ARC Group, Inc. Announces Record 2016 Financial Results

The Company achieved the following financial results for its full 2016 fiscal year:

• Revenue increased 32% to $1,275,448 for 2016 from $966,931 for 2015.
• Royalty revenue increased 23% to $1,004,587 for 2016 compared to $816,619 for 2015.
• Loss from operations was $863,088 during 2016 compared to income from operations of $46,446 during 2015.
• Adjusted income from operations, a non-GAAP measure, was $330,927 during 2016 compared to adjusted income from operations of $105,458 during 2015.
• Net loss was $863,576 during 2016 compared to net loss of $432,730 during 2015.
• Adjusted net income, a non-GAAP measure, was $330,927 during 2016 compared to adjusted net income of $105,458 during 2015.
• Net loss per share was $0.13 during 2016 compared to net loss per share of $0.07 during 2015.
• Adjusted net income per share was $0.05 during 2016 compared to adjusted net income per share of $0.02 during 2015.

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 have delivered another successful year, highlighted by record revenue,” stated Richard W. Akam, Chief Executive Officer of ARC Group.  “This past year was pivotal as we completed the acquisition of Seediv, which owns two of our highest grossing Dick’s Wings & Grill restaurants.  We now have 20 franchised restaurants and two company-owned restaurants, along with our two concession stands at EverBank Field, home of the NFL’s Jacksonville Jaguars.  We expect to have a strong 2017 as our two company-owned restaurants are expected to contribute more than $3.6 million of revenue to our business during the year.”

“During 2016, we incurred one-time, non-cash charges in the aggregate amount of $754,165 in connection with our acquisition of Seediv and recognized a non-cash charge for the full impairment of our investment in Wing Nutz^® in the amount of $348,143,” continued Akam.  “These charges collectively accounted for more than $1.1 million of the $2.1 million in operating expenses that we incurred during the year.  While these charges negatively impacted our financial results during 2016, we do not expect any of these items to impact our financial results going forward.”

Akam added, “We are encouraged by our progress and the strategic work that we performed to better position our Dick’s Wings^® brand and capture market share.  Royalties will continue to be a key component of our revenue, and we have devoted significant time and resources to maximizing the performance of our franchisees.  During 2012, we generated royalties of $22,188 per franchised restaurant.  By comparison, during 2016, we generated aggregate royalties of $47,837 per franchised restaurant, representing an increase of 116% during the past four years.  This improvement is a testament to the work we have performed supporting our franchisees and the terrific job they are doing with the operation of their respective restaurants.”

2016 Business Highlights

The Company’s most notable achievement during 2016 was its acquisition of Seediv, LLC in December.  Seediv is the owner and operator of the Dick’s Wings and Grill restaurant located at 100 Marketside Avenue, Suite 301, in the Nocateedevelopment in Ponte Vedra, Florida and the Dick’s Wings and Grill restaurant located at 6055 Youngerman Circle in Argyle Village in Jacksonville, Florida.  Collectively, these two restaurants generated more than $3.6 million of revenue during 2016.

In addition, the Company opened three new Dick’s Wings & Grill franchised restaurants in the cities of Pensacola and Atlantic Beach, Florida, and Kingsland, Georgia, respectively, and relocated its franchised restaurant located in the Mandarin section of Jacksonville, Florida.  The Company also introduced a new line of craft beers called Dick’s Craft Beers™ in partnership with Ancient City Brewing, a local brewery based in St. Augustine, Florida.

“We intend to maintain a healthy mix of company-owned and franchised restaurants,” stated Akam.  “This will provide us with additional flexibility and financial stability as we continue to grow our company and brand.  Our ownership of restaurants also provides us with the opportunity to make beneficial changes to their operations to further improve their performance.  We can then show our franchisees how to implement these beneficial changes in their restaurants.”

Outlook for 2017

The Company intends to continue executing on its multi-faceted growth strategy during 2017.  The first component of the strategy involves the continued strengthening and expansion of the Company’s legacy Dick’s Wings brand.  The second component involves a heightened effort to identify and acquire controlling and non-controlling financial interests in leading restaurant brands that will offer the Company product and geographic diversification.

“Moving forward, we intend to open additional restaurant locations through low-cost conversions and seek additional acquisition opportunities for premium restaurant brands,” stated Akam.  “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 the 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, stock-based compensation expense and loss on impairment of investment.

“Adjusted net income” means net loss plus interest income, interest expense, depreciation expense, Seediv compensation expense, other Seediv transaction costs, stock-based compensation expense, loss from investment in Paradise on Wings, loss on impairment of investment, gain / (loss) on settlement of litigation, gain on settlement of liabilities, 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 June 27, 2017and 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 20^th 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 “Dicks Craft Beers“.  Dick’s Wings has 17 restaurants in Florida and five restaurants in Georgia.  It also has two concession stands at 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, 2016 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.