Dick's Wings Results

ARC Group, Inc. Announces Record Q1 2018 Financial Results

Dick's Wings

ARC Group, Inc. (OTC: ARCK), the owner, operator and franchisor of the award-winning Dick's Wings & Grill® concept, announced financial results for its first fiscal quarter of 2018 highlighted by record revenue.

The Company achieved the following financial results for its first fiscal quarter of 2018:

  • Revenue increased 14% to $1,246,662 for Q1 2018 from $1,088,796 for Q1 2017.
  • Income from operations was $48,308 during Q1 2018 compared to $210,392 during Q1 2017.
  • Adjusted income from operations, a non-GAAP measure, was $76,364 during Q1 2018 compared to $226,853 during 2016.
  • Net income was $47,614, or $0.01 per share, during Q1 2018 compared to 206,077, or $0.03 per share, during Q1 2017.
  • Adjusted net income, a non-GAAP measure, was $76,364 during Q1 2018 compared to $226,853 during Q1 2017.
  • Adjusted net income per share was $0.01 for Q1 2018 compared to $0.03 for Q1 2017.
  • Cash flows from operations was $96,620 during Q1 2018 compared to 168,446 during Q1 2017.

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".

During Q1 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) which changed the timing of recognition of initial franchise fees as well as the reporting of advertising fund contributions and related expenditures.  ARC Group implemented this guidance using the modified retrospective transition method.  Under this method, the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative period has not been adjusted and continues to be reported under the previous revenue recognition guidance. The adoption. 

"Our Q1 2018 results show continued strength in our business," stated Richard W. Akam, Chief Executive Officer of ARC Group.  "We expect to open additional Dick's Wings restaurants during the remainder of 2018, an are currently evaluating potential acquisitions of multiple leading restaurants brands.  In anticipation of this, we are fortifying our management team and employee base with key hires and will be reorganizing our business to better position us for our upcoming growth.  We are committed to achieving 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."

"As a result of the adoption of ASU 2014-09, we recognized deferred franchise fees in the amount of $196,478 on our balance sheet as of January 1, 2018 and an increase in our accumulated deficit by the same amount on that date," stated Seenu G. Kasturi, Chief Financial Officer of ARC Group.  "The adoption of ASU 2014-09 had the effect of increasing franchise and other revenue from related and unrelated parties by $8,625 for franchise fees and $53,232 for ad fund fees.  The effect of the ad fund fees on our revenue was negated by the recognition of $53,232 for ad fund expenses.  Accordingly, the net effect of ASU 2014-09 on our Q1 2018 operating results was to increase our revenue, income from operations and net income by $8,625."

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.

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 15 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, as well as a concession stand at Jacksonville Veterans Memorial Arena, home of the National Arena League's Jacksonville Sharks.

 

ARC Group, Inc. 

Condensed Consolidated Balance Sheets (Unaudited) 

March 31,

December 31,

2018

2017

Assets

Cash and cash equivalents

$

237,988

$

145,346

Accounts receivable, net

49,818

166,987

Accounts receivable, net – related party

1,640

1,505

Ad funds receivable, net

11,065

36,837

Ad funds receivable, net – related party

2,759

2,280

Inventory

51,802

45,417

Notes receivable, net

22,214

28,522

Deposits

21,458

21,189

Other current assets

12,628

5,923

     Total current assets

411,372

454,006

Notes receivable, net of current portion

4,468

5,106

Property and equipment, net

117,527

99,114

          Total assets

$

533,367

$

558,226

Liabilities and stockholders' deficit

Accounts payable and accrued expenses

$

390,818

$

467,264

Accounts payable and accrued expenses – related party

63,883

94,150

Accrued interest

14,349

13,472

Settlement agreements payable

267,776

264,997

Accrued legal settlement

157,865

155,935

Notes payable – related party

43,551

30,503

Contingent consideration

199,682

199,682

Deferred franchise fees

31,486

-

Other current liabilities

10,881

9,147

     Total current liabilities

1,180,291

1,235,150

Deferred franchise fees, net of current portion

156,367

-

          Total liabilities

1,336,658

1,235,150

Stockholders' equity deficit:

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

      6,974,008 and 6,950,869 shares issued and outstanding at

     March 31, 2018 and December 31, 2017, respectively    

69,740

69,509

Additional paid-in capital

4,031,075

3,995,306

Stock subscriptions payable

13,350

26,853

Accumulated deficit

(4,917,456)

(4,768,592)

     Total stockholders' deficit

(803,291)

(676,924)

          Total liabilities and stockholders' deficit

$

533,367

$

558,226

ARC Group, Inc. 

Condensed Consolidated Statements of Operations (Unaudited) 

For the Three Months Ended 

March 31, 2018

March 31, 2017

Revenue:

Restaurant sales

$

984,775

$

868,476

Franchise and other revenue

233,259

177,302

Franchise and other revenue – related party

28,628

43,018

Total net revenue

1,246,662

1,088,796

Operating expenses:

Restaurant operating costs:

    Cost of sales

270,535

283,006

    Labor

254,539

268,479

    Occupancy

60,459

30,715

    Other operating expenses

212,118

170,052

Professional fees

128,913

25,620

Employee compensation expense

131,205

85,323

General and administrative expenses

140,585

15,209

Total operating expenses

1,198,354

878,404

Income from operations

48,308

210,392

Other expense:

Interest expense

(5,692)

(7,925)

Interest income

298

-

Other income

4,700

3,610

Total other expense

(694)

(4,315)

Net income

$

47,614

$

206,077

Net income per share – basic and fully diluted

$

0.01

$

0.03

Weighted average number of shares 

outstanding – basic and fully diluted

6,980,735

6,647,464

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, 

2018

2017

Income from operations (as reported)

$

48,308

$

210,392

Depreciation expense

5,559

3,146

Stock-based compensation expense

22,497

13,315

Adjusted income from operations

$

76,364

$

226,853

Table 2: Adjusted Net Income and Net Income Per Share

For the Three Months Ended March 31,

2018

2017

Net income (as reported)

$

47,614

$

206,077

Interest expense

5,692

7,925

Interest income

(298)

-

Depreciation expense

5,559

3,146

Stock-based compensation expense

22,497

13,315

Other income

(4,700)

(3,610)

Adjusted net income

$

76,364

$

226,853

Adjusted earnings per share – basic and fully diluted:

Net loss per share (as reported)

$

0.01

$

0.03

Adjusted net income per share

$

0.01

$

0.03

Weighted average number of shares 

outstanding – basic and fully diluted

6,980,735

6,647,464

 



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