Q3 Restaurant Sales up 23% to $1.7 Million, Driven by 13% Increase in Same-Store Sales at Southern Hospitality Denver
Build-Out of First 'Carve Barbecue' Fast-Casual Restaurant Complete
COLORADO SPRINGS, Colo., Nov. 6, 2015 (GLOBE NEWSWIRE) -- Southern Concepts Restaurant Group, Inc. (OTCQB:RIBS), an innovator of fast casual barbecue, reported financial results for the third quarter ended September 30, 2015.
Third Quarter 2015 Highlights
- Restaurant sales increased 23% over the same year-ago quarter to $1.7 million
- Completed build-out of the company's first Carve Barbecue fast casual restaurant in Glendale, Colorado
- Engaged Liolios Group to lead new strategic investor relations program
- Carve Barbecue featured in Denver Business Journal, Denver Food Examiner, Westword, Denver Eater, Nation's Restaurant News
Third Quarter 2015 Financial Results
Restaurant sales in the third quarter of 2015 increased 23% to $1.7 million compared to $1.4 million in the same year-ago period. The increase in revenue is primarily attributable to the opening of a third Southern Hospitality full-service restaurant in Lone Tree, Colorado, as well as increased same-store sales by the company's downtown Denver location. The downtown Denver location, which opened in January 2013 generated a same-store sales increase of 13% compared to the year-ago quarter.
Gross profit in the third quarter of 2015 was a loss of $34,000 compared to a loss of $50,000 in the year-ago period. The improvement in gross profit was primarily attributable to increased scale achieved by opening the third full service Southern Hospitality location in the Denver metro area, as well as increased sales in catering and party takeout.
Operating expenses in the third quarter of 2015 increased 21% to $1.8 million compared to $1.5 million in the same year-ago period. The increase in operating expense is primarily attributable to the opening expenses related to the company's new full-service Southern Hospitality location in Lone Tree, Colorado and the new fast casual barbecue restaurant, Carve Barbecue in Glendale, Colorado.
Net loss in the third quarter of 2015 totaled $958,000 or ($0.02) per diluted share, compared to net loss of $813,000 or ($0.02) per diluted share in the year-ago quarter. The wider net loss is primarily due to increased operating costs associated with the development and pre-opening expenses for Southern Hospitality in Lone Tree and the development of Carve Barbecue, as well as the marketing expenses associated with increased branding efforts including print and TV commercials.
Cash at September 30, 2015 was $549,000 compared to $1.1 million at December 31, 2014.
In the third quarter of 2015, the company maintained three full-service restaurants operating in the Denver metro area.
Management Commentary
"Revenue growth in the third quarter was driven by unit growth with the addition of our Southern Hospitality location in Lone Tree, Colorado, as well as double digit comparable same-store sales growth at Southern Hospitality in downtown Denver," said Southern Concepts CEO, Mitchell Roth. "Our Denver location is the only store in our system mature enough to measure same-store sales growth. However, this marks the location's second consecutive quarter of double digit same-store sales growth, which we attribute to gaining a better brand presence in the Denver area with the opening of the Lone Tree store, as well as additional catering sales.
"These positive trends are very encouraging for our management team, as it proves our ability to grow same-store sales and bolster store level economics through innovative marketing efforts. During the second quarter we hired a corporate sales and event manager to work in the field, which has increased corporate sales, and supporting the increase in both top line sales and gross margin.
"Also during the quarter we invested in our brand with new, fresh collateral and marketing materials designed to strengthen our foothold in the Colorado barbecue community. We are going to continue investing in the Southern Hospitality brand, as we believe we've only just begun to realize its potential. As we further build catering sales into the system and develop each day-part, we're confident that sales and profitability will continue to grow.
"Our planned expansion into the fast casual category with our Carve Barbecue concept will give us the opportunity to grow at a more rapid pace and dramatically increase shareholder value over both the short and long term.
"We expect the typical Carve Barbecue location to generate approximately $1.8 million in annual revenues, with 20% store-level EBITDA margins, after an investment of roughly $700,000 per store. We see this ultimately generating a cash-on-cash return north of 51% per unit. Generally speaking, we see this concept's operating model as potentially more scalable and profitable than a full service model, and owning our own concept will give us the opportunity to grow through franchise partners.
"Carve is 'Authentic Barbecue for the Modern Consumer,' meaning there will be no corners cut in the culinary process. For example, we will smoke our briskets for 13 hours and our burnt ends for 17 hours, but still accommodate the busy schedule and special dietary needs of today's consumer. More than 80% of the menu is gluten free, including gluten free sauces, made in house, and gluten free buns and street taco tortillas. We have innovated around classical barbecue sides and will be introducing new, healthy sides to be paired with our meats, such as seasonal veggies, sweet potatoes, baked beans, coleslaw and potato salad.
"Finally, today's consumer is tired of overly processed meat and ingredients from factories rather than farms. Carve Barbecue will exclusively serve the highest quality proteins and ingredients possible, including all-natural black angus and Duroc pork from Creekstone Farms and Cobb Hubbard chicken from Red Bird Farms, among others.
"In 2016, we are maintaining our strong growth outlook with Carve Barbecue, with one new location opening per quarter, and we are currently evaluating sites in Colorado Springs and Boulder as well as in Phoenix and Scottsdale.
"We are building a lifestyle brand based on the highest quality barbecue possible, and taking a very measured approach to becoming part of the community and developing a brand. We see this ultimately establishing a strong business platform that allows for rapid expansion financed by our cash flows, and generating tremendous value for our investors."
