                     0             2,045                 0 
  Dividends on other paid-in capital                                      (241)                0              (142)
  Net income (loss)                                                        297           (11,816)           (4,262)
-------------------------------------------------------------------------------------------------------------------
  Ending balance                                                       (18,633)          (18,689)           (8,918)
-------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                                  $  5,397          $ (2,963)          $ 6,793 
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements.                                 

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ELEPHANT & CASTLE GROUP INC.                                                    
CONSOLIDATED STATEMENTS OF CASH FLOWS                                           
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS)                                                       

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------------------------
                                                                       2001              2000               1999    
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    

OPERATING ACTIVITIES                                                                                                
  Net income (loss)                                                   $   297           $(11,816)           $(4,262)
  Operating items not using cash                                        3,462             12,886              5,023 
--------------------------------------------------------------------------------------------------------------------

OPERATING CASH FLOW                                                     3,759              1,070                761 
--------------------------------------------------------------------------------------------------------------------

CHANGES IN NON-CASH WORKING CAPITAL                                                                                 
  Accounts receivable                                                     218                193               (306)
  Inventory                                                               (42)               555               (254)
  Deposits and prepaid expenses                                          (212)                51                 98 
  Accounts payable and accrued liabilities                               (974)              (898)             1,512 
--------------------------------------------------------------------------------------------------------------------

                                                                       (1,010)               (99)             1,050 
--------------------------------------------------------------------------------------------------------------------

CASH PROVIDED BY OPERATING ACTIVITIES                                   2,749                971              1,811 
--------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES                                                                                                
  Acquisition of fixed assets                                          (2,817)              (215)            (3,857)
  Acquisition of other assets                                            (140)                 0               (546)
  Acquisition of trademark                                                (23)                (8)                 0 
--------------------------------------------------------------------------------------------------------------------

CASH USED IN INVESTING ACTIVITIES                                      (2,980)              (223)            (4,403)
--------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES                                                                                                
  Deferred finance charges                                                (97)                 0               (364)
  Repurchase of shares                                                   (157)                 0                  0 
  Proceeds from long-term debt                                             73                 29              1,847 
  Repayment of long-term debt                                            (262)               (66)              (345)
--------------------------------------------------------------------------------------------------------------------

CASH PROVIDED BY (USED IN)                                                                                          
  FINANCING ACTIVITIES                                                   (443)               (37)             1,138 
--------------------------------------------------------------------------------------------------------------------

INFLOW (OUTFLOW) OF CASH                                                 (674)               711             (1,454)
CASH AND TERM DEPOSITS, BEGINNING OF YEAR                               1,725              1,014              2,468 
--------------------------------------------------------------------------------------------------------------------

CASH AND TERM DEPOSITS, END OF YEAR                                   $ 1,051           $  1,725            $ 1,014 
--------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                    
  Cash paid during the year for                                                                                     
    Interest                                                          $   302           $  1,007            $   820 
    Income taxes                                                      $     0           $      0            $     0 
--------------------------------------------------------------------------------------------------------------------

See notes to consolidated financial statements.                                 

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSAND OF DOLLARS)                                                        

--------------------------------------------------------------------------------

1.   BASIS OF PRESENTATION                                                      

    These financial statements include the accounts of Elephant & Castle Group
 Inc. ("the Company") and its wholly-owned subsidiaries. All significant
inter-company balances and transactions are eliminated.               

    (a)  The Elephant and Castle Canada Inc. ("the Canadian subsidiary") which
       owns and operates English style restaurants across Canada under the
name "The Elephant & Castle Restaurant and Pub";            

   (b)  Elephant & Castle Inc. ("the U.S. subsidiary" incorporated in Texas)
        and its subsidiaries which own and operate English style restaurants
        in Washington, Pennsylvania, Massachusetts, California and Illinois;

 (c)  Alamo Grill, Inc. ("Alamo" incorporated in Indiana) which owns and
        operates a red meat steak house at the Mall of America, Bloomington,
Minnesota;                                                  

 (d)  Elephant & Castle International, Inc. incorporated in Texas, which
         franchises the Elephant & Castle British-style pub and restaurant and
Alamo Steakhouse & Grill concept.                           

     Also included in these financial statements are the Company's proportionate
shares of revenues and expenses from its interest in a joint venture  
    established to develop and operate rainforest theme restaurants in Canada.
The 2000 and 1999 financial statements of the Company included its    
proportionate share of assets, liabilities and restaurant revenues and
expenses. Effective December 31, 2000 the Company had written off its 
entire investment in the joint venture (see note 11).                 

 These consolidated financial statements are prepared in accordance with
  Canadian generally accepted accounting principles and all figures are in
Canadian dollars unless otherwise stated. Canadian generally accepted 
     accounting principles differ in certain respects from accounting principles
generally accepted in the United States of America. The significant   
differences and the approximate related effect on the consolidated    
financial statements are set forth in Note 15.                        

Certain comparative figures have been restated to conform to current  
presentation.                                                         

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                 

(a)  Franchise fees                                                   

        The Company recognizes initial fees from the sale of franchises as a
         recovery of general and administrative expenses. Continuing franchise
royalties are included in sales as they are earned.         

(b)  Inventory                                                        

       Inventory consists of food, beverages and retail merchandise and is
         recorded at the lower of cost or market. Cost is determined using the
first-in, first-out method.                                 

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSAND OF DOLLARS)                                                        

--------------------------------------------------------------------------------

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                     

(c)  Fixed assets                                                     

     Fixed assets are recorded at cost and are depreciated annually as
follows:                                                    

      Furniture and fixtures        - 10% Straight-line method
      Computer equipment            - 20% Straight-line method

         Improvements to leased premises and property under capital leases are
       being amortized on a straight-line basis over the term of the lease
except for locations opened prior to January 1, 1993. Those 
         improvements are being amortized on the straight-line method over the
term of the lease plus the first renewal option.            

