10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x Quarterly report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: September 30, 2017

or

¨ Transition report PURSUANT TO Section 13 or 15(d) of the Exchange Act of 1934

For the transition period from ___________ to ______________

Commission File No. 000-54226

 

ARC GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada	59-3649554
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6327-4 Argyle Forest Blvd.

Jacksonville, FL 32244

(Address of principal executive offices)

(904) 741-5500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1394 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x     No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x      No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer (Do not check if a smaller reporting company) ¨	Smaller reporting company x
	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes ¨     No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN

BANKRUPTCY PROCEEDINGS DURING THE

PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ¨     No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were 6,937,869 shares of the issuer’s Class A common stock, $0.01 par value per share, issued and outstanding on November 10, 2017.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets at September 30, 2017 (unaudited) and December 31, 2016	1
	Consolidated Statements of Operations for the three- and nine-month periods ended  September 30, 2017 and September 30, 2016 (unaudited)	2
	Consolidated Statement of Stockholders’ Deficit for the nine-month period ended  September 30, 2017 (unaudited)	3
	Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2017  and September 30, 2016 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 4.	Controls and Procedures	46
PART II – OTHER INFORMATION
Item 2.	Unregistered Sales of Securities and Use of Proceeds	47
Item 6.	Exhibits	47

i 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

ARC Group, Inc.

Consolidated Balance Sheets

	September 30,			December 31,
	2017			2016
	(Unaudited)
Assets
Cash and cash equivalents	$	132,904		$	50,923
Restricted cash and cash equivalents		13,076			-
Accounts receivable, net		48,971			67,395
Accounts receivable, net – related party		3,056			14,568
Ad funds receivable, net		37,093			-
Ad funds receivable, net – related party		2,601			-
Other receivables, net – related party		24,000			-
Inventory		40,867			45,250
Notes receivable, net		37,171			63,742
Interest receivable, net		-			838
Other current assets		16,711			1,806
Total current assets		356,450			244,522
Notes receivable, net of current portion		1,209			29,379
Property and equipment, net		102,101			80,948
Total assets	$	459,760		$	354,849
Liabilities and stockholders' deficit
Accounts payable and accrued expenses	$	703,809		$	735,331
Accounts payable and accrued expenses – related party		46,149			98,434
Accrued interest		12,969			2,594
Ad fund liability		13,076			-
Settlement agreements payable		262,155			253,724
Accrued legal settlement		153,961			148,105
Notes payable – in default		7,000			7,000
Notes payable – related party		26,248			232,572
Contingent consideration		20,897			20,897
Other current liabilities		10,985			5,096
Total current liabilities		1,257,249			1,503,753
Total liabilities		1,257,249			1,503,753
Stockholders' deficit:
Class A common stock – $0.01 par value: 100,000,000 shares authorized, 6,935,119 and 6,647,464 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		69,351			66,475
Additional paid-in capital		3,982,077			3,747,953
Stock subscriptions payable		176,740			150,000
Accumulated deficit		(5,025,657	)		(5,113,332	)
Total stockholders' deficit		(797,489	)		(1,148,904	)
Total liabilities and stockholders' deficit	$	459,760		$	354,849

The accompanying notes are an integral part of these financial statements

1

ARC Group, Inc.

Consolidated Statements of Operations (Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Revenue:
Restaurant sales	$	841,214		$	-		$	2,595,679		$	-
Franchise and other revenue		165,905			174,499			509,032			476,831
Franchise and other revenue – related party		40,285			9,092			123,343			314,576
Total net revenue		1,047,404			183,591			3,228,054			791,407
Operating expenses:
Restaurant operating costs:
Cost of sales		274,846			-			869,600			-
Labor		293,035			-			857,933			-
Occupancy		92,729			-			187,264			-
Other operating expenses		198,354			-			555,664			-
Professional fees		67,975			52,550			351,185			121,450
Employee compensation expense		91,033			140,600			250,626			390,582
General and administrative expenses		50,991			268,559			82,437			316,124
Total operating expenses		1,068,963			461,709			3,154,709			828,156
Income / (loss) from operations		(21,559	)		(278,118	)		73,345			(36,749	)
Other income:
Interest income / (expense)		(6,506	)		(2,622	)		(22,730	)		293
Income from investment in Paradise on Wings		-			101,056			-			106,082
Gain on settlement of liabilities		-			175,449			-			175,449
Gain on sale of investment in Paradise on Wings – related party		24,000			-			24,000			-
Other income		3,976			-			13,060			864
Total other income		21,470			273,883			14,330			282,688
Net income / (loss)	$	(89	)	$	(4,235	)	$	87,675		$	245,939
Net income / (loss) per share – basic and fully diluted	$	(0.00	)	$	(0.00	)	$	0.01		$	0.04
Weighted average number of shares  outstanding – basic and fully diluted		6,773,041			6,612,983			6,768,839			6,599,357

The accompanying notes are an integral part of these financial statements

2

ARC Group, Inc.

Consolidated Statement of Stockholders' Deficit (Unaudited)

					Additional		Stock
	Common Stock				Paid-in		Subscriptions		Accumulated
	Shares		Par Value		Capital		Payable		Deficit			Total
Balance at December 31, 2016		6,647,464	$	66,475	$	3,747,953	$	150,000	$	(5,113,332	)	$	(1,148,904	)
Common stock issued for services		252,360		2,523		204,477		26,740		-			233,740
Common stock issued for payment of consulting  fees due		35,295		353		29,647		-		-			30,000
Net income		-		-		-		-		87,675			87,675
Balance at September 30, 2017		6,935,119	$	69,351	$	3,982,077	$	176,740	$	(5,025,657	)	$	(797,489	)

The accompanying notes are an integral part of these financial statements

3

ARC Group, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	For the Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net income	$	87,675		$	245,939
Adjustments to reconcile net income to net cash  provided by operating activities:
Depreciation expense		11,902			-
Stock-based compensation expense		233,740			37,295
Stock-based payment for consulting fees due		30,000			-
Bad debt expense		-			271,590
Income from investment in Paradise on Wings		-			(106,082	)
Gain on sale of investment in Paradise on Wings – related party		(24,000	)		-
Gain on settlement of liabilities		-			(175,449	)
Changes in operating assets and liabilities:
Restricted cash		(13,076	)		-
Accounts receivable		18,424			(36,858	)
Accounts receivable – related party		11,512			(28,332	)
Ad fund receivable		(37,093	)		-
Ad fund receivable – related party		(2,601	)		-
Other receivables		(24,000	)		-
Inventory		4,383			-
Interest receivable		838			11,380
Other assets		(14,905	)		(28,841	)
Accounts payable and accrued liabilities		(31,522	)		63,579
Accounts payable and accrued liabilities – related party		(41,910	)		(23,023	)
Advertising fund liabilities		13,076			-
Settlement agreements payable		8,431			(6,401	)
Accrued legal settlement		5,856			-
Other liabilities		5,889			2,075
Net cash provided by operating activities		242,619			226,872
Cash flows from investing activities
Issuance of notes receivable		-			(74,593	)
Repayments of notes receivable		54,741			-
Issuance of notes receivable – related party		-			(595,635	)
Repayments of notes receivable – related party		-			445,683
Sale of investment in Paradise on Wings		24,000			-
Purchases of fixed assets		(33,055	)		-
Net cash provided / (used) by investing activities		45,686			(224,545	)
Cash flows from financing activities
Proceeds from issuance of notes payable – related party		-			783,323
Repayments of notes payable – related party		(206,324	)		(783,323	)
Net cash used by financing activities		(206,324	)		-
Net decrease in cash and cash equivalents		81,981			2,327
Cash and cash equivalents, beginning of period		50,923			6,775
Cash and cash equivalents, end of period	$	132,904		$	9,102
Supplemental disclosure of cash flow information
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-
Schedule of non-cash financing activities
Stock issued for settlement of litigation	$	-		$	19,551

The accompanying notes are an integral part of these financial statements

4

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Description of Business

ARC Group, Inc., a Nevada corporation (the “Company”), was incorporated in April 2000. The Company’s business is focused on the development of the Dick’s Wings^® franchise and the acquisition of financial interests in other restaurant brands. The Dick’s Wings concept is currently comprised of traditional restaurants like its Dick’s Wings & Grill^® restaurants and non-traditional units like the Dick’s Wings concession stands that the Company has at EverBank Field in Jacksonville, Florida.

On December 19, 2016, the Company acquired all of the issued and outstanding membership interests of Seediv, LLC, a Louisiana limited liability company (“Seediv”), for $600,000 and an earn-out payment. Seediv is the owner and operator of the Dick’s Wings & Grill restaurant located at 100 Marketside Avenue, Suite 301, in the Nocatee development in Ponte Vedra, Florida 32081 (the “Nocatee Restaurant”) and the Dick’s Wings & Grill restaurant located at 6055 Youngerman Circle in Argyle Village in Jacksonville, Florida 32244 (the “Youngerman Circle Restaurant”; together with the Nocatee Restaurant, the “Nocatee and Youngerman Restaurants”). A description of the Company’s acquisition of Seediv is set forth herein under Note 5 – Acquisition of Seediv.

At September 30, 2017, the Company had 22 restaurants and two concession stands. Of the 22 restaurants, 17 were located in Florida and five were located in Georgia. The Company’s concession stands were also located in Florida. Two of the Company’s restaurants were owned by the Company, and the remaining 20 restaurants were owned and operated by franchisees. The operation of the Company’s concession stands at EverBank Field has been assigned to a third-party operator.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Seediv, LLC. All intercompany accounts and transactions were eliminated in consolidation. 

The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the disclosures included in these financial statements are adequate to make the information presented not misleading.

5

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in management’s opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K/A. The results of operations for the three- and nine-month periods ended September 30, 2017 are not necessarily indicative of the results that the Company will have for any subsequent quarter or full fiscal year.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the Company’s financial statements for the 2016 fiscal year have been reclassified to conform to the 2017 fiscal year presentation. These reclassifications did not result in any change to the previously reported total assets, net income / (loss) or stockholders’ deficit.

Going Concern 

As shown in the accompanying financial statements, the Company had an accumulated deficit of $5,025,657 and a working capital deficit of $900,799 at September 30, 2017. In addition, the Company incurred net losses of $863,576 and $432,730 for the years ended December 31, 2016 and 2015, respectively, and experienced negative cash flows from operations for each of those years. Those facts create substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon it successfully executing upon its plan to generate positive cash flows during the remainder of its 2017 fiscal year and during its 2018 fiscal year. In furtherance of this plan, the Company is seeking to increase sales and reduce expenses at its company-owned restaurants, increase the number of franchised restaurants that it has, and acquire additional brands that can contribute profits and positive cash flows to the Company. The Company’s financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

Segment Disclosure

The Company has a single brand, all of the restaurants of which operate in the full-service casual dining industry in the United States. Pursuant to the standards of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting (“ASC 280”), the Company’s Chief Executive Officer and President, who comprise the Company's Chief Operating Decision Maker function for the purposes of ASC 280, concluded that the Company operates as a single segment for reporting purposes.

6

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Revenue Recognition

The Company’s revenue consists primarily of proceeds from the sale of food and beverage products at its Company-owned restaurants, and royalty payments, franchise fees and area development fees that it receives from its franchisees. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed and determinable, and collectability is reasonably assured in accordance with ASC Topic 605, Revenue Recognition. The Company records revenue from the sale of food and beverages as products are sold. Royalties are accrued as earned and are calculated each period based on restaurant sales. Franchise fees from individual franchise sales is recognized upon the opening of the franchised restaurant when all material obligations and initial services to be provided by the Company have been performed. Area development fees are dependent upon the number of restaurants in the territory, as are the Company’s obligations under the area development agreement. Consequently, as obligations are met, area development fees are recognized proportionally with expenses incurred with the opening of each new restaurant and any royalty-free periods.

The Company records gift cards under a Dick’s Wings system-wide program.  Gift cards sold are recorded as a gift card liability.  When redeemed, the gift card liability account is offset by recording the transaction as revenue.  Breakage income represents the value associated with the portion of gift cards sold that will most likely never be redeemed. Based on the Company’s historical gift card redemption patterns and the fact that the Company’s gift cards have no expiration dates or dormancy fees, the Company can reasonably estimate the amount of gift card balances for which redemption is remote and record breakage income based on this estimate. The Company updates its estimate of the breakage rate periodically and, if necessary, adjusts the gift card liability balance accordingly.

General Advertising Fund

The Company has established a general advertising fund that it uses to pay for advertising costs, sales promotions, market research and other support functions intended to maximize general public recognition and acceptance of the Dick’s Wings brand. Company-owned and franchised restaurants are required to contribute at least 1%, but not more than 2%, of their gross revenue to the Company’s general advertising fund. Contributions made by franchisees to the general advertising fund and marketing and advertising expenses paid by the general advertising fund are not recognized as revenues and expenses. They instead constitute agency transactions. These contributions are recorded as a liability against which specific costs are charged.

We account for the cash and cash equivalents held by the general advertising fund as restricted cash on our accompanying consolidated balance sheets. The restricted cash of this fund is classified as current as it is expected to be utilized to fund short-term obligations of the general advertising fund.

7

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Significant Accounting Policies

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”). ASU 2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 introduces a five-step model to achieve its core principle of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016. Early adoption is not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers – Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred by one year the effective date of ASU 2014-09 by making ASU 2014-09 effective for annual reporting periods beginning after December 15, 2017, including interim period within that reporting period. The Company believes that the adoption of ASU 2014-09 will not have a material impact on its financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding on certain principles that are currently in U.S. auditing standards. Specifically, ASU 2014-15: (i) provides a definition of the term “substantial doubt”, (ii) requires an evaluation every reporting period including interim periods, (iii) provides principles for considering the mitigating effects of management’s plans, (iv) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (v) requires an express statement and other disclosures when substantial doubt is not alleviated, and (vi) requires an assessment for a period of one year after the date that the financial statements are issued or available to be issued. ASU 2014-15 is effective for fiscal years ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 did not have a material impact on the Company’s financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), which changes the subsequent measurement of inventory from lower of cost or market to lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2015-11 did not have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires that lease arrangements longer than 12 months result in the lessee recognizing a lease asset and liability. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (“ASU 2016-18”). ASU 2016-18 provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact of ASU 2016-18, but believes that ASU 2016-18 will not have a material impact on the Company’s financial statements.

8

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is considered a business. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for certain transactions. The Company is currently assessing the impact that ASU 2017-01will have on its financial statements.

The Company reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations or that no material effect is expected on the Company’s financial statements as a result of future adoption.

Note 3. Net Income / (Loss) Per Share

The Company calculates basic and diluted net income / (loss) per share in accordance with ASC Topic 260, Earnings per Share. Basic net income / (loss) per share is based on the weighted-average number of shares of the Company’s common stock outstanding during the applicable period, and is calculated by dividing the reported net income / (loss) for the applicable period by the weighted-average number of shares of common stock outstanding during the applicable period. Diluted net income / (loss) per share is calculated by dividing the reported net income / (loss) for the applicable period by the weighted-average number of shares of common stock outstanding during the applicable period, as adjusted to give effect to the exercise or conversion of all potentially dilutive securities outstanding at the end of the applicable period.

The Company did not have any securities outstanding at September 30, 2017 and 2016 that were exercisable or convertible into shares of the Company’s common stock. As a result, basic net income / (loss) per share was equal to diluted net income / (loss) per share for the three- and nine-month periods ended September 30, 2017 and 2016.

Note 4. Investment in Paradise on Wings

On January 20, 2014, the Company entered into a contribution agreement with Paradise on Wings. In connection with the execution of the contribution agreement, on January 20, 2014, the Company and the incumbent members of Paradise on Wings entered into an amended and restated operating agreement of Paradise on Wings to reflect the terms of the contribution agreement. The transactions contemplated by the contribution agreement and operating agreement were completed on January 20, 2014.

Under the terms of the contribution agreement, the Company (sometimes referred to herein as the “Class B Member”) acquired 117.65 Class B membership interests in Paradise on Wings, representing all of the outstanding Class B membership interests and a 50% ownership interest in Paradise on Wings (the “Class B Membership Interests”). The incumbent members of Paradise on Wings (the “Class A Members”) converted their existing membership interests into a total of 117.65 Class A membership interests in Paradise on Wings, representing all of the outstanding Class A membership interests and a 50% ownership interest in Paradise on Wings (the “Class A Membership Interests”).

9

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company agreed to pay $400,000 in cash, of which $350,000 was paid prior to closing and $50,000 was due upon closing, and $400,000 in shares of the Company’s common stock to Paradise on Wings in consideration for the Class B Membership Interests (the “Capital Contribution”). The shares of common stock (the “ARC Shares”) were valued based upon the opening bid price of the common stock on the OTCmarkets.com on the morning of the closing date, which was $1.70 per share. Accordingly, the Company issued 235,295 shares of common stock to Paradise on Wings on the closing date.

Under the operating agreement, the power to manage the business and affairs of Paradise on Wings has been vested in the managers of Paradise on Wings. The Class A Members may appoint up to two managers, which manager(s) have a total of 50% of the vote of all managers. The Company, as the owner of all of the Class B Membership Interests, may appoint one manager who has a total of 50% of the vote of all managers. Notwithstanding the foregoing, the Contributed Capital may not be used to pay salaries or bonuses to any of the Class A Members or Class B Members, and the vote of 60% of the total outstanding Class A Membership Interests and Class B Membership Interests is required in the event Paradise on Wings wishes to use the Contributed Capital for any permitted purpose.

The Class A Membership Interests are identical to the Class B Membership Interests in all respects except that the Class A Membership Interests have a preferred right to distributions from Paradise on Wings with respect to the ARC Shares. The Class A Members, through their ownership of the Class A Membership Interests, are entitled to receive a total of 50% of all items of income, gain, losses, deductions and expenses (including 100% of any such items associated with the ARC Shares), and the Company, through its ownership of the Class B Membership Interests, was entitled to receive 50% of all items of income, gain, losses, deductions and expenses (with the exception of any such items associated with the ARC Shares).

The Company accounted for its 50% ownership interest in Paradise on Wings using the equity method of accounting because the Company had the ability to exert significant influence, but not control, over the operating and financial policies of Paradise on Wings.   The investment was initially recorded at the fair value amount of the Company’s initial investment and subsequently adjusted for the Company’s share of the net income and loss, and cash contributions and distributions, to or from Paradise on Wings.  The Company reported its income from Paradise on Wings as income from investment in Paradise on Wings in its statements of operations, and reported its investment in Paradise on Wings as equity investment in Paradise on Wings in its balance sheets.

Set forth below is a summary of the unaudited income statement of Paradise on Wings for the three- and nine-month periods ended September 30, 2017 and 2016 provided to the Company by Paradise on Wings.

10

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Statement of Operations	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenue	$	74,831		$	226,273		$	91,658		$	251,421
Operating expenses		(234,525	)		(484,436	)		(124,841	)		(256,325	)
Loss from operations		(159,694	)		(258,163	)		(33,183	)		(4,904	)
Other income / (expense)		(104,203	)		(182,398	)		235,295			217,067
Net income / (loss)	$	(263,897	)	$	(440,561	)	$	202,112		$	212,163
Company’s share of net income / (loss)	$	(131,949	)	$	(220,281	)	$	101,056		$	106,082

Set forth below is a summary of the unaudited balance sheet of Paradise on Wings at September 30, 2017 and December 31, 2016 provided to the Company by Paradise on Wings.

Balance Sheet	September 30, 2017		December 31, 2016
Current assets	$	119,837	$	3,549
Equity investment		-0-		141,168
Total assets	$	119,837	$	144,717
Total liabilities	$	110,120	$	110,596
Equity		9,717		34,121
Total liabilities and equity	$	119,837	$	144,717

The Company performed a review of its investment in Paradise on Wings at the end of its 2016 fiscal year and determined that, for the reasons more fully described in Note 8. Fair Value Measurements, an “other-than-temporary” decline in the value of the investment had occurred and that a loss on impairment equal to its then carrying amount of $348,143 should be recognized. Accordingly, the carrying amount of the Company’s investment in Paradise on Wings was zero at September 30, 2017 and December 31, 2016. In addition, because the carrying amount of the Company’s investment in Paradise on Wings was zero at September 30, 2017, the amount of the Company’s share of net loss incurred by Paradise on Wings that was recognized by the Company during the three- and nine-month periods ended September 30, 2017 was zero.

On September 30, 2017, the Company sold its 50% ownership interest in Paradise on Wings to Seenu G. Kasturi for $24,000. The purchase price of $24,000 was reflected in Other Receivables, Net – Related Party and Gain on Sale of Investment in Paradise on Wings – Related Party at September 30, 2017. Mr. Kasturi paid the purchase price in full subsequent to September 30, 2017.

11

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 5. Acquisition of Seediv

On December 19, 2016, the Company entered into a membership interest purchase agreement with Seenu G. Kasturi pursuant to which the Company agreed to acquire all of the issued and outstanding membership interests of Seediv from Mr. Kasturi. Seediv is the owner and operator of the Nocatee and Youngerman Restaurants. The closing of the acquisition occurred simultaneously with the execution of the membership interest purchase agreement by the Company and Mr. Kasturi on December 19, 2016.

The Company agreed to pay Mr. Kasturi $600,000 for the membership interests on the closing date, consisting of: (a) a cash payment of $13,665, (b) the cancellation and termination of accounts receivable originally owed to the Company by DWG Acquisitions, LLC, a Louisiana limited liability company (“DWG Acquisitions”), and subsequently transferred to Seediv, in the amount of $259,123, and (c) the cancellation and termination of debt originally owed to the Company by Raceland QSR, LLC, a Louisiana limited liability company (“Raceland QSR”), and subsequently transferred to Seediv, in the amount of $327,212. The Company also agreed to pay Mr. Kasturi an earn-out payment (the “Earn-Out Payment”) calculated as follows: (x) the amount equal to: (i) 5.5, multiplied by (ii) the amount equal to the sum of: (A) earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the Nocatee Restaurant for the year ended December 31, 2017 (the “Earn-Out Period”), plus (B) EBITDA for the Youngerman Circle Restaurant for the Earn-Out Period, less (y) $600,000; provided, however, that in no event shall the Earn-Out Payment be less than zero.

At any time on or prior to April 16, 2018, Mr. Kasturi may elect to receive all or part of the Earn-Out Payment in the form of shares of the Company’s common stock; provided, however, that Mr. Kasturi may only make this election if, at the time of making such election: (a) Mr. Kasturi is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), and (b) Mr. Kasturi executes a customary investment representation letter in a form acceptable to the Company. In the event Mr. Kasturi elects to receive shares of common stock, the number of shares will be calculated based on the average daily closing price of the shares of common stock on the OTCQB market tier of the “pink sheets” maintained by the OTC Markets Group, Inc. (the “OTCQB”) during the 30-day period immediately preceding the closing date. The shares will be “restricted securities” as such term is defined under Rule 144 of the Securities Act. Notwithstanding the foregoing: (x) in no event shall the Company be required to issue shares of common stock exceeding 20% of the number of shares of common stock issued and outstanding on the closing date, and (y) in no event shall the Company be required to issue more shares of common stock to Mr. Kasturi than are then authorized and available for issuance by the Company. In the event Mr. Kasturi elects to receive all or part of the Earn-Out Payment in the form of shares of common stock and the restrictions set forth in clauses (x) and/or (y) of the immediately preceding sentence are triggered, then, notwithstanding Mr. Kasturi’s election to receive all or part of the Earn-Out Payment in the form of shares of common stock, the Company shall issue the maximum number of shares of common stock permitted under clauses (x) and (y) and shall settle any liability to Mr. Kasturi created as a result thereof in cash.

12

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

As of December 19, 2016, Mr. Kasturi owned approximately 14.8% of the Company’s issued and outstanding shares of Common Stock and all of the outstanding membership interests in Seediv. In addition, as of December 19, 2016, he served as the President, Treasurer and Secretary, and as the sole member of the board of directors, of Blue Victory Holdings, Inc., a Nevada corporation (“Blue Victory”), and owned 90% of the equity interests in Blue Victory. Blue Victory loaned the Company $840,353 and $1,987,953 during the years ended December 31, 2016 and 2015, respectively. As of December 19, 2016, Mr. Kasturi also served as the President, Treasurer and Secretary of, and is the sole member of, DWG Acquisitions and Raceland QSR, and owned all of the equity interests in DWG Acquisitions and Raceland QSR. DWG Acquisitions owned and operated six of the Company’s 22 franchised restaurants as of December 19, 2016. Raceland QSR served as the landlord under the Company’s lease for the Youngerman Circle Restaurant as of December 19, 2016.

The acquisition was accounted for as a business combination. Based upon its analysis of the above facts, the Company determined that the acquisition of Seediv was a related-party transaction. Accordingly, the assets acquired and liabilities assumed were recorded based on their cost basis at the time of the acquisition and the excess of the purchase price over the aggregate cost basis of the net assets acquired was allocated to Seediv compensation expense.