About Southern Concepts Restaurant Group
Headquartered in Colorado Springs, Southern Concepts Restaurant Group owns and manages three full-service Southern Hospitality restaurants in the Colorado market, and has introduced Carve Barbecue, a new fast casual barbecue concept. The full-service Southern Hospitality concept was co-created by Eytan Sugarman, Justin Timberlake, and Trace Eyala in New York City's Hell's Kitchen neighborhood. To learn more, visit www.southernconcepts.com.
Important Cautions Regarding Forward-Looking Statements
The information in this news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding the company's business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," or "continue," the negative of such terms or other comparable terminology. Actual events or results may differ materially. The company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Third Quarter 2015 Financial Summary Tables
The following financial information should be read in conjunction with the unaudited financial statements and accompanying notes filed by the company with the Securities and Exchange Commission on November 5, 2015 in its Quarterly Report on Form 10-Q for the period ended September 30, 2015, and which can be viewed at www.sec.gov and in the investor relations section of the company's website at www.southernconcepts.com.
| SOUTHERN CONCEPTS RESTAURANT GROUP, INC. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
|
September 30, 2015 |
December 31, 2014 |
|
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 549,140 | $ 1,182,099 |
| Prepaid expenses and other | 143,200 | 66,023 |
| Inventory | 87,389 | 64,091 |
| Total current assets | 779,729 | 1,312,213 |
| Deposits | 96,113 | 80,525 |
| Deferred financing costs, net | 7,092 | 28,369 |
| Related party receivable | 25,787 | 25,787 |
| Intangible asset, net | 36,875 | 40,625 |
| Property and equipment, net | 4,188,848 | 2,986,050 |
| Total assets | $ 5,134,444 | $ 4,473,569 |
| Liabilities and equity | ||
| Current liabilities: | ||
| Accounts payable | $ 69,067 | $ 91,792 |
| Accrued expenses | 244,201 | 229,539 |
| Related party notes payable and accrued interest | -- | 117,318 |
| Notes payable and accrued interest | 495,733 | 218,970 |
| Convertible notes payable and accrued interest, current portion | 109,022 | 129,589 |
| Total current liabilities | 918,023 | 787,208 |
| Deferred rent | 315,898 | 303,070 |
| Convertible notes payable and accrued interest, less current portion, (net of $546,521 (2015) and $528,019 (2014) discount) | 1,071,647 | 722,439 |
| Related party note payable (net of $457,425 (2015) and $731,880 (2014) discount) | 792,574 | 520,184 |
| Total liabilities | 3,098,142 | 2,232,901 |
| Commitments and contingencies | ||
| Equity | ||
| Preferred stock - par value $0.001; | ||
| Authorized Series A shares - 4,884,859 | ||
| Issued and outstanding Series A shares - 4,884,859 (2015 and 2014) | 248,994 | 248,994 |
| Common stock - no par value; | ||
| Authorized shares - 120,000,000 | ||
| Issued and outstanding shares - 55,518,303 (2015) and 48,783,363 (2014) | 9,239,966 | 7,916,942 |
| Additional paid-in capital | 2,975,172 | 2,602,171 |
| Accumulated deficit | (11,219,668) | (8,692,743) |
| Total Southern Concepts Restaurant Group, Inc ("SCRG") equity | 1,244,464 | 2,075,364 |
| Noncontrolling interest | 791,838 | 65,304 |
| Total equity | 2,036,302 | 2,140,668 |
| Total liabilities and equity | $ 5,134,444 | $ 4,473,569 |
| SOUTHERN CONCEPTS RESTAURANT GROUP, INC. | ||||
| CONSOLIDATED STATEMENTS OF LOSS | ||||
| (Unaudited) | ||||
|
Three months ended September 30, |
Nine months ended September 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Revenue | $ 1,736,930 | $ 1,408,772 | $ 4,792,725 | $ 3,953,749 |
| Operating expenses: | ||||
| Restaurant operating costs, (related party $100,300 and $300,800 for three and nine months ended September 30, 2015 and $99,100 and $284,000 for three and nine months ended September 30, 2014) exclusive of depreciation and amortization below | 1,770,622 | 1,458,823 | 4,857,207 | 4,199,909 |
| General and administrative | 495,420 | 503,165 | 1,589,855 | 1,806,079 |
| Selling and marketing | 98,067 | 110,588 | 244,253 | 395,446 |
| Depreciation and amortization | 152,897 | 111,013 | 405,119 | 322,558 |
| Total operating expenses | 2,517,006 | 2,183,589 | 7,096,434 | 6,723,992 |
| Loss from operations | (780,076) | (774,817) | (2,303,709) | (2,770,243) |
| Other expense: | ||||
| Interest expense (related party $32,500 and $97,497 for the three and nine months ended September 30, 2015 and nil in 2014) | (177,962) | (37,755) | (554,020) | (90,663) |
| Net loss | $ (958,038) | $ (812,572) | $ (2,857,729) | $ (2,860,906) |
| Net loss attributable to noncontrolling interest | $ (126,582) | $ (107,793) | $ (330,805) | $ (274,346) |
| Net loss attributable to SCRG | (831,456) | (704,779) | (2,526,925) | (2,586,560) |
| Net loss | $ (958,038) | $ (812,572) | $ (2,857,729) | $ (2,860,906) |
| Basic and diluted net loss per share attributable to SCRG common shareholders | $ (0.02) | $ (0.02) | $ (0.05) | $ (0.06) |
| Weighted average number of common shares outstanding - basic and diluted | 54,008,923 | 46,958,130 | 51,164,319 | 40,227,931 |