         China, glassware and cutlery are not depreciated and replacements are
charged directly to operations.                             

(d)  Goodwill                                                         

    Goodwill is recorded at cost and amortization is calculated on a
straight-line basis over periods from 10 to 40 years.       

(e)  Pre-opening costs                                                

         Pre-opening costs represent amounts for staff training costs, payroll
          for trainees, rents paid prior to opening, travel and accommodation of
  trainers and supplies consumed prior to opening which were all
  incurred to open new locations. These costs are amortized on a
straight-line basis over 12 months.                         

(f)  Other assets                                                     

      The following other assets are recorded at cost which is amortized
annually as follows:                                        

           Deferred finance costs        - Term of the related financial
instruments                             
Deferred franchise costs      - 5 Years           
Trademark                     - 10 Years          

(g)  Income taxes                                                     

 Income taxes are calculated using the liability method of tax
         accounting. Temporary differences arising from the difference between
         the tax basis of an asset or liability and its carrying amount on the
   balance sheet are used to calculate future income tax assets or
       liabilities. Future income tax assets or liabilities are calculated
          using tax rates anticipated to apply in the periods that the temporary
          differences are expected to reverse. A valuation allowance is provided
    to reduce the asset to the net amount management estimates to be
reasonable to carry as a future income tax asset (note 12). 

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSAND OF DOLLARS)                                                        

--------------------------------------------------------------------------------

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                     

(h)  Foreign currency translation                                     

     Amounts recorded in foreign currency are translated into Canadian
dollars as follows:                                         

    (i)   Monetary assets and liabilities at the rate of exchange in
effect at the balance sheet date;               

   (ii)  Non-monetary assets and liabilities at the exchange rates
          prevailing at the time of the acquisition of the assets or
assumption of the liabilities; and,             

        (iii) Revenues and expenses (excluding depreciation and amortization
               which are translated at the same rate as the related asset), at
the average rate of exchange for the year.      

          Gains and losses arising from this translation of foreign currency are
    included in net income except for unrealized gains and losses on
     long-term monetary assets and liabilities, which are deferred and
     amortized over the lives of those items. The unrealized gains and
     losses will be recognized as amounts are received or paid and are
included as a separate component of shareholders' equity.   

(i)  Net income (loss) per share                                      

      Net income (loss) per share computations are based on the weighted
    average number of common shares outstanding during the year. The
       conversion of restated and amended junior secured notes (note 7(a))
          and the payment of interest thereon through common share issuances and
     the assumed exercise of stock options or warrants have a dilutive
effect for 2001.                                            

(j)  Use of estimates                                                 

        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates
 and assumptions that affect the reported amount of assets and
       liabilities and disclosures of contingent assets and liabilities at
     the date of the financial statements, and the reported amounts of
     revenues and expenses during the reporting period. Actual results
        could differ from those estimates and would impact future results of
operations and cash flows.                                  

3.   FIXED ASSETS                                                               

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------
                                                                 2001                      
                                                             Accumulated                   
                                                             Depreciation                  
                                                                  And                      
                                                 Cost         Amortization           Net   
-------------------------------------------------------------------------------------------

                                                                                           
Leasehold improvements                          $15,456           $ 7,148          $ 8,308 
Furniture and fixtures                            8,578             5,613            2,965 
China, glassware and cutlery                        420                 0              420 
Computer equipment                                  446               266              180 
-------------------------------------------------------------------------------------------

                                                $24,900           $13,027          $11,873 
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSAND OF DOLLARS)                                                        

--------------------------------------------------------------------------------

3.       FIXED ASSETS (Continued)                                               

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------
                                                                 2000                      
                                                             Accumulated                   
                                                             Depreciation                  
                                                                  And                      
                                                 Cost         Amortization           Net   
-------------------------------------------------------------------------------------------

                                                                                           
Leasehold improvements                          $14,165           $ 6,338          $ 7,827 
Furniture and fixtures                            7,753             5,306            2,447 
China, glassware and cutlery                        439                 0              439 
Computer equipment                                  422               228              194 
-------------------------------------------------------------------------------------------

                                                $22,779           $11,872          $10,907 
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------

4.   OTHER ASSETS                                                               

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------
                                                                      2001            2000 
-------------------------------------------------------------------------------------------

                                                                                           
Deferred finance costs                                               $  910           $544 
Deferred franchise costs                                                173            228 
Trademark                                                               154            131 
Other                                                                   119             81 
-------------------------------------------------------------------------------------------

                                                                     $1,356           $984 
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------

5.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                   

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------
                                                                     2001            2000  
-------------------------------------------------------------------------------------------

                                                                                           
Trade payables                                                      $2,064          $1,348 
Advances for leasehold improvements                                    760               0 
Occupancy and other operating expenses                                 654             716 
Accrued salaries, wages and related taxes                              607           1,501 
Closing costs and legal settlement                                     377             953 
Debt redemption and other interest costs                               368             724 
Sales taxes                                                            291             361 
Other payables                                                         251             693 
Prepaid supplier rebates                                               200             250 
-------------------------------------------------------------------------------------------

                                                                    $5,572          $6,546 
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

6.   LONG-TERM DEBT                                                             

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------
                                                                             2001                2000     
----------------------------------------------------------------------------------------------------------

