ARC Group, Inc. Provides Third Quarter 2018 Business Update; Reports 134% Increase in Revenue


JACKSONVILLE, Fla., Nov. 19, 2018 (GLOBE NEWSWIRE) -- ARC Group, Inc. (OTC: ARCK), the owner, operator and franchisor of the Dick's Wings & Grill® and Fat Patty’s® concepts, announced financial results for the third quarter ended September 30, 2018.

Third quarter 2018 financial highlights:

  • Revenue increased 134% to approximately $2.5 million for Q3 2018 from approximately $1 million for Q3 2017.
  • Achieved net income of $97,467, or $0.01 per share, during Q3 2018 compared to a net loss of $89, or $0.00 per share, during Q3 2017.
  • Cash flows from operating activities were $235,787 for the nine-month period ended September 30, 2018.

Richard W. Akam, Chief Executive Officer of ARC Group, stated, “We are pleased to report that our revenues increased 134% to approximately $2.5 million for the third quarter of 2018, as we continue to grow both organically and through our recent acquisition of Fat Patty’s. During the third quarter, we acquired the Fat Patty’s franchise, which generated more than $11 million in revenue and $700,000 in net income during 2017.  In addition, we recently announced that we entered into an agreement to acquire the Tilted Kilt Pub and Eatery®.  We expect to close this acquisition by the end of the year, which will bring our combined annualized revenue run rate to over $25 million.”

“The Fat Patty’s acquisition is consistent with our strategy of building a highly scalable and profitable organization,” stated Seenu G. Kasturi, Chairman, President and Chief Financial Officer of ARC Group.  “Notably, we completed the acquisition on very favorable terms without equity dilution to our shareholders.  Our goal is to aggressively expand the brand through the addition of new franchises.”

Mr. Kasturi continued, “We continue to demonstrate the success of our business model, which involves acquiring restaurant chains that are growing and profitable, at attractive multiples, as well as underperforming restaurant chains that can be turned around quickly.  This will provide us the opportunity to leverage our franchising, marketing, operational, logistics and financial expertise across brands, while maintaining a strict focus on driving sales, reducing costs, and expanding margins. As an example of our operational success, we increased system-wide sales of Dick’s Wings from $10 million to $22 million in just four years. Our goal is to achieve similar success with Fat Patty’s and Tilted Kilt, as well as other restaurant chains that we may acquire in the future.”

About ARC Group, Inc.  

ARC Group, Inc., headquartered in Jacksonville, Florida, is a holding company with a focus on the quick serve 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 23rd 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 17 franchised locations. ARC also owns the Fat Patty’s® franchise, 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.

Pro Forma Financial Information

The pro forma financial information included in this press release was prepared by management for illustrative purposes only using unaudited financial information for Fat Patty’s and Tilted Kilt that was provided to ARC Group by Fat Patty’s and Tilted Kilt, respectively.  The pro forma financial information is not necessarily indicative of the financial position or results of operations that would have been realized had ARC Group completed the acquisition of Fat Patty’s and Tilted Kilt on January 1, 2018, nor is it meant to be indicative of any anticipated financial position or future results of operations that ARC Group or Tilted Kilt will experience in the event the acquisition of Tilted Kilt is completed in the future.  In addition, the pro forma financial information does not include any pro forma adjustments to reflect any operational efficiencies, cost savings or economies of scale that may be achievable, or the impact of any non-recurring charges and transaction-related costs that result directly from the proposed acquisition. Future results of operations are also subject to risks and uncertainties that could cause such results to differ materially from those reflected in the pro forma financial information.  Readers are cautioned not to place undue reliance on the pro forma financial information presented in this press release.  See “Safe Harbor Provision” below regarding forward-looking statements presented in this press release.