The assets acquired and liabilities assumed were comprised of the following:

Cash and cash equivalents	$	18,089
Inventory		40,574
Other current assets		6,538
Leasehold improvements, net		46,541
Furniture and equipment, net		33,701
Total assets acquired		145,443
Accounts payable – related party		(1,026	)
Accrued expenses		(126,878	)
Notes payable – related party		(234,286	)
Total liabilities assumed		(362,190	)
Seediv compensation expense		251,309
Net consideration paid	$	34,562

In connection with the acquisition of Seediv, the Company recorded $20,897 of contingent consideration as the estimated initial fair value of the Earnout Payment. A description of the manner by which the Earnout Payment was valued is set forth herein under Note 8. Fair Value Measurements.

13

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes certain financial information for the three- and nine-month periods ended September 30, 2017 contained in the accompanying unaudited consolidated financial statements, and certain unaudited pro forma financial information for the three- and nine-month periods ended September 30, 2016 as if the acquisition of Seediv had occurred on January 1, 2016:

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017		Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenue	$	1,047,404		$	3,228,054	$	1,089,081		$	3,546,474
Income / (loss) from continuing operations		(21,559	)		73,345		(358,656	)		(84,279	)
Net income / (loss)		(89	)		87,675		(74,514	)		198,398
Net income / (loss) per share – basic and fully diluted	$	(0.00	)	$	0.01	$	(0.01	)	$	0.03

The results of operations for Seediv were included in the Company's results of operations beginning December 19, 2016. The actual amounts of revenue and net income / (loss) for Seediv that are included in the Company’s Consolidated Statements of Operations for the three-month period ended September 30, 2017 were $841,214 and $(44,108), respectively, and for the nine-month period ended September 30, 2017 were $2,595,679 and $80,661, respectively.

The unaudited pro forma financial information has been presented for informational purposes only and is not necessarily indicative of the actual results that would have occurred had the acquisition been consummated on January 1, 2016 or of the future results of the combined entities. For additional information about the Company’s acquisition of Seediv, please refer to the Company’s Current Report on Form 8-K and Current Report on Form 8-K/A filed with the Securities and Exchange Commission on December 23, 2016 and April 28, 2017, respectively.

Note 6. Inventory

Inventory was comprised of the following at September 30, 2017 and December 31, 2016, respectively:

	September 30, 2017		December 31, 2016
Food	$	28,369	$	25,942
Beverages		12,498		19,308
Total	$	40,867	$	45,250

14

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 7. Property and Equipment, Net

Property and equipment were comprised of the following at September 30, 2017 and December 31, 2016, respectively:

	September 30, 2017			December 31, 2016
Leasehold improvements	$	68,346		$	62,125
Furniture, fixtures and equipment		82,154			50,140
Subtotal		150,500			112,265
Less: accumulated depreciation		(48,399	)		(31,317	)
Total	$	102,101		$	80,948

Depreciation expense was $4,571 and $11,902 for the three- and nine-month periods ended September 30, 2017. The Company did not incur any depreciation expense for the three- and nine-month periods ended September 30, 2016.

Note 8. Fair Value Measurements

On January 20, 2014, the Company purchased a 50% ownership interest in Paradise on Wings. On December 19, 2016, the Company acquired all of the issued and outstanding membership interests of Seediv. A description of the investment in Paradise on Wings and the acquisition of Seediv is set forth herein under Note 4. Investment in Paradise on Wings and Note 5. Acquisition of Seediv, respectively.

The Company performed a review of its investment in Paradise on Wings at the end of its 2016 fiscal year to determine whether an impairment must be recorded. As described more fully in Note 4. Investment in Paradise on Wings, Paradise on Wings incurred losses of $445,370 and $495,435 during the years ended December 31, 2016 and 2015, respectively. As a result of these recurring operating losses and other quantitative and qualitative factors and circumstances surrounding the investment, including prices for comparable businesses and those factors and circumstances more fully described in Note 2. Significant Account Policies – Investment in Paradise on Wings, the Company determined that an “other-than-temporary” decline in the value of the investment had occurred and that a loss on impairment equal to its then carrying amount of $348,143 should be recognized. In addition, because Paradise on Wings incurred losses of $263,897 and $440,561 during the three- and nine-month periods ended September 30, 2017, the carrying amount of the Company’s investment in Paradise on Wings remained unchanged at September 30, 2017. Accordingly, the carrying amount of the Company’s investment in Paradise on Wings was zero at September 30, 2017 and December 31, 2016. On September 30, 2017, the Company sold its 50% ownership interest in Paradise on Wings to Seenu G. Kasturi for $24,000.

In connection with the acquisition of Seediv, the Company agreed to pay contingent consideration in the form of an earn-out payment. The Company determined that the fair value of the liability for the contingent consideration was estimated to be $20,897 at the acquisition date. The fair value of this liability did not change from the initial valuation calculated on the acquisition date.

The Company determined the fair value of the contingent consideration based on a probability-weighted approach derived from earn-out criteria estimates and a probability assessment with respect to the likelihood of achieving the earn-out criteria. The measurement was based upon significant inputs not observable in the market, including internal projections and an analysis of the target markets. The resultant probability-weighted contingent consideration was discounted using a discount rate based upon the weighted-average cost of capital.

15

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

At each reporting date, the Company revalues the contingent consideration to the reporting date fair value and records increases and decreases in the fair value as income or expense under general and administrative expenses in the Company’s Consolidated Statements of Operations. Increases or decreases in the fair value of the contingent consideration may result from, among other things, changes in discount periods and rates, changes in the timing and amount of earn-out criteria, and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

The following table presents the contingent consideration recorded by the Company in connection with the acquisition of Seediv within the fair value hierarchy utilized to measure fair value on a recurring basis at September 30, 2017 and December 31, 2016, respectively:

	Level 1		Level 2		Level 3
Contingent consideration:
September 30, 2017	$	-0-	$	-0-	$	20,897
December 31, 2016	$	-0-	$	-0-	$	20,897

The fair value measurement of the contingent consideration represented a Level 3 fair value measurement because it was based on significant inputs not observed in the market. The Company’s other financial instruments consist of cash and cash equivalents, accounts, ad fund and other receivables, notes receivable, accounts payable, accrued expenses and notes payable. The estimated fair values of the cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates their respective carrying amounts due to the short-term maturities of these instruments. The estimated fair values of the notes receivable and notes payable also approximates their respective carrying amounts since their terms are similar to those in the lending market for comparable loans with comparable risks. The fair value of related-party transactions is not determinable due to their related-party nature. None of these instruments are held for trading purposes.

Note 9. Notes Receivable

Notes Receivable – Unrelated Parties

In May and June 2013, the Company made loans to certain of its franchisees in the aggregate original principal amount of $40,507 to assist them with the payment of franchise fees owed to the Company and the payment of other business expenses incurred by the franchisees in running their respective restaurants. The loans were for terms ranging from one year to three years in duration, were payable in monthly installments, and did not require the payment of any interest. Payments in the aggregate amount of $723 and $2,170 were made against the loans during the three- and nine-month periods ended September 30, 2016. The loans were paid off in full during the year ended December 31, 2016. Accordingly, no payments were made against the loans during the three- and nine-month periods ended September 30, 2017, and no principal was outstanding under the loans at September 30, 2017 and December 31, 2016.

16

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In September 2014, the Company made a loan to one of its franchisees in the aggregate original principal amount of $6,329 to assist it with the payment of franchise fees owed to the Company and the payment of other business expenses incurred by the franchisee in running its restaurant. The loan is for a term of three years, is payable in monthly installments, and does not require the payment of any interest. Payments in the aggregate amount of $527 and $1,582 were made against the loan during the three- and nine-month periods ended September 30, 2017, respectively, and the three- and nine-month periods ended September 30, 2016, respectively. A total of $201 and $1,783 of principal was outstanding under the loan at September 30, 2017 and December 31, 2016, respectively.

In June 2016, the Company made a loan to one of its franchisees under a promissory note in the aggregate original principal amount of $25,000. In July 2016, the Company made an additional loan to the same franchisee under a line of credit agreement for an aggregate original principal amount of up to $28,136. In September 2016, the Company made an additional loan to the same franchisee under a second line of credit agreement for an aggregate original principal amount of up to $25,000. Each of the loans was made to assist the franchisee with the payment of franchise fees owed to the Company and the payment of other business expenses incurred by the franchisee in running its restaurant. The loan under the promissory note is for a term of two years, is payable in monthly installments beginning January 1, 2017, and accrues interest at a rate of 5% per annum beginning September 1, 2016. The loan under the $28,136 line of credit agreement was for a term of two years, was payable in monthly installments beginning January 1, 2017, and did not require the payment of any interest. The loan under the $28,136 line of credit agreement was paid off in full during the nine-month period ended September 30, 2017. The loan under the $25,000 line of credit agreement is for a term of two years, is payable in monthly installments beginning January 1, 2017 and accrues interest at a rate of 5% per annum beginning October 1, 2016. Payments in the aggregate amount of $6,155 and $48,098 were made against the loans during the three- and nine-month periods ended September 30, 2017. Interest in the aggregate amount of $425 and $1,515 accrued during the three- and nine-month periods ended September 30, 2017, and payments of interest in the aggregate amount of $425 and $2,354 were made during the three- and nine-month periods ended September 30, 2017. Interest in the aggregate amount of $310 accrued during the three- and nine-month periods ended September 30, 2016. No payments of principal or interest were made against any of the loans during the three- and nine-month periods ended September 30, 2016. A total of $29,922 and $78,020 of principal was outstanding under the loans at September 30, 2017 and December 31, 2016, respectively, and a total of $838 of accrued interest was outstanding under the loans at December 31, 2016. No accrued interest was outstanding under the loans at September 30, 2017.

In September 2016, the Company made a loan to one of its franchisees in the aggregate original principal amount of $13,869 to assist it with the payment of business expenses incurred by the franchisee in running its restaurant. The loan is due and payable in full on November 15, 2018, is payable in monthly installments beginning December 15, 2016, and accrues interest at a rate of 5% per annum beginning October 1, 2016. Payments in the amount of $2,272 and $5,060 were made against the loan during the three- and nine-month periods ended September 30, 2017. Interest in the amount of $117 and $416 accrued during the three- and nine-month periods ended September 30, 2017, respectively, of which $161 and $416 was paid during the three-and nine-month periods ended September 30, 2017, respectively. No interest accrued during the three- and nine-month periods ended September 30, 2016, and no payments of principal or interest were made against any of the loans during the three- and nine-month periods ended September 30, 2016. A total of $8,258 and $13,318 of principal was outstanding under the loan at September 30, 2017 and December 31, 2016, respectively. No accrued interest was outstanding under the loan at September 30, 2017 and December 31, 2016.

17

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The carrying value of the Company’s outstanding notes receivable was $38,380 and $93,121 at September 30, 2017 and December 31, 2016, respectively, all of which was due from unrelated third parties. The Company had interest receivable of $838 outstanding at December 31, 2016. The Company did not have any interest receivable outstanding at September 30, 2017. The Company generated interest income of $543 and $1,931 during the three- and nine-month periods ended September 30, 2017, and generated interest income of $310 during the three- and nine-month periods ended September 30, 2016.

Notes Receivable – Related Parties

During the year ended December 31, 2015, the Company loaned a total of $121,638 to Raceland QSR. The Company loaned an additional $595,635 to Raceland QSR during the nine-month period ended September 30, 2016, of which $445,683 was repaid to the Company during the nine-month period ended September 30, 2016. The Company loaned an additional $6,341 to Raceland QSR during the remainder of the year ended December 31, 2016. The loan accrued interest at a rate of 6% per year and was payable on demand. Raceland QSR did not make any interest payments under the loan during the year ended December 31, 2016. All accrued but unpaid interest was written off during the year ended December 31, 2016. During the three- and nine-month periods ended September 30, 2016, the Company recorded an allowance for uncollectible notes receivable of $271,590. Raceland QSR subsequently transferred the outstanding balance of the note receivable to Seediv in December 2016, and the outstanding balance of the loan was repaid in full on December 19, 2016 when the Company acquired Seediv. Accordingly, no principal was outstanding under the loan at September 30, 2017 and December 31, 2016. A description of the acquisition of Seediv by the Company is set forth herein under Note 5. Acquisition of Seediv.

Note 10. Debt Obligations

During the fourth quarter of 2008, the Company issued promissory notes to four investors for a total original principal amount of $11,000 in return for aggregate cash proceeds of $11,000. The notes bear interest at a rate of 6% per annum and provide for the payment of all principal and interest three years after the date of the respective notes. The notes provide for the payment of a penalty in an amount equal to 10% of the principal amount of the notes in the event they are not paid by the end of the term. In April 2015, the Company repaid notes to two of these investors representing a total original principal amount of $4,000. As a result, a total original principal balance of $7,000 was outstanding under the two remaining notes at September 30, 2017 and December 31, 2016. These notes are currently in default.

On September 13, 2013, the Company entered into a loan agreement with Blue Victory pursuant to which Blue Victory agreed to extend a revolving line of credit facility to the Company for up to $1 million. Under the terms of the loan agreement, Blue Victory agreed to make loans to the Company in such amounts as the Company may request from time to time, provided that the total amount of loans requested in any calendar month may not exceed $150,000. All loan requests are subject to approval by Blue Victory. The Company may use the proceeds from the credit facility for general working capital purposes.

18

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The credit facility is unsecured, accrues interest at a rate of 6% per annum, and will terminate upon the earlier to occur of the fifth anniversary of the loan agreement or the occurrence of an event of default. The outstanding principal balance of the credit facility and any accrued and unpaid interest thereon are payable in full on the termination date. Loans may be prepaid by the Company without penalty and borrowed again at any time prior to the termination date. The obligation of the Company to pay the outstanding balance of the credit facility is evidenced by a promissory note that was issued by the Company to Blue Victory on September 13, 2013.

Blue Victory has the right, at any time on or after September 13, 2013, to convert all or any portion of the outstanding principal of the credit facility, together with accrued interest payable thereon, into shares of the Company’s common stock at a conversion rate equal to: (i) the closing price of the common stock on the date immediately preceding the conversion date if the common stock is then listed on the OTCQB or a national securities exchange, (ii) the average of the most recent bid and ask prices on the date immediately preceding the conversion date if the common stock is then listed on any of the tiers of the OTC Markets Group, Inc., or (iii) in all other cases, the fair market value of the common stock as determined by the Company and Blue Victory. Notwithstanding the above, in the event the Company does not have adequate shares of common stock authorized and available for issuance to be able to fulfill a conversion request, or the Company would breach its obligations under the rules or regulations of any trading market on which its shares of common stock are then listed if it fulfilled a conversion request, Blue Victory will amend the conversion notice to reduce the amount of principal and/or interest for which the conversion was requested to that amount for which an adequate number of shares of common stock is authorized and available for issuance by the Company.

During the year ended December 31, 2016, the Company borrowed $840,353 under the credit facility, of which $824,250 was repaid by the Company during the year ended December 31, 2016. Accordingly, the amount of principal outstanding under the credit facility was $16,103 at December 31, 2016.

On March 24, 2017, the Company and Blue Victory entered into an amendment to the loan agreement, dated September 13, 2013, pursuant to which Blue Victory had extended a line of credit facility to the Company for up to $1 million. Under the terms of the amendment, the Company and Blue Victory agreed to reduce the maximum amount of funds available under the credit facility from $1 million to $50,000. Pursuant to the terms of the amendment, the promissory note that was issued by the Company to Blue Victory on September 13, 2013 to evidence the obligation of the Company to pay the outstanding balance of the credit facility, was terminated in its entirety. The obligation of the Company to pay any future outstanding balance of the credit facility was evidenced by a new promissory note that was issued by the Company to Blue Victory on March 24, 2017.

Between January 1, 2017 and September 30, 2017, the Company repaid the remaining outstanding balance of $16,103 to Blue Victory under the credit facility. Accordingly, no principal was outstanding under the credit facility at September 30, 2017.

19

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

On December 19, 2016, the Company acquired Seediv. In connection therewith, the Company assumed debt owed by Seediv to Blue Victory pursuant to the terms of a promissory note issued by Seediv in favor of Blue Victory in the amount of $216,469. The promissory note accrued interest at a rate of 6% per annum and was payable on demand. No payments were made by the Company under the promissory note during the year ended December 31, 2016. Accordingly, the amount of principal outstanding under the promissory note was $216,469 at December 31, 2016. The Company repaid the remaining outstanding balance of the promissory note during the three- and nine-month periods ended September 30, 2017. Accordingly, no principal was outstanding under the promissory note at September 30, 2017.

During the nine-month period ended September 30, 2017, the Company borrowed $499,837 from Blue Victory and repaid $473,589 to Blue Victory under a separate loan. The loan accrues interest at a rate of 6% per annum and is payable on demand. Accordingly, the amount of principal outstanding under the loan was $26,248 at September 30, 2017.

The carrying value of the Company’s outstanding promissory notes, net of unamortized discount, was $33,248 and $239,572 at September 30, 2017 and December 31, 2016, respectively, as follows:  

	September 30,		December 31,
	2017		2016
Notes payable – related party	$	26,248	$	232,572
Notes payable – in default		7,000		7,000
Total notes payable, net	$	33,248	$	239,572

Note 11. Capital Stock

The Company’s authorized capital consisted of 100,000,000 shares of Class A common stock, par value $0.01 per share, at September 30, 2017 and December 31, 2016, of which 6,935,119 and 6,647,464 shares of common stock were outstanding at September 30, 2017 and December 31, 2016, respectively.

In September 2011, the Company entered into an agreement with a consultant pursuant to which the Company agreed to issue 1,000,000 shares of its common stock to the consultant as payment for services to be performed in accordance with the terms of the agreement. The shares were valued at the closing price of the Company’s common stock on the date of grant for total consideration of $150,000. The Company had not issued any of the shares to the consultant as of September 30, 2017 and December 31, 2016. Accordingly, the Company had an outstanding balance of $150,000 in stock subscriptions payable at September 30, 2017 and December 31, 2016.

In January 2013, the Company appointed Richard W. Akam to serve as its Chief Operating Officer. In connection therewith, the Company entered into an employment agreement with Mr. Akam. The employment agreement provides in part that the Company will grant Mr. Akam shares of its common stock equal in value to $50,000 on January 1st of each year thereafter if Mr. Akam is continuously employed by the Company through January 1st of the applicable year. The number of shares of common stock that the Company will issue to Mr. Akam for each applicable year will be calculated based on the average of the last sales price of shares of the Company’s common stock as reported on the OTCQB for the month of January of the applicable year. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

20

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In January 2016, Mr. Akam earned 71,429 shares of common stock under the terms of his employment agreement with the Company. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date the transactions were completed. The Company recognized $137 of stock compensation expense in connection therewith during the nine-month period ended September 30, 2016. The Company also recognized $12,568 and $37,295 of stock compensation expense during the three- and nine-month periods ended September 30, 2016 in connection with the vesting of the shares of common stock to be earned to Mr. Akam on January 1, 2017 under the terms of his employment agreement with the Company.

In August 2016, the Company issued 35,000 shares of its common stock to Guiseppe Cala (“Cala”) pursuant to the terms of a settlement and release agreement to which the Company and Cala were parties. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. A description of the settlement and release agreement is set forth herein under Note 16. Judgments in Legal Proceedings.

In November 2016, the Company issued 20,000 shares of its common stock to one of its non-executive employees as incentive compensation. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. The Company recognized $41,200 of stock compensation expense in connection therewith during the year ended December 31, 2016.

On January 18, 2017, the Company appointed Seenu G. Kasturi as its President, Chief Financial Officer and Chairman of the board of directors. In connection therewith, the Company entered into an employment agreement with Mr. Kasturi to serve as the President and Chief Financial Officer of the Company. The employment agreement provides in part that Mr. Kasturi will be paid annual compensation in the amount of $80,000 per year, consisting of: (i) an initial annual base salary of $26,000, and (ii) equity awards equal in value to $54,000 per year. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

The Company recognized $13,500 of stock compensation expense during the nine-month period ended September 30, 2017 in connection with the vesting of the shares of common stock earned by Mr. Kasturi on April 1, 2017. The Company recognized $148 and $13,500 of stock compensation expense during the three- and nine-month periods ended September 30, 2017, respectively, in connection with the vesting of the shares of common stock earned by Mr. Kasturi on July 1, 2017. The Company also recognized $13,352 of stock compensation expense during the three- and nine-month periods ended September 30, 2017 in connection with the vesting of the shares of common stock to be earned by Mr. Kasturi on October 1, 2017. This amount was credited to stock subscriptions payable.

21

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In May 2017, the Company entered into an agreement with Maxim Group LLC (“Maxim”) to provide general financial advisory and investment banking services to the Company for a term of one year. Under the terms of the agreement, the Company agreed to pay Maxim $5,000 per month during the term of the agreement and issue 225,000 shares of common stock to Maxim upon the execution of the agreement. The Company recognized $180,000 of stock compensation expense during the nine-month period ended September 30, 2017 in connection with the issuance of the shares.

In August 2017, the Company approved the issuance of a total of 2,750 shares of its common stock to certain of its non-executive employees as incentive compensation. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. The Company recognized $2,338 of stock compensation expense in connection therewith during the three- and nine-month periods ended September 30, 2017. This amount was credited to stock subscriptions payable.

In August 2017, the Company approved the issuance of a total of 13,000 shares of its common stock to certain of its franchisees as incentive compensation. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. The Company recognized $11,050 of stock compensation expense in connection therewith during the three- and nine-month periods ended September 30, 2017. This amount was credited to stock subscriptions payable.

In August 2017, the Company issued 35,295 shares of its common stock to a consultant as payment for $30,000 of consulting fees then due and payable by the Company. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant.

The Company recognized a total of $26,889 and $233,740 for stock compensation expense during the three- and nine-month periods ended September 30, 2017, respectively, and recognized a total of $12,568 and $37,295 for stock compensation expense during the three- and nine-month periods ended September 30, 2016, respectively. The Company had a total of $176,741 and $150,000 of stock subscription payable outstanding at September 30, 2017 and December 31, 2016, respectively.

Note 12. Stock Options and Warrants

The Company did not issue any stock options or warrants exercisable into shares of the Company’s common stock during the three- and nine-month periods ended September 30, 2017 and 2016, and no stock options or warrants were exercised during the three- and nine-month periods ended September 30, 2017 and 2016. There were no stock options or warrants outstanding at September 30, 2017 or December 31, 2016.

22

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 13. Stock Compensation Plans

American Restaurant Concepts, Inc. 2011 Stock Incentive Plan

In August 2011, the Company adopted the American Restaurant Concepts, Inc. 2011 Stock Incentive Plan. Under the plan, 1,214,286 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2017, 142,858 shares of the Company’s common stock remained available for issuance under the plan.  The plan terminates in August 2021.  On August 18, 2011, the Company filed a registration statement on Form S-8, File No. 333-176383, with the SEC covering the public sale of all 1,214,286 shares of common stock available for issuance under the plan.

ARC Group, Inc. 2014 Stock Incentive Plan

In June 2014, the Company adopted the ARC Group, Inc. 2014 Stock Incentive Plan. Under the plan, 1,000,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2017, all 1,000,000 shares of the Company’s common stock remained available for issuance under the plan.  The plan terminates in June 2024.

Note 14. Commitments and Contingencies

Employment Agreements and Arrangements

Richard W. Akam

On January 22, 2013, the Company appointed Richard W. Akam to serve as its Chief Operating Officer. In connection therewith, the Company entered into an employment agreement with Mr. Akam pursuant to which it agreed to pay him an annual base salary of $150,000, subject to annual adjustment and discretionary bonuses, plus certain standard and customary fringe benefits.  The initial term of the employment agreement is for one year and automatically renews for additional one-year terms until terminated by Mr. Akam or the Company. 

The employment agreement provides that, on July 22, 2013, the Company would grant Mr. Akam shares of its common stock equal in value to $50,000 if Mr. Akam is continuously employed by the Company through that date. The number of shares of common stock that the Company would issue to Mr. Akam would be calculated based on the last sales price of the Company’s common stock as reported on the OTCQB on July 22, 2013.  The employment agreement also provides that the Company will grant Mr. Akam additional shares of its common stock equal in value to $50,000 on January 1st of each year thereafter if Mr. Akam is continuously employed by the Company through January 1st of the applicable year. The number of shares of common stock that the Company will issue to Mr. Akam for each applicable year will be calculated based on the average of the last sales price of shares of the Company’s common stock as reported on the OTCQB for the month of January of the applicable year.  