                                                                                                          
General Electric Investment Private Placement Partners II                                                 
("GEIPPPII)", a limited partnership, senior secured 6%                                                    
convertible notes, convertible at GEIPPPII's option  maturing                                             
September 1, 2005 and payable in three quarterly payments                                                 
beginning February 28, 2002, each in the amount of $125 U.S., four                                        
quarterly payments beginning November 30, 2002, each in the                                               
amount of $150 U.S., four quarterly payments beginning November               $7,776           $     0    
30, 2003, each in the amount of $175 U.S., four quarterly payments                                        
beginning November 30, 2004, each in the amount of $200 U.S., and one                                     
final instalment due on September 1, 2005 of $2,400 U.S. Interest                                         
payment at 6% is payable in cash quarterly. A security agreement                                          
granting security over a majority of the Company's assets has been                                        
entered into with the lender (note 7(a))                                                                  

Convertible subordinated notes issued in 2000, due December 31,                                           
2003, interest at 8% per annum payable quarterly in cash or                                               
common shares. Notes unpaid and not converted by December 31,                1,089               2,524    
2003 are immediately due and payable with a 25% premium on the                                            
unpaid principal                                                                                          

Capital lease obligations repayable over terms ranging from 36                 168                 158    
to 60 months, interest rates average 13%                                                                  

General Electric Investment Private Placement Partners II                                                 
("GEIPPPII"), a limited partnership, convertible subordinated                    0              13,500    
debentures (note 7(a))                                                                                    
----------------------------------------------------------------------------------------------------------
                                                                             9,033              16,182    
Less:  Current portion                                                         914               1,739    
----------------------------------------------------------------------------------------------------------
                                                                            $8,119             $14,443    
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------

        Long-term debt principal repayments due in each of the next five years
are as follows:                                                                 

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------

                                                                                                          
2002                                                                                                $  914
2003                                                                                                 1,055
2004                                                                                                 2,278
2005                                                                                                 4,786
----------------------------------------------------------------------------------------------------------
                                                                                                    $9,033
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

7.   CAPITAL STOCK                                                              

(a)  In July 1997, the Company issued $2,000 U.S. ($2,740 CDN.) of 6% 
  convertible subordinated debentures recorded as "other paid-in
    capital". As at December 26, 1999 $616 U.S. ($844 CDN.) remained
       outstanding. During 1999, 95,437 shares were issued to convert $386
U.S. ($597 CDN.) and the remainder were redeemed for cash.  

         In December 2000 the Company reached an agreement with the holders of
     its 8% notes whereby $1,583 U.S. ($2,374 CDN.) was converted into
          791,250 shares. During 2001, $1,000 U.S. was renegotiated and included
          in the $10,000 U.S. of convertible subordinated notes (see below). The
          conversion rate on the remaining $683 remains unchanged at $4 U.S. per
share.                                                      

     In June 2001, the Company and General Electric Investment Private
         Placement Partners II ("GEIPPPII") agreed to renegotiate the terms on
         $10,000 U.S. of convertible subordinated notes and debentures held by
        GEIPPPII. As part of the renegotiation, the Company issued 2,600,000
       shares in payment of accrued interest, reduction of future interest
rate and issued the following notes.                        

o    $5,000 U.S. of the restated and amended senior secured 
     convertible 6% notes (the "senior notes") (note 6); and

o    $5,000 U.S. of the restated and amended junior secured 
            convertible 6% notes (the "junior notes"), in exchange for the
securities to be surrendered by GEIPPII.          

        Both the senior notes and the junior notes shall be convertible into
         shares of the Company's common shares at the holder's option. However
    the junior notes are mandatorily convertible into common shares,
          subject to certain targeted performance requirements to be measured by
   the Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA") as follows:                         

     (i)   On September 1, 2002, $1,250 U.S. of the junior notes would
              convert into common shares at a conversion price at one dollar
($1.00 U.S.) per share (1,250,000 shares);      

     (ii)  On September 1, 2003, $1,250 U.S. of the junior notes would
              convert into common shares at a conversion price of one dollar
                and twenty-five cents ($1.25 U.S.) per share (1,000,000 shares);

     (iii) On September 1, 2004, $1,250 U.S. of the junior notes would
              convert into common shares at a conversion price of one dollar
            and fifty cents ($1.50 U.S.) per share and (833,333 shares);

     (iv)  On September 1, 2005, $1,250 U.S. of the junior notes would
              convert into common shares at a conversion price of one dollar
               and seventy-five cents ($1.75 U.S.) per share (714,286 shares);

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EPHANT & CASTLE GROUP INC.                                                      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

7.   CAPITAL STOCK (Continued)                                                  

     (v)   Conversion is subject only to the Company's meeting certain
             minimum tests of EBITDA during each twelve month period ended
             each June 30, preceding each such conversion date. The EBITDA
      targets for mandatory conversion are fixed as follows:

                                                                [Download Table]

---------------------------------------------------------------
12 Month Period        Conversion Date                  EBITDA 
---------------------------------------------------------------
                                                               
June 30, 2002          September 1, 2002         U      $3,000 
June 30, 2003          September 1, 2003         U       3,750 
June 30, 2004          September 1, 2004         U       4,500 
June 30, 2005          September 1, 2005         U       5,000 
---------------------------------------------------------------

             Interest payments on the junior notes in the amount of 6% shall
             be payable in arrears. The Company shall have the option to pay
        up to one-half of the interest, in common shares upon each
            conversion date. The interest payment shares will be valued at
$0.40.                                            

            The junior notes are considered a compound instrument and have
        been included in the financial statements as part of other
             paid-in capital. Interest payable with cash has been discounted
              and included in the financial statements as other liabilities of
$451.                                             

(b)  Stock option plans have been adopted as follows:                 

        (i)   The 1993 Founders' option plan set aside 50,000 common shares.
               Options on the entire 50,000 shares have been granted at $13.20
               U.S. ($21.05 CDN.). These options become exercisable on the 5th
         through 9th anniversary date of granting. 21,875 of these
 options were cancelled through December 30, 2001.

