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ARC Group, Inc. Announces Record 2017 Financial Results

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ARC Group, Inc. Announces Record 2017 Financial Results

PR Newswire

JACKSONVILLE, Fla., April 2, 2018 /PRNewswire/ -- ARC Group, Inc. (OTC:ARCK), the owner, operator and franchisor of the award-winning Dick's Wings & Grill® concept, announced financial results for its 2017 fiscal year highlighted by record revenue, net income and cash flows from operations.

2017 Financial Highlights

The Company achieved the following financial results for its 2017 fiscal year:

  • Revenue increased 248% to $4,445,663 for 2017 from $1,275,448 for 2016.
  • Loss from operations decreased $728,611 to $84,614 during 2017 compared to $813,225 during 2016.
  • Adjusted income from operations, a non-GAAP measure, was $388,591 during 2017 compared to $380,790 during 2016.
  • Net income was $344,740, or $0.05 per share, during 2017 compared to net loss of $813,713, or $0.12 per share, during 2016.
  • Adjusted net income, a non-GAAP measure, was $388,591 during 2017 compared to $380,790 during 2016.
  • Adjusted net income per share was $0.06 for 2017 and 2016.
  • Cash flows from operations was $248,345 during 2017 compared to cash used by operations of $10,087 during 2016, an improvement of $258,432.

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".

"We are very excited about our 2017 results," stated Richard W. Akam, Chief Executive Officer of ARC Group.  "The revenue, net income and cash flows that we generated this past year are by far the best we have achieved since becoming a publicly-traded company in 2011.  Our financial results were positively impacted by the two company-owned restaurants that we purchased in December 2016 through our acquisition of Seediv.  We generated $3,502,080 of sales through these restaurants during 2017, a substantial increase from the $130,861 that we generated during the short period that we owned them during 2016."

"Our results from continuing operations were very strong this past year when you consider the effects of certain non-cash expenses and other one-time items," stated Seenu G. Kasturi, President and Chief Financial Officer of ARC Group.  "These charges collectively accounted for more than $470,000.  With these charges added back, our adjusted income from operations was $388,591.  Our cash flows were similarly very strong this year, as we generated $248,345 in positive cash flow from operating activities."

2017 Highlights and Outlook

The Company had several notable achievements during 2017, including the following:

  • Seenu G. Kasturi was appointed as the Company's President, Chief Financial Officer and Chairman of the Board of Directors.
  • The Company entered into a new partnership with the NFL's Jacksonville Jaguars under which it will serve as a sponsor of the Jaguars for the next five football seasons under the designation "Official Wings of the Jacksonville Jaguars" and operate two concession stands at TIAA Bank Field (formerly EverBank Field).
  • The Company implemented an innovative stock incentive program for its franchisees to promote and more closely align the interests of the Company's franchisees with those of its shareholders.

"We also hired Eide Bailly LLP, one of the largest accounting firms in the country, as our new independent accounting firm this past year," stated Akam.  "Many of the steps that we took during 2017 were designed to position us for our next phase of growth.  We intend to continue strengthening and growing our legacy Dick's Wings brand as well as acquiring financial interests in leading restaurant brands that will offer us product and geographic diversification.  We also intend to continue to focus on our operational efficiencies and formalizing best practices throughout our franchise.  This will help us achieve our long-term goal of transforming ARC Group into a holding company comprised of a diversified portfolio of leading brands and profitable businesses that are all strong contributors to our bottom line."

Dick's Wings restaurants are family fun fooderys® where both families and sports fans can go to enjoy a unique restaurant experience from first bite to last call®.  Dick's Wings offers a variety of boldly-flavored menu items highlighted by its award-winning, Buffalo, New York-style chicken wings and hog wings and its Dick's Blingz® boneless chicken wings, for which it boasts 365 mouth-watering flavors.  It also offers customers a variety of fresh sandwiches, burgers, wraps, salads and signature waffle fries.  Guests enjoy these menu items in an elevated sports-themed environment that includes flat screen TVs located throughout each restaurant and children's areas filled with video games and other forms of children's entertainment. 

Dick's Wings is actively offering franchise opportunities in Florida, Georgia, Alabama, Louisiana, North Carolina and South Carolina.  For more information about Dick's Wings exciting menu offering and locations, and for additional franchising information, please visit www.dickswingsandgrill.com.

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 / (loss) from operations plus depreciation expense, Seediv compensation expense, other Seediv transaction costs, the Seediv earnout payment, stock-based compensation expense, and loss on impairment of investment in Paradise on Wings.

"Adjusted net income" means net loss plus interest income, interest expense, depreciation expense, Seediv compensation expense, other Seediv transaction costs, the Seediv earnout payment, stock-based compensation expense, gain on write-off of liabilities, loss from investment in Paradise on Wings, loss on impairment of investment in Paradise on Wings, gain on sale of investment in Paradise on Wings – related party, gain / (loss) on settlement of litigation, gain on settlement of liabilities, gain on write-off of notes payable, gain on write-off of stock subscriptions payable, 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 further information, please refer to the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2018 and available online at www.sec.gov.

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 the owner, operator and franchisor of the Dick's Wings & Grill concept.  Now in its 23rd year of operation, Dick's Wings prides itself on its award-winning chicken wings, hog wings and duck wings spun in its signature sauces and seasonings.  It also offers its own proprietary line of craft beers under the name "Dick's Craft Beers".  Dick's Wings has 17 restaurants in Florida and five restaurants in Georgia.  It also has two concession stands at TIAA Bank Field (formerly EverBank Field), home of the NFL's Jacksonville Jaguars.

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.