23

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Notwithstanding the above, and in connection therewith, Mr. Akam agreed that the number of shares that may be earned by him under his employment agreement in connection with any particular grant would be equal to the lesser of: (i) 71,429 shares of common stock, or (ii) the number of shares of common stock calculated by dividing $50,000 by the closing price of the Company’s common stock on the day immediately preceding the date the Company’s obligation to issue the shares to him fully accrues. Mr. Akam also agreed that in the event the Company is unable to fulfill its obligation to issue all of the shares earned by him with respect to any particular grant because it does not have enough shares of common stock authorized and available for issuance, (i) Mr. Akam will not require the Company to issue more shares of common stock than are then authorized and available for issuance by the Company, and (i) the Company may settle any liability to Mr. Akam created as a result thereof in cash.

In the event the Company terminates Mr. Akam’s employment without “cause” (as such term is defined in the employment agreement), Mr. Akam will be entitled to receive the following severance compensation from the Company: (i) if the Company terminates Mr. Akam’s employment during the first year of his employment with the Company, that amount of compensation equal to the salary payable to Mr. Akam during that year, (ii) if the Company terminates Mr. Akam’s employment during the second year of his employment with the Company, that amount of compensation equal to nine months of the salary payable to Mr. Akam during that year, (iii) if the Company terminates Mr. Akam’s employment during the third year of his employment with the Company, that amount of compensation equal to six months of the salary payable to Mr. Akam during that year, and (iv) if the Company terminates Mr. Akam’s employment after the third year of his employment with the Company, that amount of compensation equal to three months of the salary payable to Mr. Akam during the year that such termination occurs. Mr. Akam will not be entitled to receive any severance compensation from the Company if the Company terminates his employment for “cause” or as a result of his disability, or if Mr. Akam resigns from his employment with the Company.

The employment agreement also contains customary provisions that provide that, during the term of Mr. Akam’s employment with the Company and for a period of one year thereafter, Mr. Akam is prohibited from disclosing confidential information of the Company, soliciting Company employees and certain other persons, and competing with the Company.

On July 31, 2013, the Company appointed Richard Akam as its Chief Executive Officer, Chief Financial Officer and Secretary. The Company and Mr. Akam did not amend the employment agreement in connection with the above appointments, and Mr. Akam did not receive any additional compensation in connection with the above appointments.

On August 19, 2013, the Company appointed Daniel Slone as the Company’s Chief Financial Officer. In connection therewith, Richard Akam resigned as the Company’s Chief Financial Officer on August 19, 2013. Mr. Akam retained his positions as the Company’s Chief Executive Officer, Chief Operating Officer and Secretary.

On January 1, 2016, Mr. Akam earned 71,429 shares of common stock under the terms of his employment agreement with the Company.

On January 31, 2017, the Company and Richard W. Akam entered into an amendment to the employment agreement, dated January 22, 2013, by and between the Company and Mr. Akam. Under the terms of the amendment, the parties confirmed the appointment of Mr. Akam as the Company’s Chief Operating Officer on January 22, 2013 and as the Company’s Chief Executive Officer on July 31, 2013, clarified that Mr. Akam’s monthly base salary after the initial term of the employment agreement may be adjusted from time to time by the Company with Mr. Akam’s consent, removed the provision relating to the grant of shares of the Company’s common stock to Mr. Akam on January 1^st of each year effective December 31, 2016, and clarified that the criteria for Mr. Akam’s annual bonuses shall be identified and agreed upon by the Company and Mr. Akam by the end of the 1^st quarter of each fiscal year.

24

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Daniel Slone

On August 19, 2013, the Company appointed Daniel Slone as the Company’s Chief Financial Officer. The Company agreed to pay Mr. Slone an annual base salary of $1.00 in connection with his appointment. The Company did not enter into an employment agreement with Mr. Slone. On January 17, 2017, Daniel Slone resigned as the Company’s Chief Financial Officer.

Seenu G. Kasturi

On January 18, 2017, the Company appointed Seenu G. Kasturi as its President, Chief Financial Officer and Chairman of the board of directors. In connection therewith, on January 18, 2017, the Company entered into an employment agreement with Mr. Kasturi to serve as the President and Chief Financial Officer of the Company. The employment agreement is for an initial term of three years with automatic one-year renewals thereafter unless earlier terminated or not renewed as provided therein. Under the terms of the employment agreement, Mr. Kasturi will be paid annual compensation in the amount of $80,000 per year, consisting of: (i) an initial annual base salary of $26,000, and (ii) equity awards equal in value to $54,000 per year. Mr. Kasturi will be eligible to receive increases in salary on January 1^st of each subsequent year in the discretion of the Company’s board of directors. He will also be eligible to receive annual bonuses in the discretion of the Company’s board of directors beginning with the Company’s fiscal year ended December 31, 2017. The employment agreement contains customary confidentiality, non-competition and non-solicitation provisions in favor of the Company.

Operating Leases

Corporate Headquarters

In January 2015, the Company entered into a lease with Crescent Hill Office Park for its corporate headquarters located at 6327-4 Argyle Forest Boulevard, Jacksonville, Florida pursuant to which the Company leases approximately 2,000 square feet of space. The lease provides for an initial monthly rent payment of $1,806 and expires on December 31, 2017.

Nocatee Restaurant

In October 2013, DWG Acquisitions entered into a triple net shopping center lease with NTC-REG, LLC (“NTC-REG) for the Nocatee Restaurant pursuant to which DWG Acquisitions leased approximately 2,900 square feet of space. The lease provides for an initial monthly rent payment of $1,100 and an additional annual rent payment equal to the amount by which 6% of the restaurant’s annual gross sales exceeds the aggregate monthly rent payments accrued during the applicable year. The lease has an initial term of 53 months and provides DWG Acquisitions with an option to extend the lease by an additional term of 60 months. The lease was assumed by Seediv when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of that certain Asset Purchase Agreement, dated December 1, 2016, by and between Seediv and DWG Acquisitions (the “Asset Purchase Agreement”).

25

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

On April 1, 2017, DWG Acquisitions, Seediv and NTC-REG entered into an assignment and assumption & first modification to lease agreement for the Nocatee Restaurant. Under the agreement, DWG Acquisitions assigned all of its right, title, interest and claim in and to the Nocatee Lease, and Seediv assumed the payment and performance of all obligations, liabilities and covenants of DWG Acquisitions under the lease for the Nocatee Restaurant. In addition, the parties amended certain terms of the lease to state that the lease covers approximately 3,400 square feet of space, to extend the term of the lease for a 60-month period commencing on April 1, 2018 and expiring March 31, 2023, and to change the rent payments to an initial monthly rent payment of $7,035 without an additional annual rent payment.

Youngerman Circle Restaurant

In May 2014, DWG Acquisitions entered into a triple net lease with Raceland QSR for the Youngerman Circle Restaurant pursuant to which DWG Acquisitions leased approximately 6,500 square feet of space. The lease provides for a monthly rent payment equal to 7% of the restaurant’s monthly net sales. The lease has an initial term of 10 years and renews automatically for additional one-year terms unless prior written notice is provided by either party. The lease was assumed by Seediv when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement.

On December 20, 2016, Seediv entered into a new triple net lease with Raceland QSR for the Youngerman Circle Restaurant. The lease provides for rent payments to be made by the Company for each of 13 rent periods per year, with each rent period comprised of four weeks. The lease provides for an initial base rent payment equal to the greater of: (i) $10,000 per rent period, or (ii) 7.5% of the Youngerman Circle Restaurant’s net sales for the applicable rent period. Commencing on the fifth (5^th) anniversary and continuing every five years thereafter, the base rent will be equal to the sum of: (i) the average base rent previously in effect for the preceding five-year period, and (ii) the product of such previous average base rent multiplied by 7.5%. The lease has an initial term of 20 years and provides the Company with an option to extend the lease for two additional five-year periods. The Company agreed to guarantee Seediv’s payment and performance of all of its obligations under the lease.

Rent expense was $98,748 and $205,220 during the three- and nine-month periods ended September 30, 2017, respectively, and was $5,718 and $17,053 during the three- and nine-month period ended September 30, 2016, respectively.

Note 15. Related-Party Transactions

Employment Agreements

In January 2013, the Company entered into an employment agreement with Richard W. Akam in connection with his appointment as the Company’s Chief Operating Officer. Mr. Akam currently serves as the Company’s Chief Executive Officer, Chief Operating Officer and Secretary. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

26

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In January 2017, the Company appointed Seenu G. Kasturi as its President, Chief Financial Officer and Chairman of the board of directors and, in connection therewith, entered into an employment agreement with Mr. Kasturi. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

Sponsorship Agreements

In July 2013, the Company entered into a three-year sponsorship agreement with the Jacksonville Jaguars, LLC and, in connection therewith, in August 2013, entered into a subcontractor concession agreement with Levy Premium Foodservice Limited Partnership (“Levy”) for a concession stand to be located at EverBank Field in Jacksonville, Florida. The Company concurrently assigned all of its rights and obligations under the concession agreement to DWG Acquisitions in return for a fee of $2,000 per month for each full or partial month during which the concession agreement is in effect. In July 2015, the Company extended its sponsorship agreement with the Jaguars by an additional two years and entered into a subcontractor concession agreement with Ovations Food Services, L.P. (“Ovations”) for a second concession stand at EverBank Field. The Company concurrently assigned all of its rights and obligations under the second concession agreement to DWG Acquisitions in return for an additional fee of $3,000 per month for each full or partial month during which the concession agreement is in effect.

In September 2016, the Company terminated its subcontractor concession agreements with Levy and Ovations and the related assignment agreements with DWG Acquisitions, and entered into a sub-concession agreement with Jacksonville Sportservice, Inc. (“Jacksonville Sportservice”) and DWG Acquisitions with respect to the two concession stands previously covered by the Levy and Ovations subcontractor concession agreements. The Company concurrently assigned all of its rights and obligations under the sub-concession agreement to DWG Acquisitions in return for a fee equal to the income generated by the concession stands less all expenses incurred by the concession stands for each full or partial month during which the concession agreement is in effect.

Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated revenue of $15,000 and $35,000 from DWG Acquisitions under the assignment agreements related to the Levy and Ovations subcontractor concession agreements during the three- and nine-month periods ended September 30, 2016. The Company generated fees of $1,915 and $(2,680) from DWG Acquisitions under the assignment agreement related to the Jacksonville Sportservice sub-concession agreement during the three- and nine-month periods ended September 30, 2017. The fees were credited against the Company’s ad fund liability.

27

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Financing Transactions

In September 2013, the Company entered into a loan agreement with Blue Victory pursuant to which Blue Victory agreed to extend a revolving line of credit facility to the Company for up to $1 million. In March 2017, the Company and Blue Victory entered into an amendment to the loan agreement to reduce the maximum amount of funds available under the credit facility from $1 million to $50,000. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017. He owned approximately 48.9% of the Company’s common stock and 90% of the equity interests in Blue Victory at September 30, 2017. He also served as the President, Treasurer and Secretary, and as the sole member of the board of directors, of Blue Victory during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company had total principal in the amount of $16,103 outstanding under the credit facility at December 31, 2016. No principal was outstanding under the credit facility at September 30, 2017. A description of the credit facility is set forth herein under Note 10. Debt Obligations.

During the nine-month period ended September 30, 2017, the Company borrowed $499,837 from Blue Victory and repaid $473,589 to Blue Victory under a separate loan. Accordingly, the amount of principal outstanding under the loan was $26,248 at September 30, 2017. A description of this loan from Blue Victory is set forth herein under Note 10. Debt Obligations.

Leases

In May 2014, DWG Acquisitions entered into a triple net lease with Raceland QSR for the Youngerman Circle Restaurant pursuant to which DWG Acquisitions leased approximately 6,500 square feet of space. The lease was assumed by Seediv on December 1, 2016 when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement, and became an obligation of the Company when the Company acquired Seediv on December 19, 2016. On December 20, 2016, Seediv entered into a new triple net lease with Raceland QSR for the Youngerman Circle Restaurant. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions and Raceland QSR at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions and Raceland QSR during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. A description of the leases is set forth herein under Note 14. Commitments and Contingencies.

Franchise Agreements

In October 2013, DWG Acquisitions became the franchisee of the Nocatee Restaurant. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees, except that the Company did not require DWG Acquisitions to pay a franchise fee to the Company. The Nocatee Restaurant was acquired by Seediv on December 1, 2016 when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement. The Nocatee Restaurant was subsequently acquired by the Company when the Company acquired Seediv on December 19, 2016. A description of the transaction is set forth herein under Note 5. Acquisition of Seediv.

28

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $19,644 and $56,106 in royalties from DWG Acquisitions under the franchise agreement during the three- and nine-month period ended September 30, 2016. The Company did not generate any royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017 as the Company owned the Nocatee Restaurant during those periods.

In May 2014, DWG Acquisitions became the franchisee of the Youngerman Circle Restaurant. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees, except that the Company did not require DWG Acquisitions to pay a franchise fee to the Company. The Youngerman Circle Restaurant was acquired by Seediv on December 1, 2016 when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement. The Youngerman Circle Restaurant was subsequently acquired by the Company when the Company acquired Seediv on December 19, 2016. A description of the transaction is set forth herein under Note 5. Acquisition of Seediv.

In December 2016, the Company acquired Seediv and Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $22,105 and $70,610 in royalties from DWG Acquisitions under the franchise agreement during the three- and nine-month periods ended September 30, 2016. The Company did not generate any royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017 as the Company owned the Youngerman Circle Restaurant during those periods.

In December 2014, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located on Gornto Road in Valdosta, Georgia. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $10,193 and $32,224 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017, respectively, and generated $10,887 and $35,308 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively.

29

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In March 2015, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Tifton, Georgia. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. DWG Acquisitions closed the restaurant in January 2017. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $1,520 in royalties from DWG Acquisitions under the agreement during the nine-month period ended September 30, 2017, and generated $8,088 and $28,010 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively.

In June 2015, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Fleming Island, Florida. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. DWG Acquisitions sold the restaurant to an unrelated third party on January 1, 2017, on which date the third party became the franchisee and the Company terminated the franchise agreement with DWG Acquisitions. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $10,464 and $34,171 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively. The Company did not generate any royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017.

In September 2015, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Panama City Beach, Florida. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $14,013 and $37,245 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017, respectively, and generated $14,786 and $41,822 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively.

30

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In March 2016, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Pensacola, Florida. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $7,408 and $22,152 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017. The Company generated $8,861 and $22,809 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively, and generated $30,000 in franchise fees from DWG Acquisitions under the agreement during the nine-month period ended September 30, 2016.

In March 2016, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Kingsland, Georgia. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $8,671 and $30,202 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017, respectively. The Company generated $13,027 and $34,509 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively, and generated $30,000 in franchise fees from DWG Acquisitions under the agreement during the nine-month period ended September 30, 2016.

The Company generated a total of $40,285 and $123,343 in royalties and franchise fees through its franchise agreements with DWG Acquisitions during the three- and nine-month periods ended September 30, 2017, respectively, and generated a total of $112,860 and $418,344 in royalties and franchise fees through its franchise agreements with DWG Acquisitions during the three- and nine-month periods ended September 30, 2016. The Company had a total of $3,056 and $14,568 of accounts receivable outstanding from DWG Acquisitions at September 30, 2017 and December 31, 2016, respectively, and had a total of $37,093 of ad funds receivable outstanding from DWG Acquisitions at September 30, 2017. The Company did not have any ad funds receivable outstanding from DWG Acquisitions at December 31, 2016.

31

ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Loans

During the year ended December 31, 2015, the Company loaned a total of $121,638 to Raceland QSR. The Company loaned an additional $595,635 to Raceland QSR during the nine-month period ended September 30, 2016, of which $445,683 was repaid to the Company during the nine-month period ended September 30, 2016. The Company loaned an additional $6,341 to Raceland QSR during the remainder of the year ended December 31, 2016. The loan was paid off in full by Raceland QSR during the year ended December 31, 2016. Seenu G. Kasturi owned approximately 8.7% of the Company’s common stock and all of the equity interests in Raceland QSR during the period for which the loan was outstanding. He also served as the President, Treasurer and Secretary of Raceland QSR during the year ended December 31, 2016. A description of the loan is set forth herein under Note 9. Notes Receivable.

Acquisition of Seediv

On December 19, 2016, the Company acquired all of the outstanding membership interests of Seediv from Seenu G. Kasturi. In connection therewith, the Company assumed debt owed by Seediv to Blue Victory pursuant to the terms of a promissory note issued by Seediv in favor of Blue Victory in the amount of $216,469. The loan was paid off in full by Raceland QSR during the nine-month period ended September 30, 2017. Mr. Kasturi owned approximately 14.8% of the Company’s common stock and all of the outstanding membership interests of Seediv at December 19, 2016. He also served as the President, Treasurer and Secretary of Seediv at December 19, 2016. A description of the transaction is set forth herein under Note 5. Acquisition of Seediv. A description of the promissory note is set forth herein under Note 10. Debt Obligations.

Sale of Ownership Interest in Paradise on Wings

On September 30, 2017, the Company sold its 50% ownership interest in Paradise on Wings to Seenu G. Kasturi for $24,000. A description of the transaction is set forth herein under Note 4. Investment in Paradise on Wings.

Note 16. Judgments in Legal Proceedings

In October 2009, the Company initiated a legal proceeding entitled American Restaurant Concepts, Inc. vs. Cala, et al was filed in in the United States District Court for the Middle District of Florida, Jacksonville Division, in Duval County (the “ARC Proceeding”). In the complaint, the Company alleged damages for trademark infringement. Also on that date, a legal proceeding entitled Cala v. Rosenberger et al. was filed with the Fourth Judicial Circuit Court in and for Duval County, Florida (the “Cala Proceeding”; together with the ARC Proceeding, the “ARC & Cala Proceedings”). In the complaint, Cala alleged damages for breach of contract. In January 2010, the parties to each of the actions entered into a settlement agreement with respect to both actions pursuant to which the Company agreed to pay $250,000 in full settlement of the legal proceedings (the “2010 Settlement Agreement”). In early 2010, Cala breached the terms of the 2010 Settlement Agreement, relieving the Company of any further obligations under the agreement. The Company made total payments of $40,000 under the 2010 Settlement Agreement prior to the breach by Cala. Accordingly, the remaining balance of $210,000 outstanding under the settlement agreement was reflected in settlement agreements payable.

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ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In August 2016, the Company entered into a full and final settlement and release agreement with Cala. Under the terms of the agreement, the Company and Cala agreed to release each other from all claims related to the ARC & Cala Proceedings, any and all other lawsuits that may have been filed by one party against the other, the 2010 Settlement Agreement, and any other matters, causes of action or claims either party may have had against the other. In consideration for the releases, the Company agreed to pay $15,000 to Cala and issue 35,000 shares of its common stock to Cala. The Company recognized a non-cash gain on settlement of liabilities of $175,449 in connection therewith during the year ended December 31, 2016. The remaining balance of $210,000 outstanding under the 2010 Settlement Agreement was debited to settlement agreements payable.

On February 25, 2011, a legal proceeding entitled Duval Station Investment, LLC vs. Hot Wing Concepts, Inc. d/b/a Dick’s Wings and Grill, and American Restaurant Concepts, Inc. was filed with the Fourth Judicial Circuit Court in and for Duval County, Florida. In the complaint, the plaintiff alleged damages for breach of guaranty. On October 4, 2011, a final judgment was entered by the court in favor of the plaintiff in the amount of $161,747, and on November 11, 2011 a final judgment for attorneys’ fees and costs was entered in favor of the plaintiff in the amount of $33,000. These judgments, together with accrued interest of $2,369 thereon, resulted in a total loss from legal proceedings of $197,116 during the year ended December 25, 2011. The Company had not paid any part of the judgment or the accrued interest thereon. As a result, the loss was reflected in settlement agreements payable at September 30, 2017 and December 31, 2016. Interest expense in the amount of $2,841 and $8,431 accrued on the outstanding balance of the settlement agreement payable during the three- and nine-month periods ended September 30, 2017, respectively, and interest expense in the amount of $2,841 and $8,462 accrued on the outstanding balance of the settlement agreement payable during the three- and nine-month periods ended September 30, 2016, respectively. The interest expense was credited to settlement agreements payable.

In January 2015, Santander Bank filed a complaint against the Company in the Circuit Court, Fourth Judicial Circuit in and for Duval County, Florida, seeking damages of $194,181 plus interest, costs and attorney’s fees for breach of a guaranty of certain obligations of Ritz Aviation, LLC (“Ritz Aviation”) under a promissory note executed by Ritz Aviation in July 2005. During the Company’s fourth fiscal quarter of 2016, Santander Bank informed the Company that certain assets of Ritz Aviation had been sold for $82,642 and that the proceeds from the sale were applied towards the balance of the damages being sought, resulting in an outstanding balance of damages sought of $111,539. A total of $31,836 and $25,980 of accrued interest, and $10,586 of other expenses, were outstanding at September 30, 2017 and December 31, 2016, respectively, resulting in an aggregate potential loss of $153,961 and $148,105 at September 30, 2017 and December 31, 2016, respectively. The potential losses of $153,961 and $148,105 were reflected in accrued legal settlement at September 30, 2017 and December 31, 2016, respectively. This case is currently pending.

Note 17. Subsequent Events

On October 1, 2017, Seenu G. Kasturi earned 8,177 shares of the Company’s common stock pursuant to the terms of his employment agreement with the Company.

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ARC Group, Inc.

Notes to Consolidated Financial Statements (Unaudited)

On October 4, 2017, Seediv entered into an Agreement for Purchase and Sale of Real Estate with Raceland QSR pursuant to which Seediv agreed to purchase the real property located at 6055 Youngerman Circle in Argyle Circle, Jacksonville, Florida 32244 (the “Property”) from Raceland QSR. The purchase price for the Property will be the lesser of: (i) $2 million, or (ii) the appraised value of the Property determined by the appraisal completed by the financing source proposed to be utilized by Seediv to finance the acquisition of the Property. The agreement provides for the payment by Seediv of a deposit of $10,000 within 10 days of the date of the agreement to an escrow agent to be selected by the parties with the remainder of the purchase price to be paid by Seediv at closing. Seediv has the right to terminate the transaction in the event that certain feasibility studies, the title commitment or the appraisal is unsatisfactory to Seediv, or if Raceland QSR breaches any of its representations, warranties, covenants, agreements or obligations under the agreement, in which case the deposit shall be returned to Seediv. The closing of the transaction will occur on December 3, 2017.

On or about October 18, 2017, the Company issued the 2,750 shares of common stock previously approved for issuance to certain of its non-executive employees as incentive compensation in August 2017.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenue and costs, and plans and objectives of management for future operations, are forward-looking statements. In addition, 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.

We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions that may cause our actual results to differ materially from results proposed in such statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:

· our ability to fund our future growth and implement our business strategy;

· market acceptance of our restaurants and products;

· food safety issues and other health concerns;

· the cost of food and other commodities;

· labor shortages and changes in employee compensation costs;

· shortages or interruptions in the availability and delivery of food and other supplies;

· our ability to maintain and increase the value of our Dick’s Wings^® brand;

· changes in consumer preferences;

· our ability to identify, attract and retain qualified franchisees;

· our limited control over the activities of our franchisees;

· the ability of us and our franchisees to identify suitable restaurant sites, open new restaurants and operate them in a profitable manner;

· our ability to successfully operate our company-owned restaurants;

· our ability to identify, acquire and integrate new restaurant brands and businesses;

· the loss of key members of our management team;

· the impact of any failure of our information technology system or any breach of our network security;

· the impact of security breaches of confidential customer information in connection with the electronic processing of credit/debit card transactions by us and our franchisees;

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· the ability of us and our franchisees to comply with applicable federal, state and local laws and regulations;

· our ability to protect our trademarks and other intellectual property;

· competition and consolidation in the restaurant industry;

· the effects of litigation on our business;

· our ability to obtain debt, equity or other financing on favorable terms, or at all;

· the impact of any decision to record asset impairment charges in the future;

· the condition of the securities and capital markets generally;

· economic conditions in the jurisdictions in which we operate and nationally;

and statements of assumption underlying any of the foregoing, as well as any other factors set forth herein under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below and Item 1A. Risk Factors of our Annual Report on Form 10-K/A for our fiscal year ended December 31, 2016. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing. Except as required by law, we assume no duty to update or revise our forward-looking statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this report contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth herein under Item 1A. Risk Factors of our Annual Report on Form 10-K/A for our fiscal year ended December 31, 2016 and elsewhere in this report. The following should be read in conjunction with our consolidated financial statements beginning on page 1 of this report.

Overview

We were formed in April 2000 to develop the Dick’s Wings concept, and are the owner, operator and franchisor of the Dick’s Wings brand of restaurants. Our Dick’s Wings concept is comprised of traditional restaurants like our Dick’s Wings & Grill^® restaurants, which are full service restaurants, and non-traditional units like our Dick’s Wings concession stands at EverBank Field. We offer a variety of boldly-flavored menu items highlighted by our Buffalo, New York-style chicken wings spun in our signature sauces and seasonings. We offer our customers a casual, family-fun restaurant environment designed to appeal to both families and sports fans alike. At Dick’s Wings, we strive to provide our customers with a unique and enjoyable experience from first bite to last call.

