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ARC Group, Inc. Reports 71% Increase in Revenue for the Third Quarter of 2019

November 15, 2019
JACKSONVILLE, FL / ACCESSWIRE / November 15, 2019 / ARC Group, Inc. (OTCQB:RLLY), a restaurant holding company with a focus on diversified, full-service restaurants and brands, today provided a business update for the third quarter ended September ...
JACKSONVILLE, FL / ACCESSWIRE / November 15, 2019 / ARC Group, Inc. (OTCQB:RLLY), a restaurant holding company with a focus on diversified, full-service restaurants and brands, today provided a business update for the third quarter ended September ...

JACKSONVILLE, FL / ACCESSWIRE / November 15, 2019 / ARC Group, Inc. (OTCQB:RLLY), a restaurant holding company with a focus on diversified, full-service restaurants and brands, today provided a business update for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights:

A reconciliation of EBITDA 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, “I am pleased to report that our revenue was $4 million for the third quarter of 2019, an increase of 71% over the same period last year which reflects organic growth at Dick’s Wings and sales generated through the Fat Patty’s restaurants that we acquired in August 2018. In addition to our strong top-line growth, we continue to generate positive cash flow from operations. Although our operating expenses increased, this reflects our significant investment in the business to support the next phase of growth, including our recent acquisition of WingHouse.”

“Last month, we announced that we had acquired the WingHouse Bar & Grill® restaurant concept in Florida, providing us with 24 restaurants that generated more than $60.6 million in revenue and $3.5 million of cash flow from operating activities during 2018,” added Alex Andre, CFO and General Counsel of ARC Group. “Importantly, this acquisition increases our combined annualized revenue run rate to over $70 million and will enable us to leverage our franchising, marketing, operational, logistics and financial expertise to drive further sales growth and cash flow across all of our brands. Overall, we believe we have built a highly scalable organization, and as we continue to drive sales, we expect to generate solid margin improvement and improved profitability.”

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 its condensed 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 adjusted loss from operations and EBITDA 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 loss from operations” means loss from operations plus depreciation expense, amortization expense, stock based compensation expense and gain from insurance recoveries on impaired fixed assets.

“EBITDA” means net loss plus depreciation expense, amortization expense and interest expense and income taxes.

For further information, please refer to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2019 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 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 franchise with four company-owned and 16 franchised restaurants located in Florida and Georgia that is now in its 25th year of operations. ARC also owns the Fat Patty’s® concept with four restaurants located in West Virginia and Kentucky, and recently acquired the WingHouse Bar and Grill restaurant concept with 24 company-owned restaurants located in Florida.

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:

Tel: 212-671-1020

(tables to follow)

Condensed Consolidated Balance Sheets

September 30,December 31,
20192018
(Unaudited)

