Arc Group, Inc. Reports 286% Increase in Revenue For the First Quarter of 2019

ARC Group, Inc.

Companies Mentioned:

Primary Exchange: OTCQB
Under the Symbol: ARCK

Arc Group, Inc. Reports 286% Increase in Revenue For the First Quarter of 2019

Thursday, May 16, 2019 8:00 AM

JACKSONVILLE, FL / ACCESSWIRE / May 16, 2019 / ARC Group, Inc. (OTCQB: ARCK), a restaurant holding company with a focus on diversified, full-service restaurants and brands, today provided a business update for the first quarter ended March 31, 2019.

First Quarter 2019 Financial Highlights:

  • Revenue increased 286% to $4,588,821 during Q1 2019 from $1,189,164 during Q1 2018.
  • Loss from operations was $256,993 for Q1 2019 compared to income from operations of $48,308 for Q1 2018.
  • Adjusted income from operations was $68,460 during Q1 2019 compared to $76,364 during Q1 2018.
  • Net loss was $414,243 for Q1 2019 compared to net income of $47,614 during Q1 2018.
  • EBITDA was $80,107 for Q1 2019 compared to $58,865 for Q1 2018.

A reconciliation of adjusted income from operations, adjusted net income, and adjusted earnings per share on a GAAP and non-GAAP basis is included in the table below entitled "Reconciliation of GAAP to non-GAAP Financial Measures".

Seenu G. Kasturi, CEO of ARC Group, stated, "We are extremely pleased to report that our revenue increased 286% to approximately $4.6 million for the first quarter of 2019. The increase in revenue was due to organic growth within Dick's Wings and our acquisition of Fat Patty's in August of 2018. We expect our revenue will continue to increase during the next 12 months as we generate sales through our company-owned restaurants, continue to improve the operations of our existing Dick's Wings and Fat Patty's restaurants, and open new Dick's Wings and Fat Patty's restaurants. We also opened our first Tilted Kilt restaurant in Louisiana in November 2018, which we currently operate as a franchise until we compete the acquisition of the entire franchise. We expect our revenue to increase substantially as a result of our pending acquisition of Tilted Kilt and as we acquire additional interests in other restaurant brands."

"We are pleased with our progress throughout the first quarter of 2019. Although our operating expenses increased due to the company-owned restaurants that we opened and acquired and the buildout of our infrastructure, we now have a highly scalable operation with tremendous profit potential as we continue to grow our revenue. We look forward to providing meaningful updates regarding Tilted Kilt as well as other developments as we continue to work towards acquiring leading brands at attractive multiples that will enhance our company and provide us with a diversified operating portfolio."

Complete financial results are available in the Company's Form 10-Q, which has been filed with the Securities & Exchange Commission and is available at www.sec.gov.

Non-GAAP Financial Measures

The Company prepares it's consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP"). In addition to disclosing financial information prepared in accordance with GAAP, this release also includes non-GAAP operating income, non-GAAP net income and non-GAAP net income per share data for the periods presented. Management uses non-GAAP financial measures internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. The Company's management believes that these non-GAAP financial measures provide useful supplemental information to management and investors regarding the performance of the Company's core business operations, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

These non-GAAP financial measures are not recognized measures for financial statement presentation under U.S. GAAP and do not have standardized meanings. Accordingly, they may be different from similar non-GAAP financial measures presented by other companies. These non-GAAP financial measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures. Investors should consider these non-GAAP financial measures as a supplement to, and not as a substitute for, corresponding financial measures calculated in accordance with GAAP.

For the purposes of this press release, the following non-GAAP financial measures have the following meanings:

"Adjusted income from operations" means income from operations plus depreciation expense, stock compensation expense, and amortization expense for operating and financing lease right-of-use assets, intangible assets and debt discount.

"EBITDA" means net (loss) / income plus depreciation expense and amortization expense for operating and financing lease right-of-use assets, intangible assets and debt discount interest expense, interest income, depreciation expense, stock-based compensation expense, and other income.

"Adjusted earnings per share" means adjusted net income divided by the weighted average number of shares outstanding - basic and fully diluted.

For a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, please see the table below entitled "Reconciliation of GAAP to Non-GAAP Financial Measures".

About ARC Group, Inc.

ARC Group, Inc., headquartered in Jacksonville, Florida, is a holding company with a focus on the casual dining restaurant industry. ARC is the owner, operator and franchisor of Dick's Wings & Grill®, a family-oriented restaurant chain with locations in Florida and Georgia. Now in its 24th year of operation, Dick's Wings serves over 25,000 wings daily, and prides itself on its award-winning chicken wings, hog wings and duck wings spun in its signature sauces and seasonings. ARC operates four company-owned restaurants, three company-owned concession stands, and has 19 franchise locations. ARC also owns the Fat Patty's® concept, with four locations in West Virginia and Kentucky. Fat Patty's offers a number of specialty burgers and sandwiches, wings, appetizers, salads, wraps, and steak and chicken dinners in a family friendly, casual dining environment.