On December 19, 2016, we acquired all of the issued and outstanding membership interests of Seediv, LLC, a Louisiana limited liability company (“Seediv”), for $600,000 and an earn-out payment. Seediv is the owner and operator of the Dick’s Wings & Grill restaurant located at 100 Marketside Avenue, Suite 301, in the Nocatee development in Ponte Vedra, Florida 32081 (the “Nocatee Restaurant”) and the Dick’s Wings & Grill restaurant located at 6055 Youngerman Circle in Argyle Village in Jacksonville, Florida 32244 (the “Youngerman Circle Restaurant”). A description of our acquisition of Seediv is set forth herein under Note 5 – Acquisition of Seediv in our consolidated financial statements.

On October 4, 2017, Seediv entered into an Agreement for Purchase and Sale of Real Estate with Raceland QSR, LLC, a Louisiana limited liability company (“Raceland QSR”). Under the terms of the agreement, Seediv agreed to purchase the real property located at 6055 Youngerman Circle in Argyle Circle, Jacksonville, Florida 32244 (the “Property”) from Raceland QSR. The purchase price for the Property will be the lesser of: (i) $2 million, or (ii) the appraised value of the Property determined by the appraisal completed by the financing source proposed to be utilized by Seediv to finance the acquisition of the Property. The agreement provides for the payment by Seediv of a deposit of $10,000 within 10 days of the date of the agreement to an escrow agent to be selected by the parties with the remainder of the purchase price to be paid by Seediv at closing. Seediv has the right to terminate the transaction in the event that certain feasibility studies, the title commitment or the appraisal is unsatisfactory to Seediv, or if Raceland QSR breaches any of its representations, warranties, covenants, agreements or obligations under the agreement, in which case the deposit shall be returned to Seediv. The closing of the transaction will occur on December 3, 2017.

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We had 24 Dick’s Wings & Grill restaurants and one Dicks’ Wings concession stand at the end of our 2016 fiscal year. During our 2017 fiscal year, we opened a second concession stand closed two of our franchised restaurants. As a result, we currently have 22 Dick’s Wings & Grill restaurants and two Dicks’ Wings concession stands. Of our 22 restaurants, 17 are located in Florida and five are located in Georgia. Our concession stands are also located in Florida. Two of the restaurants are owned by us. The remaining 20 restaurants are owned and operated by franchisees.

Strategy

Our plan is to grow our company from a Florida and Georgia based franchisor of Dick’s Wings restaurants into a diversified restaurant company operating a portfolio of premium restaurant brands and, in some cases, their related real estate properties. We intend to focus on developing brands that offer a variety of high-quality food and beverages in a distinctive, casual, high-energy atmosphere in a diverse set of markets across the Unites States.

The first major component of our growth strategy is the continued development and expansion of our legacy Dick’s Wings brand. Key elements of our strategy include strengthening the brand, developing new menu items, improving our operations and service, driving customer satisfaction, and opening new restaurants in new and existing markets in the United States. We believe there are meaningful opportunities to grow the number of Dick’s Wings restaurants, and have implemented a rigorous and disciplined approach to drive franchising sales. In our existing markets, we plan to continue to open new restaurants until a market is penetrated to a point that will enable us to gain marketing, operational, cost and other efficiencies. In new markets, we plan to open several restaurants at a time to quickly build our brand awareness.

The other major component of our growth strategy is the acquisition of controlling and non-controlling financial interests in other restaurant brands offering us product and geographic diversification. We plan to complete, and are actively seeking, potential mergers, acquisitions, joint ventures and other strategic initiatives through which we can acquire or develop additional restaurant brands and, in some cases, their related real estate properties. We are seeking brands offering proprietary menu items that emphasize the preparation of food with high quality ingredients, as well as unique recipes and special seasonings to provide appealing, tasty, convenient and attractive food at competitive prices. We are seeking real estate properties that enable us to build equity through monthly debt payments rather than rent payments, that provide us with tax and other expense incentives, and that offer long-term appreciation potential.

Financial Results

We achieved revenue of $1,047,404 for the three-month period ended September 30, 2017, compared to $183,591 for the three-month period ended September 30, 2016, primarily due to an increase of $841,214 for sales by the company-owned restaurants that we acquired through our acquisition of Seediv. Our total operating expenses increased $607,254 to $1,068,963 for the three-month period ended September 30, 2017, compared to $461,709 for the three-month period ended September 30, 2016, primarily due to an increase of $858,964 for restaurant operating costs for the company-owned restaurants that we acquired through our acquisition of Seediv. We generated a loss from operations of $21,559 for the three-month period ended September 30, 2017, compared to a loss from operations of $278,118 for the three-month period ended September 30, 2016. We generated a net loss of $89, or $0.00 per share, for the three-month period ended September 30, 2017, compared to a net loss of $4,235, or $0.00 per share, for the three-month period ended September 30, 2016.

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We achieved revenue of $3,228,054 for the nine-month period ended September 30, 2017, compared to $791,407 for the nine-month period ended September 30, 2016, primarily due to an increase of $2,595,679 for sales by the company-owned restaurants that we acquired through our acquisition of Seediv. Our total operating expenses increased $2,326,553 to $3,154,709 for the nine-month period ended September 30, 2017, compared to $828,156 for the nine-month period ended September 30, 2016, primarily due to an increase of $2,470,461 for restaurant operating costs for the company-owned restaurants that we acquired through our acquisition of Seediv. We generated income from operations of $73,345 for the nine-month period ended September 30, 2017, compared to a loss from operations of $36,749 for the nine-month period ended September 30, 2016. We generated net income of $87,675, or $0.01 per share, for the nine-month period ended September 30, 2017, compared to net income of $245,939, or $0.04 per share, for the nine-month period ended September 30, 2016. Net cash flows provided by operating activities increased $15,747 to $242,619 for the nine-month period ended September 30, 2017, compared to $226,872 for the nine-month period ended September 30, 2016.

Outlook

We expect our revenue to increase during the next 12 months as we generate sales through our company-owned restaurants, as we continue to improve the operations of our existing Dick’s Wings restaurants and open new Dick’s Wings restaurants, and as we acquire additional interests in other restaurant brands. We expect to continue generating net income during the next 12 months as we generate revenue and income from operations through our new and existing company-owned and franchised restaurants. Notwithstanding the foregoing, in the event we complete additional acquisitions of controlling or non-controlling financial interests in other restaurant brands through mergers, acquisitions, joint ventures or other strategic initiatives, our financial results will include and reflect the financial results of the target entities. Accordingly, the completion of any such transactions in the future may have a substantial beneficial or negative impact on our business, financial condition and results of operations.

Critical Accounting Policies

For information regarding our critical accounting policies, please refer to the discussion provided in our Annual Report on Form 10-K/A for our fiscal year ended December 31, 2016 under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies”.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements applicable to our business, please refer to the discussion provided herein under Note 2. Basis of Presentation and Summary of Significant Accounting Policies – Recent Accounting Pronouncements in our consolidated financial statements.

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Comparison of the Three-Month Periods Ended September 30, 2017 and 2016

Revenue

Revenue consists primarily of proceeds from the sale of food and beverage products by our company-owned restaurants, and royalty payments, franchise fees and area development fees that we receive from our franchisees. Revenue increased $863,813 to $1,047,404 for the three-month period ended September 30, 2017 from $183,591 for the three-month period ended September 30, 2016. The increase of $863,813 was due primarily to an increase of $841,241 for sales by our company-owned restaurants that we acquired through our acquisition of Seediv. We expect our revenue to increase during the next 12 months as we generate sales through our company-owned restaurants, as we continue to improve the operations of our existing Dick’s Wings restaurants and open new Dick’s Wings restaurants, and as we acquire additional interests in other restaurant brands.

Operating Expenses

Operating expenses consist of restaurant operating costs, professional fees, employee compensation expense, and general and administrative expenses.

Restaurant Operating Costs. Restaurant operating costs consists of cost of sales, labor expenses, occupancy expenses and other operating expenses that we incur in connection with the operation of the company-owned restaurants that we acquired through our acquisition of Seediv. Restaurant operating costs were $858,964 for the three-month period ended September 30, 2017. We did not incur any restaurant operating costs for the three-month period ended September 30, 2016 because we did not acquire Seediv until December 19, 2016. Our restaurant operating costs consisted of $274,846 for cost of sales, $293,035 for labor expenses, $92,729 for occupancy expenses, and $198,354 for other operating expenses. We expect our restaurant operating costs to remain at similar levels during the next 12 months.

Professional Fees. Professional fees consist of fees paid to our independent accountants, lawyers, technology consultants and other professionals and consultants. Professional fees increased $15,425 to $67,975 for the three-month period ended September 30, 2017 from $52,550 for the three-month period ended September 30, 2016. The increase of $15,425 was due primarily to an increase of $13,550 for consulting fees. We expect our professional fees to continue to increase during the next 12 months as we incur increased legal, accounting, technology and consulting fees in connection with the general expansion of our business and operations and our compliance with the rules and regulations of the SEC.

Employee Compensation Expense. Employee compensation expense consists of salaries, hourly wages, bonuses and other cash compensation, equity-based compensation and employee benefits paid or granted to our executive officers and other employees that are not employed by our company-owned restaurants, and the related payroll taxes. Employee compensation expense decreased $49,567 to $91,033 for the three-month period ended September 30, 2017 from $140,600 for the three-month period ended September 30, 2016. The decrease of $49,567 was due primarily to a decrease of $57,237 for salaries and hourly wages paid to employees, partially offset by an increase of $14,321 for stock compensation expense. We expect employee compensation expense to increase over the next 12 months as we hire additional executive officers and other employees in connection with the growth and expansion of our business and operations.

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General and Administrative Expenses. General and administrative expenses consist of marketing and advertising expenses, bank service charges, computer and internet expenses, dues and subscriptions, licenses and filing fees, insurance expenses, investor relations expenses, shareholder meeting expenses, bad debt expense, office supplies, rent expense, repairs and maintenance expenses, telephone expenses, travel expenses, utilities expenses and other miscellaneous general and administrative expenses. General and administrative expenses decreased $217,568 to $50,991 for the three-month period ended September 30, 2017 from $268,559 for the three-month period ended September 30, 2016. The decrease of $217,568 was due primarily to a decrease of $273,763 for bad debt expense, partially offset by an increase of $15,097 for SEC filings fees and investor relations expenses and increases in other miscellaneous general and administrative expenses. We expect general and administrative expenses to increase over the next 12 months as we incur increasing expenses for marketing and advertising, investor relations, travel, rent, office supplies, insurance and other miscellaneous items associated with the general growth of our business and operations.

Income From Investment in Paradise on Wings

Income from investment in Paradise on Wings consists of our share of the income from our 50% ownership interest in Paradise on Wings that we purchased on January 20, 2014. Income from investment in Paradise on Wings was $101,056 for the three-month period ended September 30, 2016. We did not generate any income from investment in Paradise on Wings for the three-month period ended September 30, 2017. We performed a review of its investment in Paradise on Wings at the end of the year ended December 31, 2016 and determined that, for the reasons more fully described herein under Note 8. Fair Value Measurements in our consolidated financial statements, an “other-than-temporary” decline in the value of the investment had occurred and that a loss on impairment equal to its then carrying amount of $348,143 should be recognized. Accordingly, the carrying amount of our investment in Paradise on Wings was zero at September 30, 2017 and December 31, 2016. In addition, because the carrying amount of our investment in Paradise on Wings was zero at September 30, 2017, the amount of our share of net loss incurred by Paradise on Wings that we recognized during the three-month period ended September 30, 2017 was zero. We sold our 50% ownership interest in Paradise on Wings on September 30, 2017. As a result, we do not expect to recognize any income or losses from investment in Paradise on Wings in the future.

Gain on Settlement of Liabilities

Gain on settlement of liabilities consists of the gain that we realized upon entering into a settlement agreement with Guiseppe Cala with respect to several legal proceedings that had been initiated between us and Mr. Cala and breaches of a settlement agreement entered into between us and Mr. Cala in 2010. We recognized a gain on the settlement of liabilities of $175,449 for the three-month period ended September 30, 2016. We did not recognize any gain on the settlement of liabilities for the three-month period ended September 30, 2017. A description of the current settlement agreement, the 2010 settlement agreement and the legal proceedings is set forth under Note 16. Judgments in Legal Proceedings in our consolidated financial statements. We do not expect to generate any additional gain on settlement of liabilities during the next 12 months.

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Net Loss

We generated a net loss of $89 for the three-month period ended September 30, 2017 compared to a net loss of $4,235 for the three-month period ended September 30, 2016. The decrease of $4,146 was due primarily to an increase of $863,813 for revenue and decreases of $49,567 for employee compensation expense and $217,568 for general and administrative expenses. This was partially offset by increases of $858,964 for restaurant operating costs and decreases of $175,449 for gain on settlement of liabilities and $101,056 for income from investment in Paradise on Wings. We expect to continue generating net income during the next 12 months as we generate revenue and income from operations through our new and existing company-owned and franchised restaurants. Notwithstanding the foregoing, in the event we complete additional acquisitions of controlling or non-controlling financial interests in other restaurant brands through mergers, acquisitions, joint ventures or other strategic initiatives, our financial results will include and reflect the financial results of the target entities. Accordingly, the completion of any such transactions in the future may have a substantial beneficial or negative impact on our business, financial condition and results of operations.

Comparison of the Nine-Month Periods Ended September 30, 2017 and 2016

Revenue

Revenue increased $2,436,647 to $3,228,054 for the nine-month period ended September 30, 2017 from $791,407 for the nine-month period ended September 30, 2016. The increase of $2,436,647 was due primarily to an increase of $2,595,679 for sales by our company-owned restaurants, partially offset by decreases of $105,000 for franchise fees received from our franchisees. The increase in sales by our company-owned restaurants was attributable to the restaurants that we acquired through our acquisition of Seediv. The decrease in franchise fees was attributable to a reduction in new franchise agreements that we executed during the nine-month period ended September 30, 2017.

Operating Expenses

Operating expenses consist of restaurant operating costs, professional fees, employee compensation expense, and general and administrative expenses.

Restaurant Operating Costs. Restaurant operating costs were $2,470,461 for the nine-month period ended September 30, 2017. We did not incur any restaurant operating costs for the nine-month period ended September 30, 2016 because we did not acquire Seediv until December 19, 2016. Our restaurant operating costs consisted of $869,600 for cost of sales, $857,933 for labor expenses, $187,264 for occupancy expenses, and $555,664 for other operating expenses. We expect our restaurant operating costs to remain at similar levels during the next 12 months.

Professional Fees. Professional fees increased $229,735 to $351,185 for the nine-month period ended September 30, 2017 from $121,450 for the nine-month period ended September 30, 2016. The increase of $229,735 was due primarily to increases of $180,000 for stock compensation expense and $44,566 for consulting fees.

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Employee Compensation Expense. Employee compensation expense decreased $139,956 to $250,626 for the nine-month period ended September 30, 2017 from $390,582 for the nine-month period ended September 30, 2016. The decrease of $139,956 was due primarily to a decrease of $160,850 for salaries and hourly wages paid to employees, partially offset by increases in other miscellaneous employee compensation expenses. We expect employee compensation expense to increase over the next 12 months as we hire additional executive officers and other employees in connection with the growth and expansion of our business and operations.

General and Administrative Expenses. General and administrative expenses decreased $233,687 to $82,437 for the nine-month period ended September 30, 2017 from $316,124 for the nine-month period ended September 30, 2016. The decrease of $233,687 was due primarily to a decrease of $273,763 for bad debt expense, partially offset by $26,375 for SEC filings fees and investor relations expenses and increases in other miscellaneous general and administrative expenses.

Income From Investment in Paradise on Wings

Income from investment in Paradise on Wings consists of our share of the income from our 50% ownership interest in Paradise on Wings that we purchased on January 20, 2014. Income from investment in Paradise on Wings was $106,082 for the nine-month period ended September 30, 2016. We did not generate any income from investment in Paradise on Wings for the nine-month period ended September 30, 2017. We performed a review of its investment in Paradise on Wings at the end of the year ended December 31, 2016 and determined that, for the reasons more fully described herein under Note 8. Fair Value Measurements in our consolidated financial statements, an “other-than-temporary” decline in the value of the investment had occurred and that a loss on impairment equal to its then carrying amount of $348,143 should be recognized. Accordingly, the carrying amount of our investment in Paradise on Wings was zero at September 30, 2017 and December 31, 2016. In addition, because the carrying amount of our investment in Paradise on Wings was zero at September 30, 2017, the amount of our share of net loss incurred by Paradise on Wings that we recognized during the nine-month period ended September 30, 2017 was zero. We sold our 50% ownership interest in Paradise on Wings on September 30, 2017.

Gain on Settlement of Liabilities

We recognized a gain on the settlement of liabilities of $175,449 for the nine-month period ended September 30, 2016. We did not recognize any gain on the settlement of liabilities for the three-month period ended September 30, 2017. A description of the current settlement agreement, the 2010 settlement agreement and the legal proceedings is set forth under Note 16. Judgments in Legal Proceedings in our consolidated financial statements.

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Net Income

We generated net income of $87,675 for the nine-month period ended September 30, 2017 compared to $245,939 for the nine-month period ended September 30, 2016. The decrease of $158,264 was due primarily to increases of $2,470,461 for restaurant operating costs and $229,735 for professional fees, and decreases of $106,082 for income from investment in Paradise on Wings and $175,449 for gain on settlement of liabilities. This was partially offset by an increase of $2,436,647 for revenue and decreases of $139,956 for employee compensation expense and $233,687 for general and administrative expenses.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through private sales of equity securities, the use of short- and long-term debt and cash flows from operating activities.

Net cash provided by operating activities was $242,619 during the nine-month period ended September 30, 2017 compared to $226,872 during the nine-month period ended September 30, 2016. The increase of $15,747 was due primarily to an increase of $196,445 for stock compensation expense, and decreases of $106,082 for income from investment in Paradise on Wings, $175,449 for gain on settlement of liabilities and $95,126 for accounts receivable. This was partially offset by decreases of $158,264 for net income, $271,590 for bad debt expense and $113,988 for accounts payable and accrued liabilities.

Net cash provided by investing activities was $45,686 during the nine-month period ended September 30, 2017 compared to net cash used by investing activities of $224,545 during the nine-month period ended September 30, 2016. The difference of $270,231 was due to decreases of $74,593 for the issuance of notes receivable and $595,635 for the issuance of notes receivable to related parties, and increases of $54,741 for repayments of notes receivable and $24,000 for the sale of our 50% ownership interest in Paradise on Wings. This was partially offset by a decrease of $445,683 for the repayment of notes receivable issued to related parties, and an increase of $33,055 for purchases of fixed assets.

Net cash used by financing activities was $206,324 during the nine-month period ended September 30, 2017. We did not have any net cash flows from financing activities during the nine-month period ended September 30, 2016. The increase of $206,324 of net cash used by financing activities was due to a decrease of $783,323 for proceeds from the issuance of notes payable to related parties, partially offset by a decrease of $576,999 for repayments of notes payable issued to related parties.

Our primary sources of capital since January 1, 2016 are set forth below.

During the year ended December 31, 2016, we borrowed $840,353 under our credit facility with Blue Victory and repaid $824,250 under the credit facility. Accordingly, the amount of principal outstanding under the credit facility was $16,103 at December 31, 2016. We repaid the remaining $16,103 under the credit facility during the nine-month period ended September 30, 2017. Accordingly, no principal was outstanding under the credit facility at September 30, 2017. A summary of the terms of our credit facility with Blue Victory is set forth herein under Note 10. Debt Obligations in our consolidated financial statements.

During the nine-month period ended September 30, 2017, we borrowed $499,837 from Blue Victory and repaid $473,589 to Blue Victory under a separate loan. Accordingly, the amount of principal outstanding under the loan was $26,248 at September 30, 2017. A description of this loan from Blue Victory is set forth herein under Note 10. Debt Obligations in our consolidated financial statements.

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To date, our capital needs have been met through cash generated by our operations, sales of our equity securities and the use of short- and long-term debt to fund our operations, including our credit facility with Blue Victory. We have used these sources of capital to pay virtually all of the costs and expenses that we have incurred to date. These costs and expenses have been comprised primarily of the professional fees, employee compensation expenses, and general and administrative expenses discussed above. We intend to continue to rely upon each of these sources to fund our operations and expansion efforts, including additional acquisitions of controlling or non-controlling financial interests in other restaurant brands, during the next 12 months.

We can provide no assurance that these sources of capital will be adequate to fund our operations and expansion efforts during the next 12 months. If these sources of capital are not adequate, we will need to obtain additional capital through alternative sources of financing. We may attempt to obtain additional capital through the sale of equity securities or the issuance of short- and long-term debt. If we raise additional funds by issuing shares of our common stock, our stockholders will experience dilution. If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock, our stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of our common stock. Debt financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends. In addition, any equity securities or debt that we issue may have rights, preferences and privileges senior to those of the shares of common stock held by our stockholders.

We have not made arrangements to obtain additional capital and can provide no assurance that additional financing will be available in an amount or on terms acceptable to us, if at all. Our ability to obtain additional capital will be subject to a number of factors, including market conditions and our operating performance. These factors may make the timing, amount, terms and conditions of any proposed future financing transactions unattractive to us. If we cannot raise additional capital when needed, or if such capital cannot be obtained on acceptable terms, we may not be able to pay our costs and expenses as they are incurred, take advantage of future acquisition opportunities, respond to competitive pressures or unanticipated events, or otherwise execute upon our business plan. This may adversely affect our business, financial condition and results of operations and, in the extreme case, cause us to discontinue our operations.

Off-Balance Sheet Arrangements

As of September 30, 2017, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, that had been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

45

Item 4. Controls and Procedures.

As of September 30, 2017, we carried out the evaluation of the effectiveness of our disclosure controls and procedures required by Rule 13a-15(e) under the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting identified in connection with this evaluation that occurred during our fiscal quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

46

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Securities and Use of Proceeds.

In July 2017, we issued 16,823 shares of our common stock to Seenu G. Kasturi under the terms of his employment agreement with us. The securities were issued to an accredited investor in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act directly by us without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person. A description of Mr. Kasturi’s employment agreement is set forth herein under Note 14. Commitments and Contingencies in our consolidated financial statements.

In August 2017, we approved the issuance of a total of 2,750 shares of our common stock to certain of our non-executive employees as incentive compensation. The securities were issued to a limited number of individuals in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act directly by us without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person.

In August 2017, we approved the issuance of a total of 13,000 shares of our common stock to certain of our franchisees as incentive compensation. The securities were issued to a limited number of individuals in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act directly by us without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person.

In August 2017, we issued 35,295 shares of our common stock to a consultant as payment for $30,000 of consulting fees that we owed the consultant. The securities were issued to an accredited investor in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act directly by us without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person.

Item 6. Exhibits.

The documents set forth below are filed as exhibits to this report.