       (ii)  The 1993 employee option plan set aside 50,000 common shares.
              Options have been granted for approximately 45,000 shares. All
              options expire on the 5th anniversary date of the grant. 8,916
            of the options have been exercised through December 30, 2001
             and 36,084 of the options were cancelled through December 30,
2001.                                           

        (iii) The 1997 employee option plan set aside 200,000 common shares.
                Options have been granted for 139,000 shares. All options expire
        on the 5th anniversary date of the grant. None have been
             exercised through December 30, 2001 and 60,000 of the options
were cancelled through December 30, 2001.       

         (iv)  The 1993 directors' option plan set aside 10,000 common shares.
         All have been granted, 7,500 cancelled and none have been
exercised through December 30, 2001.            

        (v)   The 2001 stock options and bonus plan set aside 950,000 common
shares of which none have been granted.         

          There are 277,125 options (including the 162,500 options in (c) below)
  outstanding at December 30, 2001 exercisable at various prices
detailed below.                                             

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

7.   CAPITAL STOCK (Continued)                                                  

Stock option activity is summarized as follows:             

                                                                [Download Table]

---------------------------------------------------------------------
                                 Number           Exercise Price     
                               of Shares       (U.S.$)       (Cdn.$) 
---------------------------------------------------------------------

                                                                     
Balance outstanding,                                                 
  December 31, 1998             656,292         12.90 *       20.58  
1999 - Cancelled                (25,000)        11.36         18.12  
---------------------------------------------------------------------

Balance outstanding,                                                 
  December 26, 1999             631,292         12.96 *       20.67  
2000 - Cancelled               (334,167)        13.29         21.20  
---------------------------------------------------------------------

Balance outstanding,                                                 
  December 31, 2000             297,125       $ 12.58 *     $ 21.20  
2001 - Cancelled                (20,000)        11.26         17.96  
---------------------------------------------------------------------

Balance outstanding,                                                 
  December 30, 2001             277,125       $ 12.68 *     $ 20.22  
---------------------------------------------------------------------

*    Weighted average exercise price.                       

  (c)  During 1999, options for 472,500 common shares were granted to five
         key executives, four of whom commenced employment with the Company in
    1997. None have been exercised and 310,000 of these options were
cancelled through December 30, 2001.                        

     (d)  During 1994, 31,750 shares were issued to a director at $9.50 U.S. per
        share. At December 30, 2001, $300 U.S. ($411 CDN.) of these proceeds
         were unpaid. The amount unpaid was charged to shareholders' equity in
the 1994 fiscal year.                                       

(e)  At December 30, 2001, warrants to purchase common shares were    
outstanding as follows:                                     

                                                                [Download Table]

---------------------------------------------------------------------
                                     Exercise               Number   
Expiry Date                            Price               of Shares 
---------------------------------------------------------------------

                                                                     
2002                                $ 7.68 U.S.              351,562 
2003                                $ 6.00 U.S.              816,250 
---------------------------------------------------------------------

                                                           1,167,812 
---------------------------------------------------------------------
---------------------------------------------------------------------

   These warrants are subject to an anti-dilution provision, which
 provides for an adjustment to the exercise price to take into
      consideration the issue of other shares, or securities convertible
         into shares, at prices below the existing exercise price. In addition
      the number of shares issued on exercise may increase such that the
      total dollar amount paid on exercise of these warrants will be the
same at all times regardless of the exercise price.         

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

7.   CAPITAL STOCK (Continued)                                                  

(f)  Shareholders approved a special resolution on March 23, 2000 to  
          consolidate the Company's authorized and issued capital stock on a one
          for two basis. All numbers of shares, options and warrants reported in
these financial statements are on a post-consolidated basis.

8.   FINANCIAL INSTRUMENTS                                                      

(a)  Fair value                                                       

      The carrying value of cash and term deposits, accounts receivable,
   accounts payable and accrued liabilities approximate their fair
       value because of the short maturity of these financial instruments.

      The carrying values of convertible subordinated debentures held by
 General Electric Investment Private Placement Partners II and
      convertible subordinated notes issued in February 2000 approximate
       their fair value because the interest payments over the term of the
 debentures approximated market rates when the agreements were
finalized.                                                  

The carrying value of 6% convertible subordinated debentures
    recorded as "other paid-in capital" has been adjusted to reflect
market rates at the date the transaction was completed.     

(b)  Credit risk                                                      

  The Company's financial assets that are exposed to credit risk
        consist primarily of cash and term deposits and accounts receivable.
       Cash and term deposits are placed with major financial institutions
   rated in the two highest grades by nationally recognized rating
      agencies. Credit risk from customer exposure is nominal due to the
nature of the business.                                     

(c)  Interest rate risk                                               

       The Company is not exposed to significant interest rate risk due to
      the short-term maturity of its monetary current assets and current
 liabilities and the relatively small amount of long-term debt
subject to interest rate changes.                           

(d)  Translation risk                                                 

       The Company translates the results of U.S. operations into Canadian
        currency using rates approximating the average exchange rate for the
    year. The exchange rate may vary from time to time. This risk is
        minimized to the extent U.S. capital expansions are financed through
      borrowing in U.S. dollars and all non-Canadian source revenues and
expenses are in U.S. dollars.                               