Assets

Cash and cash equivalents

$231,180$345,228

Accounts receivable, net

82,087127,930

Ad funds receivable, net

11,44310,500

Other receivables

579,984556,986

Prepaid expenses

72,68034,582

Inventory

195,123211,025

Notes receivable, net

9,3442,967

Other current assets

16,4148,078

Total current assets

1,198,2551,297,296

Deposits

34,77949,421

Notes receivable, net of current portion

6342,553

Intangible assets, net

783,739786,565

Property and equipment, net

1,524,38012,537,502

Operating lease right-of-use assets

3,582,774-

Financing lease right-of-use assets, net

10,896,130-

Total assets

$18,020,691$14,673,337

Liabilities and stockholders' deficit

Accounts payable and accrued expenses

$2,168,571$1,478,745

Accounts payable and accrued expenses - related party

350,530231,187

Other payables

555,525544,098

Accrued interest

76,26729,105

Settlement agreements payable

284,700276,269

Accrued legal contingency

169,620163,764

Contingent consideration

55,35655,356

Deferred franchise fees

13,09313,718

Operating lease liability

284,059-

Financing lease liability

202,944175,764

Seller payable

312,000312,000

Notes payable - related party, net

770,465720,178

Gift card liabilities

55,99981,956

Total current liabilities

5,299,1294,082,140

Deferred franchise fees, net of current portion

90,17351,516

Operating lease liability, net of current portion

3,351,890-

Financing lease liability net of current portion

11,054,73211,210,146

Total liabilities

19,795,92415,343,802

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

September 30, 2019 and December 31, 2018, respectively

70,80866,801

Series A convertible preferred stock - $0.01 par value: 1,000,000 shares

authorized, 449,581 outstanding at September 30, 2019 and

December 31, 2018, respectively

4,4964,496

Series B convertible preferred stock - $0.01 par value: 2,500,000 shares

authorized, -0- outstanding at September 30, 2019 and

December 31, 2018, respectively

--

Additional paid-in capital

4,635,6524,490,338

Stock subscriptions payable

64,68215,453

Accumulated deficit

(6,550,871)(5,247,553)

Total stockholders' deficit

(1,775,233)(670,465)

Total liabilities and stockholders' deficit

$18,020,691$14,673,337

The accompanying notes are an integral part of these financial statements

Condensed Consolidated Statements of Operations (Unaudited)

For the Three Months Ended For the Nine Months Ended
September 30, 2019September 30, 2018September 30, 2019September 30, 2018

Revenue:

Restaurant sales

$3,803,609$2,104,825$12,150,290$3,871,929

Franchise and other revenue

239,035231,983670,142690,892

Franchise and other revenue - related party

-23,256-100,994

Total revenue

4,042,6442,360,06412,820,4324,663,815

Operating expenses:

Restaurant operating costs:

Cost of sales

1,368,797811,0094,447,1331,360,529

Labor

1,232,549624,8484,103,5571,222,554

Occupancy

117,43657,713432,463171,048

Other operating expenses

844,257381,5272,527,402706,978

Professional fees

52,828366,956443,984614,123

Employee compensation expense

402,008163,512973,944414,924

General and administrative expenses

446,730418,301878,919720,033

Total operating expenses

4,464,6052,823,86613,807,4025,210,189

Loss from operations

(421,961)(463,802)(986,970)(546,374)

Other (loss) / income:

Interest expense

(211,211)(74,258)(615,997)(85,131)

Income from insurance proceeds

--181,588-

Gain on bargain purchase option

-624,952-624,952

Other income

35,65810,575118,06196,103

Total other (loss) / income

(175,553)561,269(316,348)635,924

Net (loss) / income

$(597,514)$97,467$(1,303,318)$89,550

Net (loss) / income per share - basic

$(0.08)$0.01$(0.18)$0.01

Net (loss) / income per share - fully diluted

$(0.08)$0.01$(0.18)$0.01

Weighted average number of shares

outstanding - basic

7,071,9856,524,4277,077,8756,795,644

Weighted average number of shares

outstanding - fully diluted

7,071,9856,554,4277,077,8756,810,809

The accompanying notes are an integral part of these financial statements

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

Table 1: Adjusted Loss From Operations

For the Three Months Ended September 30,For the Nine Months Ended September 30,
2019201820192018

Loss from operations (as reported)

$(421,961)$(463,802)$(986,970)$(546,374)

Depreciation expense

61,85149,481163,83068,688

Amortization of operating lease right-of-use assets

82,501-250,005-

Amortization of financing lease right-of-use assets

145,091-430,545-

Amortization of intangible assets

942-2,826-

Amortization of debt discount

7,8472,59623,2852,596

Stock-based compensation expense

79,226264,377189,849303,503

Gain from insurance recoveries on impaired fixed assets

--(100,000)-

Adjusted loss from operations

$(44,503)$(147,348)$(26,630)$(171,587)

Table 2: EBITDA

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2019201820192018

Net (loss) / income (as reported)

$(597,514)$97,467$(1,303,318)$89,550

Depreciation expense

61,85149,481163,83068,688

Amortization of operating lease right-of-use assets

82,501-250,005-

Amortization of financing lease right-of-use assets

145,091-430,545-

Amortization of intangible assets

942-2,826-

Amortization of debt discount

7,8472,59623,2852,596

Interest expense

211,21174,258615,99785,131

EBITDA

$(88,071)$223,802$183,170$245,965

SOURCE: ARC Group, Inc.

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