Exhibit No.	Exhibit Description
31.1	Certification of Chief Executive Officer of the registrant required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer of the registrant required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Certification of Chief Executive Officer and Chief Financial Officer of the registrant required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ARC GROUP, INC.
Date:  November 14, 2017	/s/ Seenu G. Kasturi
	Seenu G. Kasturi
	Chief Financial Officer
	(principal financial officer and duly authorized officer)

48

EXHIBIT INDEX

Exhibit No.	Exhibit Description
31.1	Certification of Chief Executive Officer of the registrant required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer of the registrant required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Certification of Chief Executive Officer and Chief Financial Officer of the registrant required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

EX-31.1

Exhibit 31.1

Certification

I, Richard W. Akam, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ARC Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Richard W. Akam

Richard W. Akam

Chief Executive Officer

(Principal Executive Officer)

Date: November 14, 2017

EX-31.2

Exhibit 31.2

Certification

I, Seenu G. Kasturi, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ARC Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Seenu G. Kasturi

Seenu G. Kasturi

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Date: November 14, 2017

EX-32.1

Exhibit 32.1

Certifications Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

In connection with the Quarterly Report of ARC Group, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2017, as filed with the Securities and Exchange Commission (the “report”), I, Richard W. Akam, Chief Executive Officer of the Company, and I, Seenu G. Kasturi, Chief Financial Officer of the Company, do hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to my knowledge:

(1) the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 14, 2017	/s/ Richard W. Akam
	Richard W. Akam
	Chief Executive Officer
	(Principal Executive Officer)
Dated:  November 14, 2017	/s/ Seenu G. Kasturi
	Seenu G. Kasturi
	Chief Financial Officer
	(Principal Financial Officer and Principal
	Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 10, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	ARC Group, Inc.
Entity Central Index Key	0001452872
Trading Symbol	arck
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		6,937,869
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Assets
Cash and cash equivalents	$ 132,904	$ 50,923
Restricted cash and cash equivalents	13,076
Accounts receivable, net	48,971	67,395
Accounts receivable, net - related party	3,056	14,568
Ad funds receivable, net	37,093
Ad funds receivable, net - related party	2,601
Other receivables, net - related party	24,000
Inventory	40,867	45,250
Notes receivable, net	37,171	63,742
Interest receivable, net		838
Other current assets	16,711	1,806
Total current assets	356,450	244,522
Notes receivable, net of current portion	1,209	29,379
Property and equipment, net	102,101	80,948
Total assets	459,760	354,849
Liabilities and stockholders' deficit
Accounts payable and accrued expenses	703,809	735,331
Accounts payable and accrued expenses - related party	46,149	98,434
Accrued interest	12,969	2,594
Ad fund liability	13,076
Settlement agreements payable	262,155	253,724
Accrued legal settlement	153,961	148,105
Notes payable - in default	7,000	7,000
Notes payable - related party	26,248	232,572
Contingent consideration	20,897	20,897
Other current liabilities	10,985	5,096
Total current liabilities	1,257,249	1,503,753
Total liabilities	1,257,249	1,503,753
Stockholders' deficit:
Class A common stock - $0.01 par value: 100,000,000 shares authorized, 6,935,119 and 6,647,464 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	69,351	66,475
Additional paid-in capital	3,982,077	3,747,953
Stock subscriptions payable	176,740	150,000
Accumulated deficit	(5,025,657)	(5,113,332)
Total stockholders' deficit	(797,489)	(1,148,904)
Total liabilities and stockholders' deficit	$ 459,760	$ 354,849

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Class A common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Class A common stock, shares authorized	100,000,000	100,000,000
Class A common stock, shares issued	6,935,119	6,647,464
Class A common stock, shares outstanding	6,935,119	6,647,464

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenue:
Restaurant sales	$ 841,214		$ 2,595,679
Franchise and other revenue	165,905	$ 174,499	509,032	$ 476,831
Franchise and other revenue - related party	40,285	9,092	123,343	314,576
Total net revenue	1,047,404	183,591	3,228,054	791,407
Restaurant operating costs:
Cost of sales	274,846		869,600
Labor	293,035		857,933
Occupancy	92,729		187,264
Other operating expenses	198,354		555,664
Professional fees	67,975	52,550	351,185	121,450
Employee compensation expense	91,033	140,600	250,626	390,582
General and administrative expenses	50,991	268,559	82,437	316,124
Total operating expenses	1,068,963	461,709	3,154,709	828,156
Income / (loss) from operations	(21,559)	(278,118)	73,345	(36,749)
Other income:
Interest income / (expense)	(6,506)	(2,622)	(22,730)	293
Income from investment in Paradise on Wings		101,056		106,082
Gain on settlement of liabilities		175,449		175,449
Gain on sale of investment in Paradise on Wings -related party	24,000		24,000
Other income	3,976		13,060	864
Total other income	21,470	273,883	14,330	282,688
Net income / (loss)	$ (89)	$ (4,235)	$ 87,675	$ 245,939
Net income / (loss) per share - basic and fully diluted	$ (0.00)	$ (0.00)	$ 0.01	$ 0.04
Weighted average number of shares outstanding - basic and fully diluted	6,773,041	6,612,983	6,768,839	6,599,357

XML

Consolidated Statement of Stockholders' Deficit (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Common Stock	Additional Paid-in Capital	Stock Subscriptions Payable	Accumulated Deficit	Total
Balance at Dec. 31, 2016	$ 66,475	$ 3,747,953	$ 150,000	$ (5,113,332)	$ (1,148,904)
Balance (in shares) at Dec. 31, 2016	6,647,464				6,647,464
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued for services	$ 2,523	204,477	26,740		$ 233,740
Common stock issued for services (in shares)	252,360
Common stock issued for payment of consulting fees due	$ 353	29,647			30,000
Common stock issued for payment of consulting fees due (in shares)	35,295
Net income				87,675	87,675
Balance at Sep. 30, 2017	$ 69,351	$ 3,982,077	$ 176,740	$ (5,025,657)	$ (797,489)
Balance (in shares) at Sep. 30, 2017	6,935,119				6,935,119

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities
Net income	$ 87,675	$ 245,939
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	11,902
Stock-based compensation expense	233,740	37,295
Stock-based payment for consulting fees due	30,000
Bad debt expense		271,590
Income from investment in Paradise on Wings		(106,082)
Gain on sale of investment in Paradise on Wings - related party	(24,000)
Gain on settlement of liabilities		(175,449)
Changes in operating assets and liabilities:
Restricted cash	(13,076)
Accounts receivable	18,424	(36,858)
Accounts receivable - related party	11,512	(28,332)
Ad fund receivable	(37,093)
Ad fund receivable - related party	(2,601)
Other receivables	(24,000)
Inventory	4,383
Interest receivable	838	11,380
Other assets	(14,905)	(28,841)
Accounts payable and accrued liabilities	(31,522)	63,579
Accounts payable and accrued liabilities - related party	(41,910)	(23,023)
Advertising fund liabilities	13,076
Settlement agreements payable	8,431	(6,401)
Accrued legal settlement	5,856
Other liabilities	5,889	2,075
Net cash provided by operating activities	242,619	226,872
Cash flows from investing activities
Issuance of notes receivable		(74,593)
Repayments of notes receivable	54,741
Issuance of notes receivable - related party		(595,635)
Repayments of notes receivable - related party		445,683
Sale of investment in Paradise on Wings	24,000
Purchases of fixed assets	(33,055)
Net cash provided / (used) by investing activities	45,686	(224,545)
Cash flows from financing activities
Proceeds from issuance of notes payable - related party		783,323
Repayments of notes payable - related party	(206,324)	(783,323)
Net cash used by financing activities	(206,324)
Net decrease in cash and cash equivalents	81,981	2,327
Cash and cash equivalents, beginning of period	50,923	6,775
Cash and cash equivalents, end of period	132,904	9,102
Supplemental disclosure of cash flow information
Cash paid for interest	0	0
Cash paid for income taxes	$ 0	0
Schedule of non-cash financing activities
Stock issued for settlement of litigation		$ 19,551

XML

Description of Business

9 Months Ended

Sep. 30, 2017

Description Of Business [Abstract]

Description of Business

Note 1. Description of Business

ARC Group, Inc., a Nevada corporation (the “Company”), was incorporated in April 2000. The Company’s business is focused on the development of the Dick’s Wings^® franchise and the acquisition of financial interests in other restaurant brands. The Dick’s Wings concept is currently comprised of traditional restaurants like its Dick’s Wings & Grill^® restaurants and non-traditional units like the Dick’s Wings concession stands that the Company has at EverBank Field in Jacksonville, Florida.

On December 19, 2016, the Company acquired all of the issued and outstanding membership interests of Seediv, LLC, a Louisiana limited liability company (“Seediv”), for $600,000 and an earn-out payment. Seediv is the owner and operator of the Dick’s Wings & Grill restaurant located at 100 Marketside Avenue, Suite 301, in the Nocatee development in Ponte Vedra, Florida 32081 (the “Nocatee Restaurant”) and the Dick’s Wings & Grill restaurant located at 6055 Youngerman Circle in Argyle Village in Jacksonville, Florida 32244 (the “Youngerman Circle Restaurant”; together with the Nocatee Restaurant, the “Nocatee and Youngerman Restaurants”). A description of the Company’s acquisition of Seediv is set forth herein under Note 5 – Acquisition of Seediv.

At September 30, 2017, the Company had 22 restaurants and two concession stands. Of the 22 restaurants, 17 were located in Florida and five were located in Georgia. The Company’s concession stands were also located in Florida. Two of the Company’s restaurants were owned by the Company, and the remaining 20 restaurants were owned and operated by franchisees. The operation of the Company’s concession stands at EverBank Field has been assigned to a third-party operator.

XML

Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Seediv, LLC. All intercompany accounts and transactions were eliminated in consolidation. 

The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the disclosures included in these financial statements are adequate to make the information presented not misleading.

The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in management’s opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K/A. The results of operations for the three- and nine-month periods ended September 30, 2017 are not necessarily indicative of the results that the Company will have for any subsequent quarter or full fiscal year.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the Company’s financial statements for the 2016 fiscal year have been reclassified to conform to the 2017 fiscal year presentation. These reclassifications did not result in any change to the previously reported total assets, net income / (loss) or stockholders’ deficit.

Going Concern 

As shown in the accompanying financial statements, the Company had an accumulated deficit of $5,025,657 and a working capital deficit of $900,799 at September 30, 2017. In addition, the Company incurred net losses of $863,576 and $432,730 for the years ended December 31, 2016 and 2015, respectively, and experienced negative cash flows from operations for each of those years. Those facts create substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon it successfully executing upon its plan to generate positive cash flows during the remainder of its 2017 fiscal year and during its 2018 fiscal year. In furtherance of this plan, the Company is seeking to increase sales and reduce expenses at its company-owned restaurants, increase the number of franchised restaurants that it has, and acquire additional brands that can contribute profits and positive cash flows to the Company. The Company’s financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

Segment Disclosure

The Company has a single brand, all of the restaurants of which operate in the full-service casual dining industry in the United States. Pursuant to the standards of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting (“ASC 280”), the Company’s Chief Executive Officer and President, who comprise the Company's Chief Operating Decision Maker function for the purposes of ASC 280, concluded that the Company operates as a single segment for reporting purposes.

Revenue Recognition

The Company’s revenue consists primarily of proceeds from the sale of food and beverage products at its Company-owned restaurants, and royalty payments, franchise fees and area development fees that it receives from its franchisees. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed and determinable, and collectability is reasonably assured in accordance with ASC Topic 605, Revenue Recognition. The Company records revenue from the sale of food and beverages as products are sold. Royalties are accrued as earned and are calculated each period based on restaurant sales. Franchise fees from individual franchise sales is recognized upon the opening of the franchised restaurant when all material obligations and initial services to be provided by the Company have been performed. Area development fees are dependent upon the number of restaurants in the territory, as are the Company’s obligations under the area development agreement. Consequently, as obligations are met, area development fees are recognized proportionally with expenses incurred with the opening of each new restaurant and any royalty-free periods.

The Company records gift cards under a Dick’s Wings system-wide program.  Gift cards sold are recorded as a gift card liability.  When redeemed, the gift card liability account is offset by recording the transaction as revenue.  Breakage income represents the value associated with the portion of gift cards sold that will most likely never be redeemed. Based on the Company’s historical gift card redemption patterns and the fact that the Company’s gift cards have no expiration dates or dormancy fees, the Company can reasonably estimate the amount of gift card balances for which redemption is remote and record breakage income based on this estimate. The Company updates its estimate of the breakage rate periodically and, if necessary, adjusts the gift card liability balance accordingly.

General Advertising Fund

The Company has established a general advertising fund that it uses to pay for advertising costs, sales promotions, market research and other support functions intended to maximize general public recognition and acceptance of the Dick’s Wings brand. Company-owned and franchised restaurants are required to contribute at least 1%, but not more than 2%, of their gross revenue to the Company’s general advertising fund. Contributions made by franchisees to the general advertising fund and marketing and advertising expenses paid by the general advertising fund are not recognized as revenues and expenses. They instead constitute agency transactions. These contributions are recorded as a liability against which specific costs are charged.

We account for the cash and cash equivalents held by the general advertising fund as restricted cash on our accompanying consolidated balance sheets. The restricted cash of this fund is classified as current as it is expected to be utilized to fund short-term obligations of the general advertising fund.

Significant Accounting Policies

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”). ASU 2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 introduces a five-step model to achieve its core principle of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016. Early adoption is not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers – Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred by one year the effective date of ASU 2014-09 by making ASU 2014-09 effective for annual reporting periods beginning after December 15, 2017, including interim period within that reporting period. The Company believes that the adoption of ASU 2014-09 will not have a material impact on its financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding on certain principles that are currently in U.S. auditing standards. Specifically, ASU 2014-15: (i) provides a definition of the term “substantial doubt”, (ii) requires an evaluation every reporting period including interim periods, (iii) provides principles for considering the mitigating effects of management’s plans, (iv) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (v) requires an express statement and other disclosures when substantial doubt is not alleviated, and (vi) requires an assessment for a period of one year after the date that the financial statements are issued or available to be issued. ASU 2014-15 is effective for fiscal years ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 did not have a material impact on the Company’s financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), which changes the subsequent measurement of inventory from lower of cost or market to lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2015-11 did not have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires that lease arrangements longer than 12 months result in the lessee recognizing a lease asset and liability. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (“ASU 2016-18”). ASU 2016-18 provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact of ASU 2016-18, but believes that ASU 2016-18 will not have a material impact on the Company’s financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is considered a business. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for certain transactions. The Company is currently assessing the impact that ASU 2017-01will have on its financial statements.

The Company reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations or that no material effect is expected on the Company’s financial statements as a result of future adoption.

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Net Income / (Loss) Per Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Net Income / (Loss) Per Share

Note 3. Net Income / (Loss) Per Share

The Company calculates basic and diluted net income / (loss) per share in accordance with ASC Topic 260, Earnings per Share. Basic net income / (loss) per share is based on the weighted-average number of shares of the Company’s common stock outstanding during the applicable period, and is calculated by dividing the reported net income / (loss) for the applicable period by the weighted-average number of shares of common stock outstanding during the applicable period. Diluted net income / (loss) per share is calculated by dividing the reported net income / (loss) for the applicable period by the weighted-average number of shares of common stock outstanding during the applicable period, as adjusted to give effect to the exercise or conversion of all potentially dilutive securities outstanding at the end of the applicable period.

The Company did not have any securities outstanding at September 30, 2017 and 2016 that were exercisable or convertible into shares of the Company’s common stock. As a result, basic net income / (loss) per share was equal to diluted net income / (loss) per share for the three- and nine-month periods ended September 30, 2017 and 2016.

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Investment in Paradise on Wings

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

Investment in Paradise on Wings

Note 4. Investment in Paradise on Wings

On January 20, 2014, the Company entered into a contribution agreement with Paradise on Wings. In connection with the execution of the contribution agreement, on January 20, 2014, the Company and the incumbent members of Paradise on Wings entered into an amended and restated operating agreement of Paradise on Wings to reflect the terms of the contribution agreement. The transactions contemplated by the contribution agreement and operating agreement were completed on January 20, 2014.

Under the terms of the contribution agreement, the Company (sometimes referred to herein as the “Class B Member”) acquired 117.65 Class B membership interests in Paradise on Wings, representing all of the outstanding Class B membership interests and a 50% ownership interest in Paradise on Wings (the “Class B Membership Interests”). The incumbent members of Paradise on Wings (the “Class A Members”) converted their existing membership interests into a total of 117.65 Class A membership interests in Paradise on Wings, representing all of the outstanding Class A membership interests and a 50% ownership interest in Paradise on Wings (the “Class A Membership Interests”).

The Company agreed to pay $400,000 in cash, of which $350,000 was paid prior to closing and $50,000 was due upon closing, and $400,000 in shares of the Company’s common stock to Paradise on Wings in consideration for the Class B Membership Interests (the “Capital Contribution”). The shares of common stock (the “ARC Shares”) were valued based upon the opening bid price of the common stock on the OTCmarkets.com on the morning of the closing date, which was $1.70 per share. Accordingly, the Company issued 235,295 shares of common stock to Paradise on Wings on the closing date.

Under the operating agreement, the power to manage the business and affairs of Paradise on Wings has been vested in the managers of Paradise on Wings. The Class A Members may appoint up to two managers, which manager(s) have a total of 50% of the vote of all managers. The Company, as the owner of all of the Class B Membership Interests, may appoint one manager who has a total of 50% of the vote of all managers. Notwithstanding the foregoing, the Contributed Capital may not be used to pay salaries or bonuses to any of the Class A Members or Class B Members, and the vote of 60% of the total outstanding Class A Membership Interests and Class B Membership Interests is required in the event Paradise on Wings wishes to use the Contributed Capital for any permitted purpose.

The Class A Membership Interests are identical to the Class B Membership Interests in all respects except that the Class A Membership Interests have a preferred right to distributions from Paradise on Wings with respect to the ARC Shares. The Class A Members, through their ownership of the Class A Membership Interests, are entitled to receive a total of 50% of all items of income, gain, losses, deductions and expenses (including 100% of any such items associated with the ARC Shares), and the Company, through its ownership of the Class B Membership Interests, was entitled to receive 50% of all items of income, gain, losses, deductions and expenses (with the exception of any such items associated with the ARC Shares).

The Company accounted for its 50% ownership interest in Paradise on Wings using the equity method of accounting because the Company had the ability to exert significant influence, but not control, over the operating and financial policies of Paradise on Wings.   The investment was initially recorded at the fair value amount of the Company’s initial investment and subsequently adjusted for the Company’s share of the net income and loss, and cash contributions and distributions, to or from Paradise on Wings.  The Company reported its income from Paradise on Wings as income from investment in Paradise on Wings in its statements of operations, and reported its investment in Paradise on Wings as equity investment in Paradise on Wings in its balance sheets.

Set forth below is a summary of the unaudited income statement of Paradise on Wings for the three- and nine-month periods ended September 30, 2017 and 2016 provided to the Company by Paradise on Wings.

Statement of Operations	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenue	$	74,831		$	226,273		$	91,658		$	251,421
Operating expenses		(234,525	)		(484,436	)		(124,841	)		(256,325	)
Loss from operations		(159,694	)		(258,163	)		(33,183	)		(4,904	)
Other income / (expense)		(104,203	)		(182,398	)		235,295			217,067
Net income / (loss)	$	(263,897	)	$	(440,561	)	$	202,112		$	212,163
Company’s share of net income / (loss)	$	(131,949	)	$	(220,281	)	$	101,056		$	106,082

Set forth below is a summary of the unaudited balance sheet of Paradise on Wings at September 30, 2017 and December 31, 2016 provided to the Company by Paradise on Wings.

Balance Sheet	September 30, 2017		December 31, 2016
Current assets	$	119,837	$	3,549
Equity investment		-0-		141,168
Total assets	$	119,837	$	144,717
Total liabilities	$	110,120	$	110,596
Equity		9,717		34,121
Total liabilities and equity	$	119,837	$	144,717

The Company performed a review of its investment in Paradise on Wings at the end of its 2016 fiscal year and determined that, for the reasons more fully described in Note 8. Fair Value Measurements, an “other-than-temporary” decline in the value of the investment had occurred and that a loss on impairment equal to its then carrying amount of $348,143 should be recognized. Accordingly, the carrying amount of the Company’s investment in Paradise on Wings was zero at September 30, 2017 and December 31, 2016. In addition, because the carrying amount of the Company’s investment in Paradise on Wings was zero at September 30, 2017, the amount of the Company’s share of net loss incurred by Paradise on Wings that was recognized by the Company during the three- and nine-month periods ended September 30, 2017 was zero.

On September 30, 2017, the Company sold its 50% ownership interest in Paradise on Wings to Seenu G. Kasturi for $24,000. The purchase price of $24,000 was reflected in Other Receivables, Net – Related Party and Gain on Sale of Investment in Paradise on Wings – Related Party at September 30, 2017. Mr. Kasturi paid the purchase price in full subsequent to September 30, 2017.

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Acquisition of Seediv

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Acquisition of Seediv

Note 5. Acquisition of Seediv

On December 19, 2016, the Company entered into a membership interest purchase agreement with Seenu G. Kasturi pursuant to which the Company agreed to acquire all of the issued and outstanding membership interests of Seediv from Mr. Kasturi. Seediv is the owner and operator of the Nocatee and Youngerman Restaurants. The closing of the acquisition occurred simultaneously with the execution of the membership interest purchase agreement by the Company and Mr. Kasturi on December 19, 2016.

The Company agreed to pay Mr. Kasturi $600,000 for the membership interests on the closing date, consisting of: (a) a cash payment of $13,665, (b) the cancellation and termination of accounts receivable originally owed to the Company by DWG Acquisitions, LLC, a Louisiana limited liability company (“DWG Acquisitions”), and subsequently transferred to Seediv, in the amount of $259,123, and (c) the cancellation and termination of debt originally owed to the Company by Raceland QSR, LLC, a Louisiana limited liability company (“Raceland QSR”), and subsequently transferred to Seediv, in the amount of $327,212. The Company also agreed to pay Mr. Kasturi an earn-out payment (the “Earn-Out Payment”) calculated as follows: (x) the amount equal to: (i) 5.5, multiplied by (ii) the amount equal to the sum of: (A) earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the Nocatee Restaurant for the year ended December 31, 2017 (the “Earn-Out Period”), plus (B) EBITDA for the Youngerman Circle Restaurant for the Earn-Out Period, less (y) $600,000; provided, however, that in no event shall the Earn-Out Payment be less than zero.

At any time on or prior to April 16, 2018, Mr. Kasturi may elect to receive all or part of the Earn-Out Payment in the form of shares of the Company’s common stock; provided, however, that Mr. Kasturi may only make this election if, at the time of making such election: (a) Mr. Kasturi is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), and (b) Mr. Kasturi executes a customary investment representation letter in a form acceptable to the Company. In the event Mr. Kasturi elects to receive shares of common stock, the number of shares will be calculated based on the average daily closing price of the shares of common stock on the OTCQB market tier of the “pink sheets” maintained by the OTC Markets Group, Inc. (the “OTCQB”) during the 30-day period immediately preceding the closing date. The shares will be “restricted securities” as such term is defined under Rule 144 of the Securities Act. Notwithstanding the foregoing: (x) in no event shall the Company be required to issue shares of common stock exceeding 20% of the number of shares of common stock issued and outstanding on the closing date, and (y) in no event shall the Company be required to issue more shares of common stock to Mr. Kasturi than are then authorized and available for issuance by the Company. In the event Mr. Kasturi elects to receive all or part of the Earn-Out Payment in the form of shares of common stock and the restrictions set forth in clauses (x) and/or (y) of the immediately preceding sentence are triggered, then, notwithstanding Mr. Kasturi’s election to receive all or part of the Earn-Out Payment in the form of shares of common stock, the Company shall issue the maximum number of shares of common stock permitted under clauses (x) and (y) and shall settle any liability to Mr. Kasturi created as a result thereof in cash.

As of December 19, 2016, Mr. Kasturi owned approximately 14.8% of the Company’s issued and outstanding shares of Common Stock and all of the outstanding membership interests in Seediv. In addition, as of December 19, 2016, he served as the President, Treasurer and Secretary, and as the sole member of the board of directors, of Blue Victory Holdings, Inc., a Nevada corporation (“Blue Victory”), and owned 90% of the equity interests in Blue Victory. Blue Victory loaned the Company $840,353 and $1,987,953 during the years ended December 31, 2016 and 2015, respectively. As of December 19, 2016, Mr. Kasturi also served as the President, Treasurer and Secretary of, and is the sole member of, DWG Acquisitions and Raceland QSR, and owned all of the equity interests in DWG Acquisitions and Raceland QSR. DWG Acquisitions owned and operated six of the Company’s 22 franchised restaurants as of December 19, 2016. Raceland QSR served as the landlord under the Company’s lease for the Youngerman Circle Restaurant as of December 19, 2016.

The acquisition was accounted for as a business combination. Based upon its analysis of the above facts, the Company determined that the acquisition of Seediv was a related-party transaction. Accordingly, the assets acquired and liabilities assumed were recorded based on their cost basis at the time of the acquisition and the excess of the purchase price over the aggregate cost basis of the net assets acquired was allocated to Seediv compensation expense.

The assets acquired and liabilities assumed were comprised of the following:

Cash and cash equivalents	$	18,089
Inventory		40,574
Other current assets		6,538
Leasehold improvements, net		46,541
Furniture and equipment, net		33,701
Total assets acquired		145,443
Accounts payable – related party		(1,026	)
Accrued expenses		(126,878	)
Notes payable – related party		(234,286	)
Total liabilities assumed		(362,190	)
Seediv compensation expense		251,309
Net consideration paid	$	34,562

In connection with the acquisition of Seediv, the Company recorded $20,897 of contingent consideration as the estimated initial fair value of the Earnout Payment. A description of the manner by which the Earnout Payment was valued is set forth herein under Note 8. Fair Value Measurements.

The following table summarizes certain financial information for the three- and nine-month periods ended September 30, 2017 contained in the accompanying unaudited consolidated financial statements, and certain unaudited pro forma financial information for the three- and nine-month periods ended September 30, 2016 as if the acquisition of Seediv had occurred on January 1, 2016:

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017		Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenue	$	1,047,404		$	3,228,054	$	1,089,081		$	3,546,474
Income / (loss) from continuing operations		(21,559	)		73,345		(358,656	)		(84,279	)
Net income / (loss)		(89	)		87,675		(74,514	)		198,398
Net income / (loss) per share – basic and fully diluted	$	(0.00	)	$	0.01	$	(0.01	)	$	0.03

The results of operations for Seediv were included in the Company's results of operations beginning December 19, 2016. The actual amounts of revenue and net income / (loss) for Seediv that are included in the Company’s Consolidated Statements of Operations for the three-month period ended September 30, 2017 were $841,214 and $(44,108), respectively, and for the nine-month period ended September 30, 2017 were $2,595,679 and $80,661, respectively.