9.   CONTINGENCY                                                                

    In 1989 and 1990, the Canadian subsidiary received Notices of Reassessment
from Revenue Canada and the Ontario Ministry of Revenue regarding a   
  construction allowance received in 1984 from the landlord for its former
Sarnia, Ontario location. The reassessment has been under appeal since
  1989. A portion of the dispute was settled in the Company's favour and a
tax provision of $125 has been made for the estimated remainder of the
 dispute. Including interest accrued retroactively since 1984, the total
amount disputed at December 30, 2001 approximates $240.               

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

10.  COMMITMENT                                                                 

The subsidiaries are committed to leases on their restaurant locations
extending into the 2014 fiscal year. Minimum annual rentals for the   
restaurants excluding realty taxes, common area maintenance and other 
charges are as follows:                                               

                                                                [Download Table]

--------------------------------------------------------------------------

                                                                          
2002                                                              $ 2,648 
2003                                                                2,147 
2004                                                                1,888 
2005                                                                1,295 
2006                                                                  894 
2007 to 2012 inclusive                                              3,654 
--------------------------------------------------------------------------

                                                                  $12,526 
--------------------------------------------------------------------------
--------------------------------------------------------------------------

 Each of the aforementioned leases provide for the payment of additional
rent based on percentages of gross annual revenue in excess of minimum
     rents, or other graduated formulae derived from gross revenue as defined in
the particular lease agreements. The percentages range from 6% to 12%.

11.  RESTAURANT CLOSING COSTS, RETIRING ALLOWANCES AND OTHER COSTS              

Restaurant closing costs for 2000 are comprised of the following:     

(a)  Write-off of investment in Rainforest Restaurants Joint Venture  
($4,939)                                                    

   In 1997 the Company entered into a joint venture agreement with
          Rainforest Cafe Canada holdings Inc. for the development of rainforest
         themed restaurants in Canada through a joint venture entity, Canadian
     Rainforest Restaurants Inc. ("CRRI"). As of December 31, 2000 the
      Company made full provision against its investment in CRRI and its
       receivable from the joint venture company, resulting in a charge to
      earnings of $4,939 in 2000. The two locations in which the Company
held an ownership interest have been closed.                

(b)  Closure of Franklin Mills Restaurant ($4,787)                    

          The Company reached an agreement with the landlord of its unsuccessful
      Franklin Mills location to terminate the lease in exchange for the
          surrender of substantially all of the assets at that location, and the
       payment of up to fifteen months' rent. The restaurant was closed on
          January 7, 2001 and full provision for the disposal of assets, payment
      of rent and other closing costs was made, resulting in a charge to
earnings of $4,787 in 2000.                                 

 Senior executive retiring allowances and former employee costs for 1999
    ($867) were primarily related to the retirement of two executives in 1999.

   Legal settlement costs in 1999 ($775) were for a lease dispute with Shilo
Hotels that was settled in 1999.                                      

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

12.  INCOME TAXES                                                               

  Effective January 1, 2000 the Company adopted the new recommendations of
    the Canadian Institute of Chartered Accountants with respect to accounting
  for income taxes. Under the new recommendations, the liability method of
  tax allocation is used, based on differences between financial reporting
  and tax bases of assets and liabilities. Previously, the deferral method
was used, based on differences in the timing of reporting income and  
expenses in financial statements and tax returns. The new method was  
     applied retroactively without restatement of the 1999 financial statements.

The effect of the new recommendations on the opening 2000 financial   
statements was to increase (decrease) the following:                  

                                                                [Download Table]

--------------------------------------------------------------------------

                                                                          
Future income tax benefits                                       $ 2,045  
Deficit                                                          $(2,045) 
--------------------------------------------------------------------------
--------------------------------------------------------------------------

 The adjustment to deficit was a result of recognition of the future tax
 value of loss carry forward amounts that are more likely than not to be
realized.                                                             

   The components of the future income tax benefits at December 30, 2001 and
December 31, 2000, are as follows:                                    

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------------------
                                                                                   2001             2000   
-----------------------------------------------------------------------------------------------------------

                                                                                                           
Future income tax                                                                                          
  Tax benefit of non-capital loss carryforwards                                   $ 4,026          $ 4,739 
  Tax benefit of capital loss carryforwards                                         1,075            1,075 
  Fixed assets values for tax purposes in excess of book values                     1,019            1,087 
-----------------------------------------------------------------------------------------------------------

                                                                                    6,120            6,901 
Valuation allowance                                                                (3,398)          (4,179)
-----------------------------------------------------------------------------------------------------------

Net future income tax benefits                                                    $ 2,722          $ 2,722 
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------

     The Company has the following available tax losses, the partial benefits of
which have been recorded in these financial statements:               

(i)   Non-capital losses of approximately $4,300 which can be applied 
         against future income for Canadian tax purposes up to and including
2005.                                                     

     (ii)  Operating losses of approximately $4,000 U.S. ($6,000 CDN.) which may
         be carried forward to apply against future years' income for United
States income tax purposes expiring up to 2020.           

(iii) Net capital losses of approximately $5,300 which can be applied 
   against future capital gains income for Canadian tax purposes
indefinitely.                                             

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE PRICES)                                  

--------------------------------------------------------------------------------

13.  RELATED PARTY TRANSACTIONS                                                 

   (a)  Included in general and administrative are wages and management fees
      paid to directors, former directors, officers, former officers and
          personal service corporations used by these individuals for a total of
$450 (2000 - $358) (1999 - $717).                           

    (b)  A shareholder and a former director of the Company provides legal and
        consulting services to the Company. Fees for these services totalled
$92 (2000 - $54) (1999 - $122).                             