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, 2017 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:

David Waldman / Natalya Rudman
Crescendo Communications, LLC
Tel: 212-671-1020
Email: arck@crescendo-ir.com

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ARC Group, Inc.
 Condensed Consolidated Statements of Operations (Unaudited)
          
   For the Three Months Ended
 For the Nine Months Ended
   September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
          
Revenue:        
 Restaurant sales $2,197,463  $841,214  $4,076,307  $2,595,679 
 Franchise and other revenue  231,983   165,905   690,892   509,032 
 Franchise and other revenue – related party  23,256   40,285   100,994   123,343 
          
Total revenue  2,452,702   1,047,404   4,868,193   3,228,054 
          
Operating expenses:        
 Restaurant operating costs:        
 Cost of sales  811,009   274,846   1,360,529   869,600 
 Labor  624,848   293,035   1,222,554   857,933 
 Occupancy  57,713   92,729   171,048   187,264 
 Other operating expenses  474,165   198,354   911,356   555,664 
 Professional fees  366,956   67,975   614,123   351,185 
 Employee compensation expense  163,512   91,033   414,924   250,626 
 General and administrative expenses  418,301   50,991   720,033   82,437 
          
Total operating expenses  2,916,504   1,068,963   5,414,567   3,154,709 
          
(Loss) / income from operations  (463,802)  (21,559)  (546,374)  73,345 
          
Other income:        
 Interest expense  (74,258)  (6,506)  (85,131)  (22,730)
 Gain on sale of investment in Paradise on Wings –        
   related party  -   24,000   -   24,000 
 Gain on bargain purchase option  625,193   -   625,193   - 
 Other income  10,334   3,976   95,862   13,060 
          
Total other income  561,269   21,470   635,924   14,330 
          
Net income / (loss) $97,467  $(89) $89,550  $87,675 
          
Net income / (loss) per share – basic $0.01  $(0.00) $0.01  $0.01 
          
Net income / (loss) per share – fully diluted $0.01  $(0.00) $0.01  $0.01 
          
Weighted average number of shares        
 outstanding – basic  6,524,427   6,773,041   6,795,644   6,768,839 
          
Weighted average number of shares        
 outstanding – fully diluted  6,554,427   6,773,041   6,810,809   6,768,839 



ARC Group, Inc.
 Condensed Consolidated Balance Sheets (Unaudited)
     
  September 30, December 31,
  2018 2017
     
Assets   
     
 Cash and cash equivalents$57,084  $145,346 
 Accounts receivable, net 98,007   166,987 
 Accounts receivable, net – related party 891   1,505 
 Ad funds receivable, net 11,274   36,837 
 Ad funds receivable, net – related party 1,761   2,280 
 Other receivables 370,312   - 
 Prepaid expenses 44,037   - 
 Inventory 139,634   45,417 
 Notes receivable, net 9,412   28,522 
 Deposits 14,695   21,189 
 Other current assets 3,011   5,923 
     
 Total current assets 750,118   454,006 
     
 Notes receivable, net of current portion 3,191   5,106 
 Intangible assets 844,840   - 
 Property and equipment, net 12,498,305   99,114 
     
 Total assets$14,096,454  $558,226 
     
Liabilities and stockholders' deficit   
     
 Accounts payable and accrued expenses$1,317,984  $467,264 
 Accounts payable and accrued expenses – related party 100,892   94,150 
 Accrued interest 19,499   13,472 
 Settlement agreements payable 273,428   264,997 
 Accrued legal contingency 161,790   155,935 
 Contingent consideration 55,356   199,682 
 Deferred franchise fees 26,803   - 
 Capital lease obligation 171,411   - 
 Deferred compensation liability 312,000   - 
 Notes payable – related party 523,777   30,503 
 Gift card liabilities 91,805   9,147 
     
 Total current liabilities 3,054,745   1,235,150 
     
 Deferred franchise fees, net of current portion 124,411   - 
 Capital lease obligation, net of current portion 11,241,915   - 
     
 Total liabilities 14,421,071   1,235,150 
     
Stockholders' equity deficit:   
     
 Class A common stock – $0.01 par value: 100,000,000 shares authorized,   
 6,524,427 and 6,950,869 shares issued and outstanding at   
 September 30, 2018 and December 31, 2017, respectively 65,245   69,509 
 Series A convertible preferred stock – $0.01 par value: 1,000,000 shares   
 authorized, 449,581 and -0- outstanding at September 30, 2018 and   
 December 31, 2017, respectively 4,496   - 
 Additional paid-in capital 4,190,559   3,995,306 
 Stock subscriptions payable 290,603   26,853 
 Accumulated deficit (4,875,520)  (4,768,592)
     
 Total stockholders' deficit (324,617)  (676,924)
     
 Total liabilities and stockholders' deficit$14,096,454  $558,226