The unaudited pro forma financial information has been presented for informational purposes only and is not necessarily indicative of the actual results that would have occurred had the acquisition been consummated on January 1, 2016 or of the future results of the combined entities. For additional information about the Company’s acquisition of Seediv, please refer to the Company’s Current Report on Form 8-K and Current Report on Form 8-K/A filed with the Securities and Exchange Commission on December 23, 2016 and April 28, 2017, respectively.

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Inventory

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventory

Note 6. Inventory

Inventory was comprised of the following at September 30, 2017 and December 31, 2016, respectively:

	September 30, 2017		December 31, 2016
Food	$	28,369	$	25,942
Beverages		12,498		19,308
Total	$	40,867	$	45,250

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Property and Equipment, Net

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Note 7. Property and Equipment, Net

Property and equipment were comprised of the following at September 30, 2017 and December 31, 2016, respectively:

	September 30, 2017			December 31, 2016
Leasehold improvements	$	68,346		$	62,125
Furniture, fixtures and equipment		82,154			50,140
Subtotal		150,500			112,265
Less: accumulated depreciation		(48,399	)		(31,317	)
Total	$	102,101		$	80,948

Depreciation expense was $4,571 and $11,902 for the three- and nine-month periods ended September 30, 2017. The Company did not incur any depreciation expense for the three- and nine-month periods ended September 30, 2016.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 8. Fair Value Measurements

On January 20, 2014, the Company purchased a 50% ownership interest in Paradise on Wings. On December 19, 2016, the Company acquired all of the issued and outstanding membership interests of Seediv. A description of the investment in Paradise on Wings and the acquisition of Seediv is set forth herein under Note 4. Investment in Paradise on Wings and Note 5. Acquisition of Seediv, respectively.

The Company performed a review of its investment in Paradise on Wings at the end of its 2016 fiscal year to determine whether an impairment must be recorded. As described more fully in Note 4. Investment in Paradise on Wings, Paradise on Wings incurred losses of $445,370 and $495,435 during the years ended December 31, 2016 and 2015, respectively. As a result of these recurring operating losses and other quantitative and qualitative factors and circumstances surrounding the investment, including prices for comparable businesses and those factors and circumstances more fully described in Note 2. Significant Account Policies – Investment in Paradise on Wings, the Company determined that an “other-than-temporary” decline in the value of the investment had occurred and that a loss on impairment equal to its then carrying amount of $348,143 should be recognized. In addition, because Paradise on Wings incurred losses of $263,897 and $440,561 during the three- and nine-month periods ended September 30, 2017, the carrying amount of the Company’s investment in Paradise on Wings remained unchanged at September 30, 2017. Accordingly, the carrying amount of the Company’s investment in Paradise on Wings was zero at September 30, 2017 and December 31, 2016. On September 30, 2017, the Company sold its 50% ownership interest in Paradise on Wings to Seenu G. Kasturi for $24,000.

In connection with the acquisition of Seediv, the Company agreed to pay contingent consideration in the form of an earn-out payment. The Company determined that the fair value of the liability for the contingent consideration was estimated to be $20,897 at the acquisition date. The fair value of this liability did not change from the initial valuation calculated on the acquisition date.

The Company determined the fair value of the contingent consideration based on a probability-weighted approach derived from earn-out criteria estimates and a probability assessment with respect to the likelihood of achieving the earn-out criteria. The measurement was based upon significant inputs not observable in the market, including internal projections and an analysis of the target markets. The resultant probability-weighted contingent consideration was discounted using a discount rate based upon the weighted-average cost of capital.

At each reporting date, the Company revalues the contingent consideration to the reporting date fair value and records increases and decreases in the fair value as income or expense under general and administrative expenses in the Company’s Consolidated Statements of Operations. Increases or decreases in the fair value of the contingent consideration may result from, among other things, changes in discount periods and rates, changes in the timing and amount of earn-out criteria, and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

The following table presents the contingent consideration recorded by the Company in connection with the acquisition of Seediv within the fair value hierarchy utilized to measure fair value on a recurring basis at September 30, 2017 and December 31, 2016, respectively:

	Level 1		Level 2		Level 3
Contingent consideration:
September 30, 2017	$	-0-	$	-0-	$	20,897
December 31, 2016	$	-0-	$	-0-	$	20,897

The fair value measurement of the contingent consideration represented a Level 3 fair value measurement because it was based on significant inputs not observed in the market. The Company’s other financial instruments consist of cash and cash equivalents, accounts, ad fund and other receivables, notes receivable, accounts payable, accrued expenses and notes payable. The estimated fair values of the cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates their respective carrying amounts due to the short-term maturities of these instruments. The estimated fair values of the notes receivable and notes payable also approximates their respective carrying amounts since their terms are similar to those in the lending market for comparable loans with comparable risks. The fair value of related-party transactions is not determinable due to their related-party nature. None of these instruments are held for trading purposes.

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Notes Receivable

9 Months Ended

Sep. 30, 2017

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Notes Receivable

Note 9. Notes Receivable

Notes Receivable – Unrelated Parties

In May and June 2013, the Company made loans to certain of its franchisees in the aggregate original principal amount of $40,507 to assist them with the payment of franchise fees owed to the Company and the payment of other business expenses incurred by the franchisees in running their respective restaurants. The loans were for terms ranging from one year to three years in duration, were payable in monthly installments, and did not require the payment of any interest. Payments in the aggregate amount of $723 and $2,170 were made against the loans during the three- and nine-month periods ended September 30, 2016. The loans were paid off in full during the year ended December 31, 2016. Accordingly, no payments were made against the loans during the three- and nine-month periods ended September 30, 2017, and no principal was outstanding under the loans at September 30, 2017 and December 31, 2016.

In September 2014, the Company made a loan to one of its franchisees in the aggregate original principal amount of $6,329 to assist it with the payment of franchise fees owed to the Company and the payment of other business expenses incurred by the franchisee in running its restaurant. The loan is for a term of three years, is payable in monthly installments, and does not require the payment of any interest. Payments in the aggregate amount of $527 and $1,582 were made against the loan during the three- and nine-month periods ended September 30, 2017, respectively, and the three- and nine-month periods ended September 30, 2016, respectively. A total of $201 and $1,783 of principal was outstanding under the loan at September 30, 2017 and December 31, 2016, respectively.

In June 2016, the Company made a loan to one of its franchisees under a promissory note in the aggregate original principal amount of $25,000. In July 2016, the Company made an additional loan to the same franchisee under a line of credit agreement for an aggregate original principal amount of up to $28,136. In September 2016, the Company made an additional loan to the same franchisee under a second line of credit agreement for an aggregate original principal amount of up to $25,000. Each of the loans was made to assist the franchisee with the payment of franchise fees owed to the Company and the payment of other business expenses incurred by the franchisee in running its restaurant. The loan under the promissory note is for a term of two years, is payable in monthly installments beginning January 1, 2017, and accrues interest at a rate of 5% per annum beginning September 1, 2016. The loan under the $28,136 line of credit agreement was for a term of two years, was payable in monthly installments beginning January 1, 2017, and did not require the payment of any interest. The loan under the $28,136 line of credit agreement was paid off in full during the nine-month period ended September 30, 2017. The loan under the $25,000 line of credit agreement is for a term of two years, is payable in monthly installments beginning January 1, 2017 and accrues interest at a rate of 5% per annum beginning October 1, 2016. Payments in the aggregate amount of $6,155 and $48,098 were made against the loans during the three- and nine-month periods ended September 30, 2017. Interest in the aggregate amount of $425 and $1,515 accrued during the three- and nine-month periods ended September 30, 2017, and payments of interest in the aggregate amount of $425 and $2,354 were made during the three- and nine-month periods ended September 30, 2017. Interest in the aggregate amount of $310 accrued during the three- and nine-month periods ended September 30, 2016. No payments of principal or interest were made against any of the loans during the three- and nine-month periods ended September 30, 2016. A total of $29,922 and $78,020 of principal was outstanding under the loans at September 30, 2017 and December 31, 2016, respectively, and a total of $838 of accrued interest was outstanding under the loans at December 31, 2016. No accrued interest was outstanding under the loans at September 30, 2017.

In September 2016, the Company made a loan to one of its franchisees in the aggregate original principal amount of $13,869 to assist it with the payment of business expenses incurred by the franchisee in running its restaurant. The loan is due and payable in full on November 15, 2018, is payable in monthly installments beginning December 15, 2016, and accrues interest at a rate of 5% per annum beginning October 1, 2016. Payments in the amount of $2,272 and $5,060 were made against the loan during the three- and nine-month periods ended September 30, 2017. Interest in the amount of $117 and $416 accrued during the three- and nine-month periods ended September 30, 2017, respectively, of which $161 and $416 was paid during the three-and nine-month periods ended September 30, 2017, respectively. No interest accrued during the three- and nine-month periods ended September 30, 2016, and no payments of principal or interest were made against any of the loans during the three- and nine-month periods ended September 30, 2016. A total of $8,258 and $13,318 of principal was outstanding under the loan at September 30, 2017 and December 31, 2016, respectively. No accrued interest was outstanding under the loan at September 30, 2017 and December 31, 2016.

The carrying value of the Company’s outstanding notes receivable was $38,380 and $93,121 at September 30, 2017 and December 31, 2016, respectively, all of which was due from unrelated third parties. The Company had interest receivable of $838 outstanding at December 31, 2016. The Company did not have any interest receivable outstanding at September 30, 2017. The Company generated interest income of $543 and $1,931 during the three- and nine-month periods ended September 30, 2017, and generated interest income of $310 during the three- and nine-month periods ended September 30, 2016.

Notes Receivable – Related Parties

During the year ended December 31, 2015, the Company loaned a total of $121,638 to Raceland QSR. The Company loaned an additional $595,635 to Raceland QSR during the nine-month period ended September 30, 2016, of which $445,683 was repaid to the Company during the nine-month period ended September 30, 2016. The Company loaned an additional $6,341 to Raceland QSR during the remainder of the year ended December 31, 2016. The loan accrued interest at a rate of 6% per year and was payable on demand. Raceland QSR did not make any interest payments under the loan during the year ended December 31, 2016. All accrued but unpaid interest was written off during the year ended December 31, 2016. During the three- and nine-month periods ended September 30, 2016, the Company recorded an allowance for uncollectible notes receivable of $271,590. Raceland QSR subsequently transferred the outstanding balance of the note receivable to Seediv in December 2016, and the outstanding balance of the loan was repaid in full on December 19, 2016 when the Company acquired Seediv. Accordingly, no principal was outstanding under the loan at September 30, 2017 and December 31, 2016. A description of the acquisition of Seediv by the Company is set forth herein under Note 5. Acquisition of Seediv.

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Debt Obligations

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Debt Obligations

Note 10. Debt Obligations

During the fourth quarter of 2008, the Company issued promissory notes to four investors for a total original principal amount of $11,000 in return for aggregate cash proceeds of $11,000. The notes bear interest at a rate of 6% per annum and provide for the payment of all principal and interest three years after the date of the respective notes. The notes provide for the payment of a penalty in an amount equal to 10% of the principal amount of the notes in the event they are not paid by the end of the term. In April 2015, the Company repaid notes to two of these investors representing a total original principal amount of $4,000. As a result, a total original principal balance of $7,000 was outstanding under the two remaining notes at September 30, 2017 and December 31, 2016. These notes are currently in default.

On September 13, 2013, the Company entered into a loan agreement with Blue Victory pursuant to which Blue Victory agreed to extend a revolving line of credit facility to the Company for up to $1 million. Under the terms of the loan agreement, Blue Victory agreed to make loans to the Company in such amounts as the Company may request from time to time, provided that the total amount of loans requested in any calendar month may not exceed $150,000. All loan requests are subject to approval by Blue Victory. The Company may use the proceeds from the credit facility for general working capital purposes.

The credit facility is unsecured, accrues interest at a rate of 6% per annum, and will terminate upon the earlier to occur of the fifth anniversary of the loan agreement or the occurrence of an event of default. The outstanding principal balance of the credit facility and any accrued and unpaid interest thereon are payable in full on the termination date. Loans may be prepaid by the Company without penalty and borrowed again at any time prior to the termination date. The obligation of the Company to pay the outstanding balance of the credit facility is evidenced by a promissory note that was issued by the Company to Blue Victory on September 13, 2013.

Blue Victory has the right, at any time on or after September 13, 2013, to convert all or any portion of the outstanding principal of the credit facility, together with accrued interest payable thereon, into shares of the Company’s common stock at a conversion rate equal to: (i) the closing price of the common stock on the date immediately preceding the conversion date if the common stock is then listed on the OTCQB or a national securities exchange, (ii) the average of the most recent bid and ask prices on the date immediately preceding the conversion date if the common stock is then listed on any of the tiers of the OTC Markets Group, Inc., or (iii) in all other cases, the fair market value of the common stock as determined by the Company and Blue Victory. Notwithstanding the above, in the event the Company does not have adequate shares of common stock authorized and available for issuance to be able to fulfill a conversion request, or the Company would breach its obligations under the rules or regulations of any trading market on which its shares of common stock are then listed if it fulfilled a conversion request, Blue Victory will amend the conversion notice to reduce the amount of principal and/or interest for which the conversion was requested to that amount for which an adequate number of shares of common stock is authorized and available for issuance by the Company.

During the year ended December 31, 2016, the Company borrowed $840,353 under the credit facility, of which $824,250 was repaid by the Company during the year ended December 31, 2016. Accordingly, the amount of principal outstanding under the credit facility was $16,103 at December 31, 2016.

On March 24, 2017, the Company and Blue Victory entered into an amendment to the loan agreement, dated September 13, 2013, pursuant to which Blue Victory had extended a line of credit facility to the Company for up to $1 million. Under the terms of the amendment, the Company and Blue Victory agreed to reduce the maximum amount of funds available under the credit facility from $1 million to $50,000. Pursuant to the terms of the amendment, the promissory note that was issued by the Company to Blue Victory on September 13, 2013 to evidence the obligation of the Company to pay the outstanding balance of the credit facility, was terminated in its entirety. The obligation of the Company to pay any future outstanding balance of the credit facility was evidenced by a new promissory note that was issued by the Company to Blue Victory on March 24, 2017.

Between January 1, 2017 and September 30, 2017, the Company repaid the remaining outstanding balance of $16,103 to Blue Victory under the credit facility. Accordingly, no principal was outstanding under the credit facility at September 30, 2017.

On December 19, 2016, the Company acquired Seediv. In connection therewith, the Company assumed debt owed by Seediv to Blue Victory pursuant to the terms of a promissory note issued by Seediv in favor of Blue Victory in the amount of $216,469. The promissory note accrued interest at a rate of 6% per annum and was payable on demand. No payments were made by the Company under the promissory note during the year ended December 31, 2016. Accordingly, the amount of principal outstanding under the promissory note was $216,469 at December 31, 2016. The Company repaid the remaining outstanding balance of the promissory note during the three- and nine-month periods ended September 30, 2017. Accordingly, no principal was outstanding under the promissory note at September 30, 2017.

During the nine-month period ended September 30, 2017, the Company borrowed $499,837 from Blue Victory and repaid $473,589 to Blue Victory under a separate loan. The loan accrues interest at a rate of 6% per annum and is payable on demand. Accordingly, the amount of principal outstanding under the loan was $26,248 at September 30, 2017.

The carrying value of the Company’s outstanding promissory notes, net of unamortized discount, was $33,248 and $239,572 at September 30, 2017 and December 31, 2016, respectively, as follows:  

	September 30,		December 31,
	2017		2016
Notes payable – related party	$	26,248	$	232,572
Notes payable – in default		7,000		7,000
Total notes payable, net	$	33,248	$	239,572

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Capital Stock

9 Months Ended

Sep. 30, 2017

Stockholders Equity Note [Abstract]

Capital Stock

Note 11. Capital Stock

The Company’s authorized capital consisted of 100,000,000 shares of Class A common stock, par value $0.01 per share, at September 30, 2017 and December 31, 2016, of which 6,935,119 and 6,647,464 shares of common stock were outstanding at September 30, 2017 and December 31, 2016, respectively.

In September 2011, the Company entered into an agreement with a consultant pursuant to which the Company agreed to issue 1,000,000 shares of its common stock to the consultant as payment for services to be performed in accordance with the terms of the agreement. The shares were valued at the closing price of the Company’s common stock on the date of grant for total consideration of $150,000. The Company had not issued any of the shares to the consultant as of September 30, 2017 and December 31, 2016. Accordingly, the Company had an outstanding balance of $150,000 in stock subscriptions payable at September 30, 2017 and December 31, 2016.

In January 2013, the Company appointed Richard W. Akam to serve as its Chief Operating Officer. In connection therewith, the Company entered into an employment agreement with Mr. Akam. The employment agreement provides in part that the Company will grant Mr. Akam shares of its common stock equal in value to $50,000 on January 1st of each year thereafter if Mr. Akam is continuously employed by the Company through January 1st of the applicable year. The number of shares of common stock that the Company will issue to Mr. Akam for each applicable year will be calculated based on the average of the last sales price of shares of the Company’s common stock as reported on the OTCQB for the month of January of the applicable year. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

In January 2016, Mr. Akam earned 71,429 shares of common stock under the terms of his employment agreement with the Company. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date the transactions were completed. The Company recognized $137 of stock compensation expense in connection therewith during the nine-month period ended September 30, 2016. The Company also recognized $12,568 and $37,295 of stock compensation expense during the three- and nine-month periods ended September 30, 2016 in connection with the vesting of the shares of common stock to be earned to Mr. Akam on January 1, 2017 under the terms of his employment agreement with the Company.

In August 2016, the Company issued 35,000 shares of its common stock to Guiseppe Cala (“Cala”) pursuant to the terms of a settlement and release agreement to which the Company and Cala were parties. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. A description of the settlement and release agreement is set forth herein under Note 16. Judgments in Legal Proceedings.

In November 2016, the Company issued 20,000 shares of its common stock to one of its non-executive employees as incentive compensation. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. The Company recognized $41,200 of stock compensation expense in connection therewith during the year ended December 31, 2016.

On January 18, 2017, the Company appointed Seenu G. Kasturi as its President, Chief Financial Officer and Chairman of the board of directors. In connection therewith, the Company entered into an employment agreement with Mr. Kasturi to serve as the President and Chief Financial Officer of the Company. The employment agreement provides in part that Mr. Kasturi will be paid annual compensation in the amount of $80,000 per year, consisting of: (i) an initial annual base salary of $26,000, and (ii) equity awards equal in value to $54,000 per year. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

The Company recognized $13,500 of stock compensation expense during the nine-month period ended September 30, 2017 in connection with the vesting of the shares of common stock earned by Mr. Kasturi on April 1, 2017. The Company recognized $148 and $13,500 of stock compensation expense during the three- and nine-month periods ended September 30, 2017, respectively, in connection with the vesting of the shares of common stock earned by Mr. Kasturi on July 1, 2017. The Company also recognized $13,352 of stock compensation expense during the three- and nine-month periods ended September 30, 2017 in connection with the vesting of the shares of common stock to be earned by Mr. Kasturi on October 1, 2017. This amount was credited to stock subscriptions payable.

In May 2017, the Company entered into an agreement with Maxim Group LLC (“Maxim”) to provide general financial advisory and investment banking services to the Company for a term of one year. Under the terms of the agreement, the Company agreed to pay Maxim $5,000 per month during the term of the agreement and issue 225,000 shares of common stock to Maxim upon the execution of the agreement. The Company recognized $180,000 of stock compensation expense during the nine-month period ended September 30, 2017 in connection with the issuance of the shares.

In August 2017, the Company approved the issuance of a total of 2,750 shares of its common stock to certain of its non-executive employees as incentive compensation. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. The Company recognized $2,338 of stock compensation expense in connection therewith during the three- and nine-month periods ended September 30, 2017. This amount was credited to stock subscriptions payable.

In August 2017, the Company approved the issuance of a total of 13,000 shares of its common stock to certain of its franchisees as incentive compensation. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant. The Company recognized $11,050 of stock compensation expense in connection therewith during the three- and nine-month periods ended September 30, 2017. This amount was credited to stock subscriptions payable.

In August 2017, the Company issued 35,295 shares of its common stock to a consultant as payment for $30,000 of consulting fees then due and payable by the Company. The shares were valued at a price per share equal to the closing price of the Company’s common stock on the OTCQB on the date of grant.

The Company recognized a total of $26,889 and $233,740 for stock compensation expense during the three- and nine-month periods ended September 30, 2017, respectively, and recognized a total of $12,568 and $37,295 for stock compensation expense during the three- and nine-month periods ended September 30, 2016, respectively. The Company had a total of $176,741 and $150,000 of stock subscription payable outstanding at September 30, 2017 and December 31, 2016, respectively.

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Stock Options and Warrants

9 Months Ended

Sep. 30, 2017

Stock Options and Warrants [Abstract]

Stock Options and Warrants

Note 12. Stock Options and Warrants

The Company did not issue any stock options or warrants exercisable into shares of the Company’s common stock during the three- and nine-month periods ended September 30, 2017 and 2016, and no stock options or warrants were exercised during the three- and nine-month periods ended September 30, 2017 and 2016. There were no stock options or warrants outstanding at September 30, 2017 or December 31, 2016.

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Stock Compensation Plans

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Compensation Plans

Note 13. Stock Compensation Plans

American Restaurant Concepts, Inc. 2011 Stock Incentive Plan

In August 2011, the Company adopted the American Restaurant Concepts, Inc. 2011 Stock Incentive Plan. Under the plan, 1,214,286 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2017, 142,858 shares of the Company’s common stock remained available for issuance under the plan.  The plan terminates in August 2021.  On August 18, 2011, the Company filed a registration statement on Form S-8, File No. 333-176383, with the SEC covering the public sale of all 1,214,286 shares of common stock available for issuance under the plan.

ARC Group, Inc. 2014 Stock Incentive Plan

In June 2014, the Company adopted the ARC Group, Inc. 2014 Stock Incentive Plan. Under the plan, 1,000,000 shares of common stock may be granted to employees, officers and directors of, and consultants and advisors to, the Company under awards that may be made in the form of stock options, warrants, stock appreciation rights, restricted stock, restricted units, unrestricted stock and other equity-based or equity-related awards.  As of September 30, 2017, all 1,000,000 shares of the Company’s common stock remained available for issuance under the plan.  The plan terminates in June 2024.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 14. Commitments and Contingencies

Employment Agreements and Arrangements

Richard W. Akam

On January 22, 2013, the Company appointed Richard W. Akam to serve as its Chief Operating Officer. In connection therewith, the Company entered into an employment agreement with Mr. Akam pursuant to which it agreed to pay him an annual base salary of $150,000, subject to annual adjustment and discretionary bonuses, plus certain standard and customary fringe benefits.  The initial term of the employment agreement is for one year and automatically renews for additional one-year terms until terminated by Mr. Akam or the Company. 

The employment agreement provides that, on July 22, 2013, the Company would grant Mr. Akam shares of its common stock equal in value to $50,000 if Mr. Akam is continuously employed by the Company through that date. The number of shares of common stock that the Company would issue to Mr. Akam would be calculated based on the last sales price of the Company’s common stock as reported on the OTCQB on July 22, 2013.  The employment agreement also provides that the Company will grant Mr. Akam additional shares of its common stock equal in value to $50,000 on January 1st of each year thereafter if Mr. Akam is continuously employed by the Company through January 1st of the applicable year. The number of shares of common stock that the Company will issue to Mr. Akam for each applicable year will be calculated based on the average of the last sales price of shares of the Company’s common stock as reported on the OTCQB for the month of January of the applicable year.  

Notwithstanding the above, and in connection therewith, Mr. Akam agreed that the number of shares that may be earned by him under his employment agreement in connection with any particular grant would be equal to the lesser of: (i) 71,429 shares of common stock, or (ii) the number of shares of common stock calculated by dividing $50,000 by the closing price of the Company’s common stock on the day immediately preceding the date the Company’s obligation to issue the shares to him fully accrues. Mr. Akam also agreed that in the event the Company is unable to fulfill its obligation to issue all of the shares earned by him with respect to any particular grant because it does not have enough shares of common stock authorized and available for issuance, (i) Mr. Akam will not require the Company to issue more shares of common stock than are then authorized and available for issuance by the Company, and (i) the Company may settle any liability to Mr. Akam created as a result thereof in cash.