(c)  At December 26, 1999 the Company held a non-interest bearing     
      promissory note for $350 from a director and former officer of the
          Company. The note was repaid in 2000. Consideration included cash plus
       the surrender of 50,000 shares of the capital stock of the Company.

(d)  GEIPPPII (note 6) is related to the Company by way of its share  
     ownership in the Company and the election of two directors to the
         Board. Interest payments totalled $852 in 2001, $937 in 2000; $824 in
     1999 consisting of cash of $215 in 2001, $937 in 2000 and $725 in
1999; the balance was paid by share issuances.              

14.  GEOGRAPHIC SEGMENTED DATA                                                  

                                                        [Enlarge/Download Table]

---------------------------------------------------------------------------------------------------------
                                                              2001               2000              1999  
---------------------------------------------------------------------------------------------------------

                                                                                                         
Sales to unaffiliated customers                                                                          
  Canada                                                     $25,083            $29,958          $28,703 
  United States                                               21,750             20,126           21,401 
---------------------------------------------------------------------------------------------------------

                                                             $46,833            $50,084          $50,104 
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------

Capital assets and goodwill                                                                              
  Canada                                                     $ 5,659            $ 5,860          $16,501 
  United States                                                9,385              7,913           11,598 
---------------------------------------------------------------------------------------------------------

                                                             $15,044            $13,773          $28,099 
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------

15.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED          
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP)                   

(a)  U.S. accounting pronouncements                                   

  (i)   SFAS 130, "Reporting Comprehensive Income" and SFAS 131,
        "Disclosures About Segments of an Enterprise and Related
       Information" became effective in 1999, expand or modify
   disclosures and, accordingly, have no effect on the
         Corporation's consolidated financial position, results of
            operations or cash flows. Under U.S. GAAP, the Company would
              have reported comprehensive income (loss) of $(485), $(11,688)
   and $(2,640) for 2001, 2000 and 1999, respectively.

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS)                                                       

--------------------------------------------------------------------------------

15.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED          
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP) (Continued)       

   (ii)  In April 1999, the American Institute of Certified Public
              Accountants (AICPA) issued Statement of Position No. 98-5 (SOP
                98-5), "Reporting on the Costs of Start-Up Activities". SOP 98-5
              generally requires costs of start-up activities to be expensed
                instead of being capitalized and amortized and is required to be
                adopted no later than January 1, 2000. Under U.S. GAAP in fiscal
 2001 the Company would have no pre-opening costs.

    (iii) In December 1999, the SEC issued Staff Accounting Bulletin
            ("SAB") 101, "Revenue Recognition", which outlines the basic
           criteria that must be met to recognize revenue and provides
               guidance for presentation of revenue and for disclosure related
             to revenue recognition policies in financial statements filed
               with the SEC. The Company believes the adoption of SAB 101 does
              not have a material impact on the Company's financial position
and results of operations.                      

         (iv)  In March 2000 the Financial Accounting Standards Board ("FASB")
               issued "Interpretation #44, Accounting for Certain Transactions
       Involving Stock Compensation". Among other issues, this
interpretation clarifies:                       

            (a)  The definition of employee for purposes of applying APB
Opinion No. 25.                       

               (b)  The criteria for determining whether a plan qualifies as a
noncompensatory plan.                 

               (c)  The accounting consequence of various modifications of the
             terms of a previously fixed stock option award, and

                (d)  The accounting for an exchange of stock compensation awards
in a business combination.            

              In relation to (c) the interpretation states, "if the exercise
               price of a fixed stock option award is reduced, the award shall
                be accounted for as a variable from the date of the modification
            to the date the award is exercised, is forfeited, or expired
           unexercised, the exercise price of an option award has been
             reduced if the fair value of the consideration required to be
             remitted pursuant to the award's original terms". There is no
impact on the Company for fiscal 2001.          

          (v)   In July 2001, FASB issued Financial Accounting Standard No. 142,
             Goodwill and Other Intangible Assets. This statement includes
              requirements to test good will and indefinite lived intangible
              assets for impairment rather than amortization. This statement
              will be effective for years beginning December 15, 2001. Early
               adoption is permitted for companies with fiscal years beginning
               after March 15, 2001. The Company will adopt this statement for
         U.S. GAAP reconciliation purposes with the year beginning
December 31, 2001.                              

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS)                                                       

--------------------------------------------------------------------------------

15.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED          
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP) (Continued)       

   (b)  Reconciliation of total assets, liabilities and shareholders' equity

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------
                                                                          2001            2000    
--------------------------------------------------------------------------------------------------

                                                                                                  
Total assets for Canadian GAAP                                           $20,453          $19,765 
Adjustments to U.S. GAAP                                                     502              106 
--------------------------------------------------------------------------------------------------

Total assets for U.S. GAAP                                                20,955           19,871 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

Total liabilities per Canadian GAAP                                       15,056           22,728 
Adjustments to U.S. GAAP                                                   7,255                0 
--------------------------------------------------------------------------------------------------

Total liabilities for U.S. GAAP                                           22,311           22,728 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

Total equity (deficit) for Canadian GAAP                                   5,397           (2,963)
Adjustment to U.S. GAAP                                                   (6,753)             106 
--------------------------------------------------------------------------------------------------

Total equity (deficit) for U.S. GAAP                                      (1,356)          (2,857)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

Total equity (deficit) and liabilities for U.S. GAAP                     $20,955          $19,871 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

          For Canadian GAAP purposes convertible debt (junior notes) and related
        costs are recorded in the books as equity if the debt is convertible
      into common shares of the Company at the option of the issuer. For
U.S. GAAP purposes these amounts have been reclassified as a
liability.                                                  