 

 ARC Group, Inc. 

 Consolidated Balance Sheets (Unaudited) 














 December 31, 






2017


2016









Assets
















Cash and cash equivalents




$               145,346


$                 50,923


Accounts receivable, net




166,987


67,395


Accounts receivable, net – related party




1,505


14,568


Ad funds receivable, net




36,837


-


Ad funds receivable, net – related party




2,280


-


Inventory




45,417


45,250


Notes receivable, net




28,522


63,742


Interest receivable, net




-


838


Deposits




21,189


1,806


Other current assets




5,923


-










     Total current assets




454,006


244,522










Notes receivable, net of current portion




5,106


29,379


Property and equipment, net




99,114


80,948










          Total assets




$               558,226


$               354,849









Liabilities and stockholders' deficit
















Accounts payable and accrued expenses




$               467,264


$               735,331


Accounts payable and accrued expenses – related party




94,150


98,434


Accrued interest




13,472


2,594


Settlement agreements payable




264,997


253,724


Accrued legal settlement




155,935


148,105


Notes payable – in default




-


7,000


Notes payable – related party




30,503


232,572


Contingent consideration




199,682


20,897


Other current liabilities




9,147


5,096










     Total current liabilities




1,235,150


1,503,753










          Total liabilities




1,235,150


1,503,753









Stockholders' equity deficit:
















Class A common stock – $0.01 par value: 100,000,000 shares authorized,








      6,950,869 and 6,647,464 shares issued and outstanding at








     December 31, 2017 and December 31, 2016, respectively    




69,509


66,475


Additional paid-in capital




3,995,306


3,747,953


Stock subscriptions payable




26,853


150,000


Accumulated deficit




(4,768,592)


(5,113,332)










     Total stockholders' deficit




(676,924)


(1,148,904)










          Total liabilities and stockholders' deficit




$               558,226


$               354,849

 

 ARC Group, Inc. 

 Consolidated Statements of Operations (Unaudited) 














 

 For the Years Ended December 31, 






2017


2016









Revenue:








Restaurant sales




$              3,612,951


$                 130,861


Franchise and other revenue




676,007


630,791


Franchise and other revenue – related party




156,705


513,796









Total net revenue




4,445,663


1,275,448









Operating expenses:








Restaurant operating costs:








    Cost of sales




1,201,825


28,082


    Labor




1,159,026


32,258


    Occupancy




238,376


17,030


    Other operating expenses




779,644


10,807


Professional Fees




407,512


169,190


Employee compensation expense




388,944


502,493


General and administrative expenses




354,950


980,670


Loss on impairment of investment in Paradise on Wings



-


348,143









Total operating expenses




4,530,277


2,088,673









Loss from operations




(84,614)


(813,225)









Other income / (expense):








Interest expense




(29,980)


(37,703)


Interest income




2,340


896


Gain on write-off of liabilities




251,238


-


Loss from investment in Paradise on Wings




-


(222,685)


Gain on sale of investment in Paradise on Wings –








    related party




24,000


-


Gain on settlement of litigation




-


82,642


Gain on settlement of liabilities




-


175,449


Gain on write-off of notes payable




7,000


-


Gain on write-off of stock subscriptions payable




150,000


-


Other income




24,756


913









Total other income / (expense)




429,354


(488)









Net income / (loss)




$                 344,740


$                (813,713)









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




$                       0.05


$                      (0.12)









Weighted average number of shares 








outstanding – basic and fully diluted




6,817,310


6,608,225

 

 ARC Group, Inc. 

 Reconcilation of GAAP to Non-GAAP Financial Measures (Unaudited) 









Table 1: Adjusted Income From Operations




















 For the Years Ended December 31, 






2017


2016









Income / (loss) from operations (as reported)




$                  (84,614)


$                (813,225)










Depreciation expense




17,180


507


Seediv compensation expense




-


230,412


Other Seediv transaction costs




-


502,856


Seediv earnout payment




178,785


20,897


Stock-based compensation expense




277,240


91,200


Loss on impairment of investment in Paradise on Wings



-


348,143









Adjusted income from operations




$                 388,591


$                 380,790

















Table 2: Adjusted Net Income and Net Income Per Share



















For the Years Ended December 31, 






2017


2016









Net income / (loss) (as reported)




$                 344,740


$                (813,713)










Interest expense




29,980


37,703


Interest income




(2,340)


(896)


Depreciation expense




17,180


507


Seediv compensation expense




-


230,412


Other Seediv transaction costs




-


502,856


Seediv earnout payment




178,785


20,897


Stock-based compensation expense




277,240


91,200


Gain on write-off of liabilities




(251,238)




Loss from investment in Paradise on Wings




-


222,685


Loss on impairment of investment in Paradise on Wings



-


348,143


Gain on sale of investment in Paradise on Wings – related party


(24,000)


-


Gain / (loss) on settlement of litigation




-


(82,642)


Gain on settlement of liabilities




-


(175,449)


Gain on write-off of notes payable




(7,000)


-


Gain on write-off of stock subscriptions payable




(150,000)


-


Other income




(24,756)


(913)









Adjusted net income




$                 388,591


$                 380,790









Adjusted earnings per share – basic and fully diluted:















Net loss per share (as reported)




$                       0.05


$                      (0.12)










Adjusted net income per share




$                       0.06


$                       0.06









Weighted average number of shares 








outstanding – basic and fully diluted




6,817,310


6,608,225

 

Cision View original content:http://www.prnewswire.com/news-releases/arc-group-inc-announces-record-2017-financial-results-300622450.html

SOURCE ARC Group, Inc.

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