In the event the Company terminates Mr. Akam’s employment without “cause” (as such term is defined in the employment agreement), Mr. Akam will be entitled to receive the following severance compensation from the Company: (i) if the Company terminates Mr. Akam’s employment during the first year of his employment with the Company, that amount of compensation equal to the salary payable to Mr. Akam during that year, (ii) if the Company terminates Mr. Akam’s employment during the second year of his employment with the Company, that amount of compensation equal to nine months of the salary payable to Mr. Akam during that year, (iii) if the Company terminates Mr. Akam’s employment during the third year of his employment with the Company, that amount of compensation equal to six months of the salary payable to Mr. Akam during that year, and (iv) if the Company terminates Mr. Akam’s employment after the third year of his employment with the Company, that amount of compensation equal to three months of the salary payable to Mr. Akam during the year that such termination occurs. Mr. Akam will not be entitled to receive any severance compensation from the Company if the Company terminates his employment for “cause” or as a result of his disability, or if Mr. Akam resigns from his employment with the Company.

The employment agreement also contains customary provisions that provide that, during the term of Mr. Akam’s employment with the Company and for a period of one year thereafter, Mr. Akam is prohibited from disclosing confidential information of the Company, soliciting Company employees and certain other persons, and competing with the Company.

On July 31, 2013, the Company appointed Richard Akam as its Chief Executive Officer, Chief Financial Officer and Secretary. The Company and Mr. Akam did not amend the employment agreement in connection with the above appointments, and Mr. Akam did not receive any additional compensation in connection with the above appointments.

On August 19, 2013, the Company appointed Daniel Slone as the Company’s Chief Financial Officer. In connection therewith, Richard Akam resigned as the Company’s Chief Financial Officer on August 19, 2013. Mr. Akam retained his positions as the Company’s Chief Executive Officer, Chief Operating Officer and Secretary.

On January 1, 2016, Mr. Akam earned 71,429 shares of common stock under the terms of his employment agreement with the Company.

On January 31, 2017, the Company and Richard W. Akam entered into an amendment to the employment agreement, dated January 22, 2013, by and between the Company and Mr. Akam. Under the terms of the amendment, the parties confirmed the appointment of Mr. Akam as the Company’s Chief Operating Officer on January 22, 2013 and as the Company’s Chief Executive Officer on July 31, 2013, clarified that Mr. Akam’s monthly base salary after the initial term of the employment agreement may be adjusted from time to time by the Company with Mr. Akam’s consent, removed the provision relating to the grant of shares of the Company’s common stock to Mr. Akam on January 1^st of each year effective December 31, 2016, and clarified that the criteria for Mr. Akam’s annual bonuses shall be identified and agreed upon by the Company and Mr. Akam by the end of the 1^st quarter of each fiscal year.

Daniel Slone

On August 19, 2013, the Company appointed Daniel Slone as the Company’s Chief Financial Officer. The Company agreed to pay Mr. Slone an annual base salary of $1.00 in connection with his appointment. The Company did not enter into an employment agreement with Mr. Slone. On January 17, 2017, Daniel Slone resigned as the Company’s Chief Financial Officer.

Seenu G. Kasturi

On January 18, 2017, the Company appointed Seenu G. Kasturi as its President, Chief Financial Officer and Chairman of the board of directors. In connection therewith, on January 18, 2017, the Company entered into an employment agreement with Mr. Kasturi to serve as the President and Chief Financial Officer of the Company. The employment agreement is for an initial term of three years with automatic one-year renewals thereafter unless earlier terminated or not renewed as provided therein. Under the terms of the employment agreement, Mr. Kasturi will be paid annual compensation in the amount of $80,000 per year, consisting of: (i) an initial annual base salary of $26,000, and (ii) equity awards equal in value to $54,000 per year. Mr. Kasturi will be eligible to receive increases in salary on January 1^st of each subsequent year in the discretion of the Company’s board of directors. He will also be eligible to receive annual bonuses in the discretion of the Company’s board of directors beginning with the Company’s fiscal year ended December 31, 2017. The employment agreement contains customary confidentiality, non-competition and non-solicitation provisions in favor of the Company.

Operating Leases

Corporate Headquarters

In January 2015, the Company entered into a lease with Crescent Hill Office Park for its corporate headquarters located at 6327-4 Argyle Forest Boulevard, Jacksonville, Florida pursuant to which the Company leases approximately 2,000 square feet of space. The lease provides for an initial monthly rent payment of $1,806 and expires on December 31, 2017.

Nocatee Restaurant

In October 2013, DWG Acquisitions entered into a triple net shopping center lease with NTC-REG, LLC (“NTC-REG) for the Nocatee Restaurant pursuant to which DWG Acquisitions leased approximately 2,900 square feet of space. The lease provides for an initial monthly rent payment of $1,100 and an additional annual rent payment equal to the amount by which 6% of the restaurant’s annual gross sales exceeds the aggregate monthly rent payments accrued during the applicable year. The lease has an initial term of 53 months and provides DWG Acquisitions with an option to extend the lease by an additional term of 60 months. The lease was assumed by Seediv when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of that certain Asset Purchase Agreement, dated December 1, 2016, by and between Seediv and DWG Acquisitions (the “Asset Purchase Agreement”).

On April 1, 2017, DWG Acquisitions, Seediv and NTC-REG entered into an assignment and assumption & first modification to lease agreement for the Nocatee Restaurant. Under the agreement, DWG Acquisitions assigned all of its right, title, interest and claim in and to the Nocatee Lease, and Seediv assumed the payment and performance of all obligations, liabilities and covenants of DWG Acquisitions under the lease for the Nocatee Restaurant. In addition, the parties amended certain terms of the lease to state that the lease covers approximately 3,400 square feet of space, to extend the term of the lease for a 60-month period commencing on April 1, 2018 and expiring March 31, 2023, and to change the rent payments to an initial monthly rent payment of $7,035 without an additional annual rent payment.

Youngerman Circle Restaurant

In May 2014, DWG Acquisitions entered into a triple net lease with Raceland QSR for the Youngerman Circle Restaurant pursuant to which DWG Acquisitions leased approximately 6,500 square feet of space. The lease provides for a monthly rent payment equal to 7% of the restaurant’s monthly net sales. The lease has an initial term of 10 years and renews automatically for additional one-year terms unless prior written notice is provided by either party. The lease was assumed by Seediv when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement.

On December 20, 2016, Seediv entered into a new triple net lease with Raceland QSR for the Youngerman Circle Restaurant. The lease provides for rent payments to be made by the Company for each of 13 rent periods per year, with each rent period comprised of four weeks. The lease provides for an initial base rent payment equal to the greater of: (i) $10,000 per rent period, or (ii) 7.5% of the Youngerman Circle Restaurant’s net sales for the applicable rent period. Commencing on the fifth (5^th) anniversary and continuing every five years thereafter, the base rent will be equal to the sum of: (i) the average base rent previously in effect for the preceding five-year period, and (ii) the product of such previous average base rent multiplied by 7.5%. The lease has an initial term of 20 years and provides the Company with an option to extend the lease for two additional five-year periods. The Company agreed to guarantee Seediv’s payment and performance of all of its obligations under the lease.

Rent expense was $98,748 and $205,220 during the three- and nine-month periods ended September 30, 2017, respectively, and was $5,718 and $17,053 during the three- and nine-month period ended September 30, 2016, respectively.

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Related-Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related-Party Transactions

Note 15. Related-Party Transactions

Employment Agreements

In January 2013, the Company entered into an employment agreement with Richard W. Akam in connection with his appointment as the Company’s Chief Operating Officer. Mr. Akam currently serves as the Company’s Chief Executive Officer, Chief Operating Officer and Secretary. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

In January 2017, the Company appointed Seenu G. Kasturi as its President, Chief Financial Officer and Chairman of the board of directors and, in connection therewith, entered into an employment agreement with Mr. Kasturi. A description of the employment agreement is set forth herein under Note 14. Commitments and Contingencies – Employment Agreements.

Sponsorship Agreements

In July 2013, the Company entered into a three-year sponsorship agreement with the Jacksonville Jaguars, LLC and, in connection therewith, in August 2013, entered into a subcontractor concession agreement with Levy Premium Foodservice Limited Partnership (“Levy”) for a concession stand to be located at EverBank Field in Jacksonville, Florida. The Company concurrently assigned all of its rights and obligations under the concession agreement to DWG Acquisitions in return for a fee of $2,000 per month for each full or partial month during which the concession agreement is in effect. In July 2015, the Company extended its sponsorship agreement with the Jaguars by an additional two years and entered into a subcontractor concession agreement with Ovations Food Services, L.P. (“Ovations”) for a second concession stand at EverBank Field. The Company concurrently assigned all of its rights and obligations under the second concession agreement to DWG Acquisitions in return for an additional fee of $3,000 per month for each full or partial month during which the concession agreement is in effect.

In September 2016, the Company terminated its subcontractor concession agreements with Levy and Ovations and the related assignment agreements with DWG Acquisitions, and entered into a sub-concession agreement with Jacksonville Sportservice, Inc. (“Jacksonville Sportservice”) and DWG Acquisitions with respect to the two concession stands previously covered by the Levy and Ovations subcontractor concession agreements. The Company concurrently assigned all of its rights and obligations under the sub-concession agreement to DWG Acquisitions in return for a fee equal to the income generated by the concession stands less all expenses incurred by the concession stands for each full or partial month during which the concession agreement is in effect.

Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated revenue of $15,000 and $35,000 from DWG Acquisitions under the assignment agreements related to the Levy and Ovations subcontractor concession agreements during the three- and nine-month periods ended September 30, 2016. The Company generated fees of $1,915 and $(2,680) from DWG Acquisitions under the assignment agreement related to the Jacksonville Sportservice sub-concession agreement during the three- and nine-month periods ended September 30, 2017. The fees were credited against the Company’s ad fund liability.

Financing Transactions

In September 2013, the Company entered into a loan agreement with Blue Victory pursuant to which Blue Victory agreed to extend a revolving line of credit facility to the Company for up to $1 million. In March 2017, the Company and Blue Victory entered into an amendment to the loan agreement to reduce the maximum amount of funds available under the credit facility from $1 million to $50,000. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017. He owned approximately 48.9% of the Company’s common stock and 90% of the equity interests in Blue Victory at September 30, 2017. He also served as the President, Treasurer and Secretary, and as the sole member of the board of directors, of Blue Victory during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company had total principal in the amount of $16,103 outstanding under the credit facility at December 31, 2016. No principal was outstanding under the credit facility at September 30, 2017. A description of the credit facility is set forth herein under Note 10. Debt Obligations.

During the nine-month period ended September 30, 2017, the Company borrowed $499,837 from Blue Victory and repaid $473,589 to Blue Victory under a separate loan. Accordingly, the amount of principal outstanding under the loan was $26,248 at September 30, 2017. A description of this loan from Blue Victory is set forth herein under Note 10. Debt Obligations.

Leases

In May 2014, DWG Acquisitions entered into a triple net lease with Raceland QSR for the Youngerman Circle Restaurant pursuant to which DWG Acquisitions leased approximately 6,500 square feet of space. The lease was assumed by Seediv on December 1, 2016 when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement, and became an obligation of the Company when the Company acquired Seediv on December 19, 2016. On December 20, 2016, Seediv entered into a new triple net lease with Raceland QSR for the Youngerman Circle Restaurant. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions and Raceland QSR at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions and Raceland QSR during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. A description of the leases is set forth herein under Note 14. Commitments and Contingencies.

Franchise Agreements

In October 2013, DWG Acquisitions became the franchisee of the Nocatee Restaurant. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees, except that the Company did not require DWG Acquisitions to pay a franchise fee to the Company. The Nocatee Restaurant was acquired by Seediv on December 1, 2016 when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement. The Nocatee Restaurant was subsequently acquired by the Company when the Company acquired Seediv on December 19, 2016. A description of the transaction is set forth herein under Note 5. Acquisition of Seediv.

Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $19,644 and $56,106 in royalties from DWG Acquisitions under the franchise agreement during the three- and nine-month period ended September 30, 2016. The Company did not generate any royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017 as the Company owned the Nocatee Restaurant during those periods.

In May 2014, DWG Acquisitions became the franchisee of the Youngerman Circle Restaurant. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees, except that the Company did not require DWG Acquisitions to pay a franchise fee to the Company. The Youngerman Circle Restaurant was acquired by Seediv on December 1, 2016 when Seediv acquired all of the assets and liabilities associated with the Nocatee Restaurant and the Youngerman Circle Restaurant from DWG Acquisitions pursuant to the terms of the Asset Purchase Agreement. The Youngerman Circle Restaurant was subsequently acquired by the Company when the Company acquired Seediv on December 19, 2016. A description of the transaction is set forth herein under Note 5. Acquisition of Seediv.

In December 2016, the Company acquired Seediv and Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $22,105 and $70,610 in royalties from DWG Acquisitions under the franchise agreement during the three- and nine-month periods ended September 30, 2016. The Company did not generate any royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017 as the Company owned the Youngerman Circle Restaurant during those periods.

In December 2014, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located on Gornto Road in Valdosta, Georgia. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $10,193 and $32,224 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017, respectively, and generated $10,887 and $35,308 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively.

In March 2015, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Tifton, Georgia. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. DWG Acquisitions closed the restaurant in January 2017. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $1,520 in royalties from DWG Acquisitions under the agreement during the nine-month period ended September 30, 2017, and generated $8,088 and $28,010 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively.

In June 2015, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Fleming Island, Florida. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. DWG Acquisitions sold the restaurant to an unrelated third party on January 1, 2017, on which date the third party became the franchisee and the Company terminated the franchise agreement with DWG Acquisitions. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $10,464 and $34,171 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively. The Company did not generate any royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017.

In September 2015, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Panama City Beach, Florida. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $14,013 and $37,245 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017, respectively, and generated $14,786 and $41,822 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively.

In March 2016, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Pensacola, Florida. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $7,408 and $22,152 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017. The Company generated $8,861 and $22,809 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively, and generated $30,000 in franchise fees from DWG Acquisitions under the agreement during the nine-month period ended September 30, 2016.

In March 2016, DWG Acquisitions became the franchisee of the Dick’s Wings restaurant located in Kingsland, Georgia. In connection therewith, DWG Acquisitions entered into a franchise agreement with the Company. The terms of the franchise agreement were identical to those of the franchise agreements that the Company enters into with unrelated franchisees. Seenu G. Kasturi was appointed President, Chief Financial Officer and Chairman of the board of directors of the Company in January 2017, and owned approximately 48.9% of the Company’s common stock at September 30, 2017. He owned all of the outstanding membership interests in DWG Acquisitions at September 30, 2017. He also served as the President, Treasurer and Secretary of DWG Acquisitions during the nine-month period ended September 30, 2017 and the year ended December 31, 2016. The Company generated $8,671 and $30,202 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2017, respectively. The Company generated $13,027 and $34,509 in royalties from DWG Acquisitions under the agreement during the three- and nine-month periods ended September 30, 2016, respectively, and generated $30,000 in franchise fees from DWG Acquisitions under the agreement during the nine-month period ended September 30, 2016.

The Company generated a total of $40,285 and $123,343 in royalties and franchise fees through its franchise agreements with DWG Acquisitions during the three- and nine-month periods ended September 30, 2017, respectively, and generated a total of $112,860 and $418,344 in royalties and franchise fees through its franchise agreements with DWG Acquisitions during the three- and nine-month periods ended September 30, 2016. The Company had a total of $3,056 and $14,568 of accounts receivable outstanding from DWG Acquisitions at September 30, 2017 and December 31, 2016, respectively, and had a total of $37,093 of ad funds receivable outstanding from DWG Acquisitions at September 30, 2017. The Company did not have any ad funds receivable outstanding from DWG Acquisitions at December 31, 2016.

Loans

During the year ended December 31, 2015, the Company loaned a total of $121,638 to Raceland QSR. The Company loaned an additional $595,635 to Raceland QSR during the nine-month period ended September 30, 2016, of which $445,683 was repaid to the Company during the nine-month period ended September 30, 2016. The Company loaned an additional $6,341 to Raceland QSR during the remainder of the year ended December 31, 2016. The loan was paid off in full by Raceland QSR during the year ended December 31, 2016. Seenu G. Kasturi owned approximately 8.7% of the Company’s common stock and all of the equity interests in Raceland QSR during the period for which the loan was outstanding. He also served as the President, Treasurer and Secretary of Raceland QSR during the year ended December 31, 2016. A description of the loan is set forth herein under Note 9. Notes Receivable.

Acquisition of Seediv

On December 19, 2016, the Company acquired all of the outstanding membership interests of Seediv from Seenu G. Kasturi. In connection therewith, the Company assumed debt owed by Seediv to Blue Victory pursuant to the terms of a promissory note issued by Seediv in favor of Blue Victory in the amount of $216,469. The loan was paid off in full by Raceland QSR during the nine-month period ended September 30, 2017. Mr. Kasturi owned approximately 14.8% of the Company’s common stock and all of the outstanding membership interests of Seediv at December 19, 2016. He also served as the President, Treasurer and Secretary of Seediv at December 19, 2016. A description of the transaction is set forth herein under Note 5. Acquisition of Seediv. A description of the promissory note is set forth herein under Note 10. Debt Obligations.

Sale of Ownership Interest in Paradise on Wings

On September 30, 2017, the Company sold its 50% ownership interest in Paradise on Wings to Seenu G. Kasturi for $24,000. A description of the transaction is set forth herein under Note 4. Investment in Paradise on Wings.

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Judgments in Legal Proceedings

9 Months Ended

Sep. 30, 2017

Judgment In Legal Proceedings [Abstract]

Judgments in Legal Proceedings

Note 16. Judgments in Legal Proceedings

In October 2009, the Company initiated a legal proceeding entitled American Restaurant Concepts, Inc. vs. Cala, et al was filed in in the United States District Court for the Middle District of Florida, Jacksonville Division, in Duval County (the “ARC Proceeding”). In the complaint, the Company alleged damages for trademark infringement. Also on that date, a legal proceeding entitled Cala v. Rosenberger et al. was filed with the Fourth Judicial Circuit Court in and for Duval County, Florida (the “Cala Proceeding”; together with the ARC Proceeding, the “ARC & Cala Proceedings”). In the complaint, Cala alleged damages for breach of contract. In January 2010, the parties to each of the actions entered into a settlement agreement with respect to both actions pursuant to which the Company agreed to pay $250,000 in full settlement of the legal proceedings (the “2010 Settlement Agreement”). In early 2010, Cala breached the terms of the 2010 Settlement Agreement, relieving the Company of any further obligations under the agreement. The Company made total payments of $40,000 under the 2010 Settlement Agreement prior to the breach by Cala. Accordingly, the remaining balance of $210,000 outstanding under the settlement agreement was reflected in settlement agreements payable.

In August 2016, the Company entered into a full and final settlement and release agreement with Cala. Under the terms of the agreement, the Company and Cala agreed to release each other from all claims related to the ARC & Cala Proceedings, any and all other lawsuits that may have been filed by one party against the other, the 2010 Settlement Agreement, and any other matters, causes of action or claims either party may have had against the other. In consideration for the releases, the Company agreed to pay $15,000 to Cala and issue 35,000 shares of its common stock to Cala. The Company recognized a non-cash gain on settlement of liabilities of $175,449 in connection therewith during the year ended December 31, 2016. The remaining balance of $210,000 outstanding under the 2010 Settlement Agreement was debited to settlement agreements payable.

On February 25, 2011, a legal proceeding entitled Duval Station Investment, LLC vs. Hot Wing Concepts, Inc. d/b/a Dick’s Wings and Grill, and American Restaurant Concepts, Inc. was filed with the Fourth Judicial Circuit Court in and for Duval County, Florida. In the complaint, the plaintiff alleged damages for breach of guaranty. On October 4, 2011, a final judgment was entered by the court in favor of the plaintiff in the amount of $161,747, and on November 11, 2011 a final judgment for attorneys’ fees and costs was entered in favor of the plaintiff in the amount of $33,000. These judgments, together with accrued interest of $2,369 thereon, resulted in a total loss from legal proceedings of $197,116 during the year ended December 25, 2011. The Company had not paid any part of the judgment or the accrued interest thereon. As a result, the loss was reflected in settlement agreements payable at September 30, 2017 and December 31, 2016. Interest expense in the amount of $2,841 and $8,431 accrued on the outstanding balance of the settlement agreement payable during the three- and nine-month periods ended September 30, 2017, respectively, and interest expense in the amount of $2,841 and $8,462 accrued on the outstanding balance of the settlement agreement payable during the three- and nine-month periods ended September 30, 2016, respectively. The interest expense was credited to settlement agreements payable.

In January 2015, Santander Bank filed a complaint against the Company in the Circuit Court, Fourth Judicial Circuit in and for Duval County, Florida, seeking damages of $194,181 plus interest, costs and attorney’s fees for breach of a guaranty of certain obligations of Ritz Aviation, LLC (“Ritz Aviation”) under a promissory note executed by Ritz Aviation in July 2005. During the Company’s fourth fiscal quarter of 2016, Santander Bank informed the Company that certain assets of Ritz Aviation had been sold for $82,642 and that the proceeds from the sale were applied towards the balance of the damages being sought, resulting in an outstanding balance of damages sought of $111,539. A total of $31,836 and $25,980 of accrued interest, and $10,586 of other expenses, were outstanding at September 30, 2017 and December 31, 2016, respectively, resulting in an aggregate potential loss of $153,961 and $148,105 at September 30, 2017 and December 31, 2016, respectively. The potential losses of $153,961 and $148,105 were reflected in accrued legal settlement at September 30, 2017 and December 31, 2016, respectively. This case is currently pending.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Note 17. Subsequent Events

On October 1, 2017, Seenu G. Kasturi earned 8,177 shares of the Company’s common stock pursuant to the terms of his employment agreement with the Company.

On October 4, 2017, Seediv entered into an Agreement for Purchase and Sale of Real Estate with Raceland QSR pursuant to which Seediv agreed to purchase the real property located at 6055 Youngerman Circle in Argyle Circle, Jacksonville, Florida 32244 (the “Property”) from Raceland QSR. The purchase price for the Property will be the lesser of: (i) $2 million, or (ii) the appraised value of the Property determined by the appraisal completed by the financing source proposed to be utilized by Seediv to finance the acquisition of the Property. The agreement provides for the payment by Seediv of a deposit of $10,000 within 10 days of the date of the agreement to an escrow agent to be selected by the parties with the remainder of the purchase price to be paid by Seediv at closing. Seediv has the right to terminate the transaction in the event that certain feasibility studies, the title commitment or the appraisal is unsatisfactory to Seediv, or if Raceland QSR breaches any of its representations, warranties, covenants, agreements or obligations under the agreement, in which case the deposit shall be returned to Seediv. The closing of the transaction will occur on December 3, 2017.

On or about October 18, 2017, the Company issued the 2,750 shares of common stock previously approved for issuance to certain of its non-executive employees as incentive compensation in August 2017.

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Interim Financial Information

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Seediv, LLC. All intercompany accounts and transactions were eliminated in consolidation. 

The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the disclosures included in these financial statements are adequate to make the information presented not misleading.

The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in management’s opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K/A. The results of operations for the three- and nine-month periods ended September 30, 2017 are not necessarily indicative of the results that the Company will have for any subsequent quarter or full fiscal year.

Estimates

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Reclassifications

Certain amounts in the Company’s financial statements for the 2016 fiscal year have been reclassified to conform to the 2017 fiscal year presentation. These reclassifications did not result in any change to the previously reported total assets, net income / (loss) or stockholders’ deficit.

Going Concern

Going Concern 

As shown in the accompanying financial statements, the Company had an accumulated deficit of $5,025,657 and a working capital deficit of $900,799 at September 30, 2017. In addition, the Company incurred net losses of $863,576 and $432,730 for the years ended December 31, 2016 and 2015, respectively, and experienced negative cash flows from operations for each of those years. Those facts create substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon it successfully executing upon its plan to generate positive cash flows during the remainder of its 2017 fiscal year and during its 2018 fiscal year. In furtherance of this plan, the Company is seeking to increase sales and reduce expenses at its company-owned restaurants, increase the number of franchised restaurants that it has, and acquire additional brands that can contribute profits and positive cash flows to the Company. The Company’s financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

Segment Disclosure

Segment Disclosure

The Company has a single brand, all of the restaurants of which operate in the full-service casual dining industry in the United States. Pursuant to the standards of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting (“ASC 280”), the Company’s Chief Executive Officer and President, who comprise the Company's Chief Operating Decision Maker function for the purposes of ASC 280, concluded that the Company operates as a single segment for reporting purposes.

Revenue Recognition

Revenue Recognition

The Company’s revenue consists primarily of proceeds from the sale of food and beverage products at its Company-owned restaurants, and royalty payments, franchise fees and area development fees that it receives from its franchisees. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed and determinable, and collectability is reasonably assured in accordance with ASC Topic 605, Revenue Recognition. The Company records revenue from the sale of food and beverages as products are sold. Royalties are accrued as earned and are calculated each period based on restaurant sales. Franchise fees from individual franchise sales is recognized upon the opening of the franchised restaurant when all material obligations and initial services to be provided by the Company have been performed. Area development fees are dependent upon the number of restaurants in the territory, as are the Company’s obligations under the area development agreement. Consequently, as obligations are met, area development fees are recognized proportionally with expenses incurred with the opening of each new restaurant and any royalty-free periods.