F-20

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ELEPHANT & CASTLE GROUP INC.                                                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 30, 2001, DECEMBER 31, 2000 AND DECEMBER 26, 1999          
(CANADIAN DOLLARS)                                                              
(IN THOUSANDS OF DOLLARS)                                                       

--------------------------------------------------------------------------------

15.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED          
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP) (Continued)       

     (c)  Reconciliation of earnings (loss) reported in accordance with Canadian
GAAP and U.S. GAAP:                                         

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------
                                                         2001            2000             1999    
--------------------------------------------------------------------------------------------------

                                                                                                  
Net income (loss) - Canadian GAAP                        $  297        $(11,816)         $(4,262) 

Adjustments decreasing (increasing) net loss                                                      

Amortization of improvement costs *                         (61)            (61)             (61) 

Dividend on paid-in capital that would be                  (241)              0             (142) 
rated as interest under U.S. GAAP (note 7(a))                                                     

Pre-opening costs                                           (55)            167             (167) 

Recognition of non-capital loss carry forwards *              0               0            1,559  
--------------------------------------------------------------------------------------------------
Net loss U.S. GAAP                                          (60)        (11,710)          (3,073) 
Comprehensive income adjustments                           (425)             22              433  
--------------------------------------------------------------------------------------------------
Comprehensive income (loss)                                                                       
  U.S. GAAP                                              $ (485)       $(11,688)         $(2,640) 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Net income (loss) per common share                                                                
  Canadian GAAP - Basic                                  $ 0.08        $  (4.51)         $ (2.43) 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

  U.S. GAAP - Basic ***                                  $(0.02)       $  (4.47)         $ (1.74) 
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Weighted average number of shares                                                                 
  outstanding                                         3,890,000       2,619,000        1,756,000  
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

     *    Under U.S. GAAP, amortization of leasehold improvement costs
would be restricted to the term of the lease.     

          **   Carry forward loss that would be recorded as a deferred tax asset
under U.S. GAAP.                                  

         ***  Exercise of warrants, options and debenture conversions would be
anti-dilutive under U.S. GAAP.                    

(d)  Stock options                                                    

    In 1995 the FASB issued SFAS No. 123 "Accounting for Stock-Based
       Compensation", which contains a fair value-based method for valuing
 stock-based compensation that entities may use. This measures
      compensation cost at the grant date based on the fair value of the
         award. Compensation is then recognized over the service period, which
    is usually the vesting period. For U.S. GAAP purposes management
     accounts for options under APB Opinion No. 25. As option exercise
prices approximated market price on the dates of grants no  
compensation expense has been recognized. If the alternative
        accounting-related provisions of SFAS No. 123 had been adopted as of
          the beginning of 1995, the effect on 2001, 2000 and 1999 U.S. GAAP net
income (loss) per share would have been immaterial.         

F-21

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                        SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the       
Registrant caused this report to be signed on its behalf by the undersigned,    
thereunto duly authorized.                                                      

(Registrant)  Elephant & Castle Group Inc.                                      

By   /s/ Richard Bryant                                                         
----------------------------------------------------------------      
Richard Bryant, President, Chief Executive Officer/Director           

Date March 29, 2002                                                             
----------------------------------------------------------------      

By   /s/ Daniel DeBou                                                           
----------------------------------------------------------------      
Daniel DeBou, Chief Accounting Officer                                

Date March 29, 2002                                                             
----------------------------------------------------------------      

In accordance with the Exchange Act, this report has been additionally
signed below by the following persons on behalf of the Registrant and in the    
capacities and on the dates indicated.                                          

By   /s/ Jeffrey Barnett                                                        
----------------------------------------------------------------      
Jeffrey Barnett, Director                                             

Date March 29, 2002                                                             
----------------------------------------------------------------      

By   /s/ Colin Stacey                                                           
----------------------------------------------------------------      
Colin  J. Stacey, Director                                            

Date March 29, 2002                                                             
----------------------------------------------------------------      

By   /s/ George Pitman                                                          
----------------------------------------------------------------      
George W. Pitman, Director                                            

Date March 29, 2002                                                             
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By   /s/ David Wiederecht                                                       
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David Wiederecht, Director                                            

Date March 29, 2002                                                             
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By   /s/ David Matheson                                                         
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David Matheson, Director                                              

Date March 29, 2002                                                             
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S-1 

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By   /s/ Richard Kelleher                                                       
----------------------------------------------------------------      
Richard Kelleher, Director                                            

Date March 29, 2002                                                             
----------------------------------------------------------------      

S-2 

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 INDEX TO EXHIBITS

Exhibits                                                                        

                                                                [Download Table]
                                                                              
3.1      Certificate of Incorporation and                              *      
         Certificate of Name Change of                                        
         Registrant                                                           

3.2      Articles of Association of Registrant                         *      

3.3      Certificate of Amalgamation, dated                            *      
         May 1, 1990, The Elephant and Castle                                 
         Canada Inc.                                                          

3.4      Resolution to increase the authorized                         ****** 
         share capital of Registrant                                          

3.5      Amendment to Articles of Association of                       *******
         Registrant, dated March 23, 2000                                     

3.6      Memorandum of Agreement dated October 19,                            
         1999 between the Company and a shareholder                           
         group relative to governance of the Corporation               *******

4.1      Form of certificate evidencing shares                         *      
         of Common Stock                                                      

4.2      Form of Underwriter's Warrant Agreement                       *      
         between Registrant and the Underwriter                               

4.3      Form of Subordinated Convertible Note                                
         issued in Delphi Financing                                    *****  

4.4      Form of Noteholders Warrant issued in                                
         Delphi Financing                                              *****  

4.5      Form of amended Noteholder Warrant issued                     *******
         on renegotiation of Delphi Financing                                 