Safe Harbor Provision

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are intended to be covered by the safe harbor created thereby. All statements other than statements of historical fact contained herein, including, without limitation, statements regarding the Company's future financial position, business strategy, plans and objectives, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative thereof or any variation thereon or similar terminology or expressions. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from results proposed in such statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, those factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and its other filings and submissions with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements.

Contact:

Crescendo Communications, LLC
Email: [email protected]
Tel: 212-671-1020

ARC Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)




March 31,
December 31,

2019
2018

Assets

Cash and cash equivalents
$ 174,680 $ 345,228
Accounts receivable, net
192,224 127,930
Ad funds receivable, net
11,596 10,500
Other receivables
579,497 556,986
Prepaid expenses
42,530 34,582
Inventory
191,954 211,025
Insurance proceeds receivable
69,075 -
Notes receivable, net
2,967 2,967
Other current assets
5,968 8,078

Total current assets
1,270,491 1,297,296

Deposits
47,009 49,421
Notes receivable, net of current portion
1,501 2,553
Intangible assets, net
785,623 786,565
Property and equipment, net
1,122,484 12,537,502
Operating lease right-of-use assets
3,743,590 -
Financing lease right-of-use assets, net
11,184,738 -

Total assets
$ 18,155,436 $ 14,673,337

Liabilities and stockholders' deficit

Accounts payable and accrued expenses
$ 1,549,457 $ 1,478,745
Accounts payable and accrued expenses – related party
240,045 231,187
Other payables
546,525 544,098
Accrued interest
42,225 29,105
Settlement agreements payable
279,048 276,269
Accrued legal contingency
165,694 163,764
Contingent consideration
55,356 55,356
Deferred franchise fees
13,093 13,718
Operating lease liability
263,795 -
Financing lease liability
182,379 175,764
Seller payable
312,000 312,000
Notes payable – related party, net
782,947 720,178
Gift card liabilities
52,664 81,956

Total current liabilities
4,485,228 4,082,140

Deferred franchise fees, net of current portion
48,516 51,516
Operating lease liability, net of current portion
3,501,664 -
Financing lease liability net of current portion
11,161,870 11,210,146

Total liabilities
19,197,278 15,343,802

Stockholders' deficit:

Class A common stock – $0.01 par value: 100,000,000 shares authorized,
7,080,771 and 6,680,065 shares issued and outstanding at
March 31, 2019 and December 31, 2018, respectively
70,808 66,801
Series A convertible preferred stock – $0.01 par value: 1,000,000 shares
authorized, 449,581 and -0- outstanding at March 31, 2019 and
December 31, 2018, respectively
4,496 4,496
Additional paid-in capital
4,537,180 4,490,338
Stock subscriptions payable
7,470 15,453
Accumulated deficit
(5,661,796 ) (5,247,553 )

Total stockholders' deficit
(1,041,842 ) (670,465 )

Total liabilities and stockholders' deficit
$ 18,155,436 $ 14,673,337


ARC Group, Inc.
Condensed Consolidated Statements of Operations (Unaudited)




For the Three Months Ended March 31,

2019
2018

(Restated)

Revenue:
Restaurant sales
$ 4,378,791 $ 927,277
Franchise and other revenue
210,030 233,259
Franchise and other revenue – related party
- 28,628

Total net revenue
4,588,821 1,189,164

Operating expenses:
Restaurant operating costs:
Cost of sales
1,731,631 270,535
Labor
1,452,448 254,539
Occupancy
154,091 60,459
Other operating expenses
843,361 154,620
Professional fees
258,451 128,913
Employee compensation expense
227,007 131,205
General and administrative expenses
178,825 140,585

Total operating expenses
4,845,814 1,140,856

(Loss) / income from operations
(256,993 ) 48,308

Other expense
Interest expense
(203,063 ) (5,692 )
Other income
45,813 4,998

Total other expense
(157,250 ) (694 )

Net (loss) / income
$ (414,243 ) $ 47,614

Net (loss) / income per share – basic and fully diluted
$ (0.06 ) $ 0.01

Weighted average number of shares
outstanding – basic and fully diluted
7,071,985 6,980,735


ARC Group, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)


Table 1: Adjusted Income From Operations


For the Three Months Ended March 31,

2019
2018

Loss from operations (as reported)
$ (256,993 ) $ 48,308

Depreciation expense
51,541 5,559
Amortization of operating lease right-of-use assets
89,189 -
Amortization of financing lease right-of-use assets
141,938 -
Amortization of intangible assets
942 -
Amortization of debt discount
7,677 -
Stock-based compensation expense
34,166 22,497

Adjusted income from operations
$ 68,460 $ 76,364


Table 2: EBITDA


For the Three Months Ended March 31,

2019 2018

Net (loss) / income (as reported)
$ (414,243 ) $ 47,614

Depreciation expense
51,541 5,559
Amortization of operating lease right-of-use assets
89,189 -
Amortization of financing lease right-of-use assets
141,938 -
Amortization of intangible assets
942 -
Amortization of debt discount
7,677 -
Interest expense
203,063 5,692

EBITDA
$ 80,107 $ 58,865


SOURCE: ARC Group, Inc.


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