4.6      Form of certificate evidencing shares of                      *******
         Common Stock, amended March 27, 2000                                 

10.1     Bank Loan Agreement, dated September 13,                      *      
         1990, with Toronto Dominion Bank                                     

10.2     Letter Agreement dated June 26, 1991,                         *      
         regarding expansion of facilities at                                 
         Edmonton Eaton Centre food court relocation                          

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                                                                [Download Table]
                                                                              
10.3     Retailer Application dated May 23, 1992,                      *      
         and Specimen Agreement for Alberta Lotteries                         
         and Alberta Gaming Control                                           

10.4     License Agreement dated July 9, 1992, with                    *      
         Servomation Inc. relating to B.C. Place                              
         Stadium                                                              

10.5     Restaurant lease dated November 10, 1992,                     *      
         with Shilo Management Corporation, relating                          
         to the Shilo Inn, Yuma, Arizona                                      

10.6     Letter Agreement, with Shilo Management                       *      
         Corporation relating to Shilo Hotel, Pomona,                         
         California                                                           

10.7     Restaurant Lease Agreement with Holiday Inns                  **     
         of Canada, Ltd., relating to Holiday Inn Crowne                      
         Plaza at Winnipeg, Manitoba.                                         

10.8     Restaurant Lease Agreement relating to Holiday                       
         Inn, Philadelphia, Pennsylvania                               ***    

10.9     Abstract of Restaurant Lease relating to Holiday                     
         Inn, San Diego Lease                                          ****   

10.10    Revised Lease Abstract of Restaurant Lease                           
         relating to Canadian Rainforest Restaurants,                         
         Inc. (Yorkdale)                                               *****  

10.11    Revised Lease Abstract of Restaurant Lease                           
         relating to Canadian Rainforest Restaurants,                         
         Inc.(Montreal)                                                *****  

10.12    Revised Lease Abstract of Canadian Rainforest                        
         Restaurants, Inc.(Burnaby, B.C.)                              *****  

10.13    Lease Abstract of Elephant & Castle Group, Inc.                      
         (Edmonton)                                                    *****  

10.14    Lease Abstract of Canadian Rainforest                                
         Restaurants, Inc., (Scarborough, Ont.)                        *******

10.15    Lease Abstract of Elephant & Castle Group, Inc.                      
         (Franklin Mills, Pennsylvania)                                *******

10.16    Abstract of Canadian Niagara Hotels sub-franchise             *******

10.17    Abstract of Holiday Inns Hotels Exclusivity                          
         Agreement re: franchise facilities                            *******

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                                                                [Download Table]
                                                                               
10.18    Form of Franchise Agreement for Alamo Grill                   ******* 

10.19    Form of Franchise Agreement for Elephant & Castle             ******* 

10.20    Lease Abstract of Elephant & Castle Group, Inc.                       
         (Chicago, Illinois)                                           ********

21       List of Subsidiaries                                          ****    

24.1     Irrevocable Consents and Power of Attorney on                         
         Form F-X                                                      *       

99.1     Canadian Declaration as of May 11, 1990,                      *       
         claiming the trade name "The Elephant and                             
         Castle"                                                               

99.2     Filing receipt dated February 5, 1993, for                    *       
         U.S. service mark application "E&C"                                   

99.3     Filing receipt dated February 5, 1993, for                    *       
         U.S. service mark "Elephant Mug"                                      

---------------------                                                           
X Filed herewith.                                                               

*        Incorporated by reference from the Exhibits filed with the             
Company's Registration Statement on Form SB-2 (Registration   
No. 33-60612) Modification of the numbering of the exhibits is
in accordance with Item 601 of Registration S-B.              

**       Filed with Registrant's 10-K SB for the Fiscal Year ended December 31, 
1993.                                                         

***      Filed with Registrant's 10-K SB for the Fiscal Year Ended December 31, 
1994.                                                         

****     Filed with Registrant's 10-KSB A-1 for Fiscal Year Ended               
December 31, 1996                                             

*****    Filed with Registrant's 10-K for Fiscal Year Ended                     
December 27, 1998                                             

******   Filed with Registrant's 8-K dated December 8, 1999                     

*******  Filed with Registrant's 10-K dated December 27, 1999                   

******** Filed with Registrant's 10-K dated December 31, 2000                   

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K Filing		Date		First		Last			Other Filings
		5/23/92		60
		7/9/92		60
		11/10/92		60
		1/1/93		43
		2/5/93		61
		6/29/93		18
		12/31/93		61
		5/18/94		5
		12/31/94		61
		2/28/95		6
		7/1/96		6
		12/31/96		61					10KSB/A, NT 10-K, 10KSB
		5/1/97		7
		12/27/98		61					NT 10-K, 10-K, NT 10-K/A
		6/30/99		5
		10/19/99		59
		12/8/99		61
		12/26/99		24		56			10-K, 10-K/A
		12/27/99		61
		1/1/00		18		54
		3/22/00		18
		3/23/00		18		59			PRES14A
		3/27/00		59					10-K
		12/31/00		20		61			10-K/A, 10-K
		1/7/01		51
		3/15/01		54
		12/15/01		54
For The Period Ended		12/30/01		1		56
		12/31/01		54
		2/28/02		46
		3/15/02		2
		3/20/02		37
Filed On / Filed As Of		3/28/02
		3/29/02		57		58
		6/30/02		48					10-Q
		9/1/02		47		48
		11/30/02		46
		6/30/03		48
		9/1/03		47		48
		12/31/03		5		46
		6/30/04		48
		9/1/04		47		48
		11/30/04		46
		6/30/05		48
		9/1/05		4		48
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