The Company records gift cards under a Dick’s Wings system-wide program.  Gift cards sold are recorded as a gift card liability.  When redeemed, the gift card liability account is offset by recording the transaction as revenue.  Breakage income represents the value associated with the portion of gift cards sold that will most likely never be redeemed. Based on the Company’s historical gift card redemption patterns and the fact that the Company’s gift cards have no expiration dates or dormancy fees, the Company can reasonably estimate the amount of gift card balances for which redemption is remote and record breakage income based on this estimate. The Company updates its estimate of the breakage rate periodically and, if necessary, adjusts the gift card liability balance accordingly.

General Advertising Fund

General Advertising Fund

The Company has established a general advertising fund that it uses to pay for advertising costs, sales promotions, market research and other support functions intended to maximize general public recognition and acceptance of the Dick’s Wings brand. Company-owned and franchised restaurants are required to contribute at least 1%, but not more than 2%, of their gross revenue to the Company’s general advertising fund. Contributions made by franchisees to the general advertising fund and marketing and advertising expenses paid by the general advertising fund are not recognized as revenues and expenses. They instead constitute agency transactions. These contributions are recorded as a liability against which specific costs are charged.

We account for the cash and cash equivalents held by the general advertising fund as restricted cash on our accompanying consolidated balance sheets. The restricted cash of this fund is classified as current as it is expected to be utilized to fund short-term obligations of the general advertising fund.

Significant Accounting Policies

Significant Accounting Policies

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”). ASU 2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 introduces a five-step model to achieve its core principle of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016. Early adoption is not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers – Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred by one year the effective date of ASU 2014-09 by making ASU 2014-09 effective for annual reporting periods beginning after December 15, 2017, including interim period within that reporting period. The Company believes that the adoption of ASU 2014-09 will not have a material impact on its financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding on certain principles that are currently in U.S. auditing standards. Specifically, ASU 2014-15: (i) provides a definition of the term “substantial doubt”, (ii) requires an evaluation every reporting period including interim periods, (iii) provides principles for considering the mitigating effects of management’s plans, (iv) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (v) requires an express statement and other disclosures when substantial doubt is not alleviated, and (vi) requires an assessment for a period of one year after the date that the financial statements are issued or available to be issued. ASU 2014-15 is effective for fiscal years ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 did not have a material impact on the Company’s financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), which changes the subsequent measurement of inventory from lower of cost or market to lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2015-11 did not have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires that lease arrangements longer than 12 months result in the lessee recognizing a lease asset and liability. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (“ASU 2016-18”). ASU 2016-18 provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact of ASU 2016-18, but believes that ASU 2016-18 will not have a material impact on the Company’s financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is considered a business. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for certain transactions. The Company is currently assessing the impact that ASU 2017-01will have on its financial statements.

The Company reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations or that no material effect is expected on the Company’s financial statements as a result of future adoption.

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Investment in Paradise on Wings (Tables)

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

Schedule of unaudited income statement of Paradise on Wings

Statement of Operations	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenue	$	74,831		$	226,273		$	91,658		$	251,421
Operating expenses		(234,525	)		(484,436	)		(124,841	)		(256,325	)
Loss from operations		(159,694	)		(258,163	)		(33,183	)		(4,904	)
Other income / (expense)		(104,203	)		(182,398	)		235,295			217,067
Net income / (loss)	$	(263,897	)	$	(440,561	)	$	202,112		$	212,163
Company’s share of net income / (loss)	$	(131,949	)	$	(220,281	)	$	101,056		$	106,082

Schedule of unaudited balance sheet of Paradise on Wings

Balance Sheet	September 30, 2017		December 31, 2016
Current assets	$	119,837	$	3,549
Equity investment		-0-		141,168
Total assets	$	119,837	$	144,717
Total liabilities	$	110,120	$	110,596
Equity		9,717		34,121
Total liabilities and equity	$	119,837	$	144,717

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Acquisition of Seediv (Tables)

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Schedule of assets acquired and liabilities assumed based on their fair values at the time of the acquisition

Cash and cash equivalents	$	18,089
Inventory		40,574
Other current assets		6,538
Leasehold improvements, net		46,541
Furniture and equipment, net		33,701
Total assets acquired		145,443
Accounts payable – related party		(1,026	)
Accrued expenses		(126,878	)
Notes payable – related party		(234,286	)
Total liabilities assumed		(362,190	)
Seediv compensation expense		251,309
Net consideration paid	$	34,562

Schedule of certain unaudited pro forma financial information

Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenue	$	1,047,404		$	3,228,054		$	1,089,081		$	3,546,474
Income / (loss) from continuing operations		(21,559	)		73,345			(358,656	)		(84,279	)
Net income / (loss)		(89	)		87,675			(74,514	)		198,398
Net income / (loss) per share – basic and fully diluted	$	(0.00	)	$	0.01		$	(0.01	)	$	0.03

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Inventory (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Schedule of Inventory

	September 30, 2017		December 31, 2016
Food	$	28,369	$	25,942
Beverages		12,498		19,308
Total	$	40,867	$	45,250

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Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

	September 30, 2017			December 31, 2016
Leasehold improvements	$	68,346		$	62,125
Furniture, fixtures and equipment		82,154			50,140
Subtotal		150,500			112,265
Less: accumulated depreciation		(48,399	)		(31,317	)
Total	$	102,101		$	80,948

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of equity investment in Seediv within the fair value hierarchy utilized to measure fair value on a recurring basis

	Level 1		Level 2		Level 3
Contingent consideration:
September 30, 2017	$	-0-	$	-0-	$	20,897
December 31, 2016	$	-0-	$	-0-	$	20,897

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Debt Obligations (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of outstanding promissory notes

	September 30,		December 31,
	2017		2016
Notes payable – related party	$	26,248	$	232,572
Notes payable – in default		7,000		7,000
Total notes payable, net	$	33,248	$	239,572

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Description of Business (Detail Textuals)	1 Months Ended
	Dec. 19, 2016 USD ($)
Acquisition of Seediv
Business Acquisition [Line Items]
Payment agreed for membership interests	$ 600,000

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Description of Business (Detail Textuals 1)	Sep. 30, 2017 Restaurant Concession_Stand
Franchiser Disclosure [Line Items]
Number of restaurants	22
Florida
Franchiser Disclosure [Line Items]
Number of restaurants	17
Georgia
Franchiser Disclosure [Line Items]
Number of restaurants	5
Entity Operated Units
Franchiser Disclosure [Line Items]
Number of restaurants	2
Franchised Units
Franchiser Disclosure [Line Items]
Number of restaurants	20
Franchised Units | Florida
Franchiser Disclosure [Line Items]
Number of restaurants | Concession_Stand	2

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Basis of Presentation and Summary of Significant Accounting Policies (Detail Textuals) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Accumulated deficit	$ (5,025,657)		$ (5,025,657)		$ (5,113,332)
Working capital deficit	900,799		900,799
Net income (loss)	$ (89)	$ (4,235)	$ 87,675	$ 245,939	$ 863,576	$ 432,730
Minimum percentage of gross revenue required to contribute in Genereal Advertising Fund	1.00%
Maximum percentage of gross revenue required to contribute in Genereal Advertising Fund	2.00%

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Investment in Paradise on Wings - Summary of unaudited income statement of Paradise on Wings (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Company's share of net income / (loss)		$ 101,056		$ 106,082
Paradise on Wings Franchise Group, LLC
Schedule of Equity Method Investments [Line Items]
Revenue	$ 74,831	91,658	$ 226,273	251,421
Operating expenses	(234,525)	(124,841)	(484,436)	(256,325)
Loss from operations	(159,694)	(33,183)	(258,163)	(4,904)
Other income / (expense)	(104,203)	235,295	(182,398)	217,067
Net income / (loss)	(263,897)	202,112	(440,561)	212,163	$ 445,370	$ 495,435
Company's share of net income / (loss)	$ (131,949)	$ 101,056	$ (220,281)	$ 106,082

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Investment in Paradise on Wings - Summary of unaudited balance sheet of Paradise on Wings (Details 1) - Paradise on Wings Franchise Group, LLC - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Schedule of Equity Method Investments [Line Items]
Current assets	$ 119,837	$ 3,549
Equity investment	0	141,168
Total assets	119,837	144,717
Total liabilities	110,120	110,596
Equity	9,717	34,121
Total liabilities and equity	$ 119,837	$ 144,717

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Investment in Paradise on Wings (Detail Textuals)	1 Months Ended	9 Months Ended	12 Months Ended
	Jan. 20, 2014 USD ($) Share Manager $ / shares shares	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Schedule of Equity Method Investments [Line Items]
Percentage of preferred right to distributions related to income, gain, losses, deductions and expenses	100.00%
Loss on impairment of investment			$ 348,143
Purchase price		$ 24,000
Paradise on Wings Franchise Group, LLC
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest	50.00%	50.00%
Paradise on Wings Franchise Group, LLC | Seenu G Kasturi
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest		50.00%
Purchase price		$ 24,000
Paradise on Wings Franchise Group, LLC | Contribution agreement | Class A Membership Interests
Schedule of Equity Method Investments [Line Items]
Membership interest acquired | Share	117.65
Percentage of ownership interest	50.00%
Percentage of vote for all managers	50.00%
Percentage of vote for use of contributed capital for permitted purpose	60.00%
Percentage of preferred right to distributions related to income, gain, losses, deductions and expenses	50.00%
Paradise on Wings Franchise Group, LLC | Contribution agreement | Class A Membership Interests | Maximum
Schedule of Equity Method Investments [Line Items]
Threshold limit for appointment of manager | Manager	2
Paradise on Wings Franchise Group, LLC | Contribution agreement | Class B Membership Interests
Schedule of Equity Method Investments [Line Items]
Membership interest acquired | Share	117.65
Percentage of ownership interest	50.00%
Agreed payment in cash as per terms of contribution agreement	$ 400,000
Consideration paid prior to closing of agreement	350,000
Amount due upon closing of agreement	50,000
Consideration paid in shares for capital contribution	$ 400,000
Bid price per share on morning of closing date | $ / shares	$ 1.70
Number of shares issued on closing date | shares	235,295
Threshold limit for appointment of manager | Manager	1
Percentage of vote for all managers	50.00%
Percentage of vote for use of contributed capital for permitted purpose	60.00%
Percentage of preferred right to distributions related to income, gain, losses, deductions and expenses	50.00%

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Acquisition of Seediv (Details) - Acquisition of Seediv	Sep. 30, 2017 USD ($)
Business Acquisition [Line Items]
Cash and cash equivalents	$ 18,089
Inventory	40,574
Other current assets	6,538
Leasehold improvements, net	46,541
Furniture and equipment, net	33,701
Total assets acquired	145,443
Accounts payable - related party	(1,026)
Accrued expenses	(126,878)
Notes payable - related party	(234,286)
Total liabilities assumed	(362,190)
Seediv compensation expense	251,309
Net consideration paid	$ 34,562

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Acquisition of Seediv (Details 1) - Acquisition of Seediv - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Business Acquisition [Line Items]
Revenue	$ 1,047,404	$ 1,089,081	$ 3,228,054	$ 3,546,474
Income / (loss) from continuing operations	(21,559)	(358,656)	73,345	(84,279)
Net income / (loss)	$ (89)	$ (74,514)	$ 87,675	$ 198,398
Net income / (loss) per share - basic and fully diluted	$ 0.00	$ (0.01)	$ 0.01	$ 0.03

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Acquisition of Seediv (Detail Textuals)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 19, 2016 USD ($) Restaurant	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Business Acquisition [Line Items]
Proceeds from related party debt				$ 206,324	$ 783,323
Number of franchised restaurants | Restaurant	22
Contingent consideration		$ 20,897		20,897		$ 20,897
Revenue		1,047,404	$ 183,591	3,228,054	791,407
Net income (loss)		(89)	$ (4,235)	87,675	$ 245,939	$ 863,576	$ 432,730
Acquisition of Seediv
Business Acquisition [Line Items]
Payment agreed for membership interests to Mr. Kasturi	$ 600,000
Cash payment	$ 13,665
Multiplier for earn out payment	5.5
Percentage of number of shares of common stock issued and outstanding	20.00%
Revenue		841,214		2,595,679
Net income (loss)		$ (44,108)		$ 80,661
Seenu G Kasturi
Business Acquisition [Line Items]
Percentage of ownership interest	14.80%
DWG acquisitions LLC
Business Acquisition [Line Items]
Number of franchised restaurants | Restaurant	6
DWG acquisitions LLC | Acquisition of Seediv
Business Acquisition [Line Items]
Cancellation and termination of accounts receivable	$ 259,123
Raceland QSR, LLC | Acquisition of Seediv
Business Acquisition [Line Items]
Cancellation and termination of debt	$ 327,212
Blue Victory Holdings Inc | Seenu G Kasturi
Business Acquisition [Line Items]
Percentage of ownership interest	90.00%

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Inventory (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Inventory [Line Items]
Total	$ 40,867	$ 45,250
Food
Inventory [Line Items]
Total	28,369	28,369
Beverages
Inventory [Line Items]
Total	$ 28,369	$ 19,308

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Property and Equipment, Net (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Subtotal	$ 150,500	$ 112,265
Less: accumulated depreciation	(48,399)	(31,317)
Total	102,101	80,948
Leasehold improvements
Property, Plant and Equipment [Line Items]
Subtotal	68,346	62,125
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Subtotal	$ 82,154	$ 50,140

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Property and Equipment, Net (Detail Textuals) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 4,571	$ 11,902

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Fair Value Measurements - Summary of equity investment within fair value hierarchy utilized to measure fair value on recurring basis (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration	$ 20,897	$ 20,897
Recurring basis | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration	0	0
Recurring basis | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration	0	0
Recurring basis | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration	$ 20,897	$ 20,897

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Fair Value Measurements (Detail Textuals) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2015	Jan. 20, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loss on impairment of investment					$ 348,143
Contingent consideration	$ 20,897		$ 20,897		20,897
Sale of investment in Paradise on Wings			$ 24,000
Paradise on Wings Franchise Group, LLC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Percentage of ownership interest	50.00%		50.00%				50.00%
Net income / (loss)	$ (263,897)	$ 202,112	$ (440,561)	$ 212,163	$ 445,370	$ 495,435
Paradise on Wings Franchise Group, LLC | Seenu G Kasturi
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Percentage of ownership interest	50.00%		50.00%
Sale of investment in Paradise on Wings			$ 24,000

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Notes Receivable (Detail Textuals) - USD ($)	1 Months Ended				2 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Jul. 31, 2016	Jun. 30, 2016	Sep. 30, 2014	Jun. 30, 2013	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Payments to acquire notes receivable									$ (74,593)
Interest receivable, net										$ 838
Interest income - related party						$ 543	$ 310	$ 1,931	310
Repayments of notes payable - related party								206,324	783,323
Payments of principal or interest of loans								0	0
Promissory notes
Accounts, Notes, Loans and Financing Receivable [Line Items]
Aggregate original principal amount						26,248		26,248		216,469
Notes receivable | One of franchisees
Accounts, Notes, Loans and Financing Receivable [Line Items]
Aggregate original principal amount	$ 13,869			$ 6,329			13,869		13,869
Term of notes receivable				3 years
Payments to acquire notes receivable						527		1,582
Proceeds from notes receivable from related party						2,272		5,060
Principal outstanding under loan						201		201		1,783
Accrued interest rate per year	5.00%
Principal of accrued interest was outstanding						8,258		8,258		13,318
Interest receivable outstanding						117		416
Payments of principal or interest of loans						161		416
Notes receivable | One of franchisees | Promissory notes
Accounts, Notes, Loans and Financing Receivable [Line Items]
Term of notes receivable			2 years
Accrued interest rate per year			5.00%
Outstanding amount under line of credit			$ 25,000
Notes receivable | One of franchisees | Line of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Aggregate original principal amount	$ 25,000	$ 28,136					25,000		25,000
Term of notes receivable	2 years	2 years
Accrued interest rate per year	5.00%
Notes receivable | One of franchisees | Promissory note and Line of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest receivable, net										838
Interest income - related party						425		1,515
Repayments of notes payable - related party						6,155		48,098
Principal of accrued interest was outstanding						29,922		29,922		78,020
Payments of principal or interest of loans						425		2,354
Notes receivable | Certain franchisees
Accounts, Notes, Loans and Financing Receivable [Line Items]
Aggregate original principal amount					$ 40,507
Payments to acquire notes receivable							723		2,170
Notes receivable | Certain franchisees | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Term of notes receivable					1 year
Notes receivable | Certain franchisees | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Term of notes receivable					3 years
Notes receivable | Raceland QSR, LLC
Accounts, Notes, Loans and Financing Receivable [Line Items]
Payments to acquire notes receivable									595,635	6,341	$ 121,638
Carrying value of outstanding notes receivable						$ 38,380		$ 38,380		$ 93,121
Accrued interest rate per year										6.00%
Repayments of notes payable - related party									445,683
Allowance for uncollectible notes receivable	$ 271,590						$ 271,590		$ 271,590

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Debt Obligations - Summary of carrying value of outstanding promissory notes (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Notes payable - related party	$ 26,248	$ 232,572
Notes payable - in default	7,000	7,000
Total notes payable, net	$ 33,248	$ 239,572

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Debt Obligations (Detail Textuals) - Promissory notes - USD ($)	1 Months Ended	3 Months Ended
	Apr. 30, 2015	Dec. 28, 2008	Sep. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Original principal amount		$ 11,000
Cash proceeds from promissory notes		$ 11,000
Rate of interest on promissory notes		6.00%
Percentage of principal amount of notes as penalty		10.00%
Repayment of two promissory notes	$ 4,000
Original principal balance of debt outstanding for two notes			$ 7,000	$ 7,000

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Debt Obligations (Detail Textuals 1) - Blue Victory Holdings, Inc - USD ($)	Sep. 30, 2017	Mar. 24, 2017	Sep. 13, 2013
Debt Instrument [Line Items]
Accrued interest	6.00%
Loan agreement
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 1,000,000
Loan agreement | Revolving line of credit facility
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 50,000	1,000,000
Maximum amount of debt not to be exceeded every month			$ 150,000
Accrued interest			6.00%

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Debt Obligations (Detail Textuals 2) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Mar. 24, 2017	Dec. 19, 2016	Sep. 13, 2013
Debt Instrument [Line Items]
Proceeds from related party debt	$ 206,324	$ 783,323
Repayments of notes payable - related party	206,324	$ 783,323
Promissory notes, net of unamortized discount	33,248		$ 239,572
Promissory notes
Debt Instrument [Line Items]
Aggregate original principal amount	26,248		216,469
Blue Victory Holdings
Debt Instrument [Line Items]
Outstanding principal amount of credit facility	26,248
Proceeds from related party debt	499,837
Repayments of notes payable - related party	$ 473,589
Interest rate per annum	6.00%
Blue Victory Holdings | Promissory notes
Debt Instrument [Line Items]
Aggregate original principal amount					$ 216,469
Interest rate per annum					6.00%
Loan agreement | Blue Victory Holdings
Debt Instrument [Line Items]
Maximum borrowing capacity						$ 1,000,000
Loan agreement | Blue Victory Holdings | Revolving line of credit facility
Debt Instrument [Line Items]
Additional borrowing under credit facility			840,353
Outstanding principal amount of credit facility	$ 16,103		16,103
Proceeds from related party debt			824,250
Repayments of notes payable - related party			$ 824,250
Maximum borrowing capacity				$ 50,000		$ 1,000,000
Interest rate per annum						6.00%

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Capital Stock (Detail Textuals) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Stockholders Equity Note [Abstract]
Class A common stock, shares authorized	100,000,000	100,000,000
Class A common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Class A common stock, shares outstanding	6,935,119	6,647,464

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Capital Stock (Detail Textuals 1) - USD ($)	1 Months Ended									3 Months Ended		6 Months Ended	9 Months Ended		12 Months Ended
	Aug. 31, 2017	May 30, 2017	Jan. 18, 2017	Nov. 30, 2016	Aug. 31, 2016	Jan. 31, 2016	Jul. 22, 2013	Jan. 31, 2013	Sep. 30, 2011	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Capital Stock [Line Items]
Gain on sale of investment in Paradise on Wings -related party										$ 24,000			$ 24,000		$ 82,642
Stock issued for settlement of litigation														$ 19,551
Stock-based compensation expense										26,889	$ 12,568		233,740	37,295
Stock subscriptions payable													176,741	150,000
Common stock issued for services													233,740
Common Stock
Capital Stock [Line Items]
Common stock issued for services													$ 2,523
Common stock issued for services (in shares)													252,360
Common Stock | One of franchisees
Capital Stock [Line Items]
Allocated share-based compensation expense										11,050			$ 11,050
Common stock issued as incentive compensation (in shares)	13,000
Maxim Group LLC
Capital Stock [Line Items]
Amount of common stock connection with employee agreement		$ 5,000
Number of common stock issued in connection with employment agreement		225,000
Allocated share-based compensation expense													180,000
Non-executive employees one | Common Stock
Capital Stock [Line Items]
Allocated share-based compensation expense										2,338			2,338
Common stock issued as incentive compensation (in shares)	2,750
Employment agreement | Richard W Akam
Capital Stock [Line Items]
Amount of common stock connection with employee agreement							$ 50,000	$ 50,000
Number of common stock issued in connection with employment agreement						71,429	71,429
Amount of additional shares of common stock to be issued							$ 50,000
Allocated share-based compensation expense												$ 137
Employment agreement | Richard W Akam | Vesting on October 1, 2017
Capital Stock [Line Items]
Allocated share-based compensation expense											$ 12,568			$ 37,295
Employment agreement | Seenu G Kasturi
Capital Stock [Line Items]
Amount of annual compensation paid			$ 80,000
Amount of annual base salary			26,000
Amount of equity award per year			$ 54,000
Employment agreement | Seenu G Kasturi | Vesting on October 1, 2017
Capital Stock [Line Items]
Allocated share-based compensation expense										13,352			13,353
Employment agreement | Seenu G Kasturi | Vesting on April 1, 2017
Capital Stock [Line Items]
Allocated share-based compensation expense													13,500
Employment agreement | Seenu G Kasturi | Vesting on July 1, 2017
Capital Stock [Line Items]
Allocated share-based compensation expense										$ 148			13,500
Employment agreement | Non-executive employees one
Capital Stock [Line Items]
Number of common stock issued in connection with employment agreement				20,000
Allocated share-based compensation expense															41,200
Settlement and Release Agreement | Guiseppe Cala ("Cala")
Capital Stock [Line Items]
Stock issued for settlement of litigation					$ 35,000
Consultancy agreement | Common Stock
Capital Stock [Line Items]
Stock agreed to issue as payment for services									$ 150,000
Stock agreed to issue as payment for services (in shares)									1,000,000
Stock subscriptions payable													$ 150,000		$ 150,000
Common stock issued for services	$ 30,000
Common stock issued for services (in shares)	35,295

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Stock Compensation Plans (Detail Textuals) - shares	Sep. 30, 2017	Jun. 30, 2014	Aug. 31, 2011	Aug. 18, 2011
American Restaurant Concepts, Inc. 2011 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of common stock granted to employees, officers and directors of, and consultants and advisors			1,214,286
Number of common stock available for issuance	142,858			1,214,286
ARC Group, Inc. 2014 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of common stock granted to employees, officers and directors of, and consultants and advisors		1,000,000
Number of common stock available for issuance	1,000,000

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Commitments and Contingencies (Detail Textuals) - USD ($)	1 Months Ended						3 Months Ended	9 Months Ended
	Jan. 18, 2017	Jan. 31, 2016	Aug. 19, 2013	Jul. 22, 2013	Jan. 31, 2013	Jan. 22, 2013	Sep. 30, 2017	Sep. 30, 2017
Commitments And Contingencies [Line Items]
Labor							$ 293,035	$ 857,933
Daniel Slone
Commitments And Contingencies [Line Items]
Annual base salary to be paid during the term of the agreement			$ 1.00
Employment Agreement | Richard W Akam
Commitments And Contingencies [Line Items]
Term of agreement						1 year
Annual base salary to be paid during the term of the agreement						$ 150,000
Additional renewal term of agreement						1 year
Number of common stock issued in connection with employment agreement		71,429		71,429
Amount of common stock connection with employee agreement				$ 50,000	$ 50,000
Amount of additional shares of common stock to be issued				$ 50,000
Employment Agreement | Seenu G Kasturi
Commitments And Contingencies [Line Items]
Term of agreement	3 years
Annual base salary to be paid during the term of the agreement	$ 26,000
Additional renewal term of agreement	1 year
Initial annual base salary	$ 80,000
Labor	$ 54,000

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Commitments and Contingencies (Detail Textuals 1)		1 Months Ended				3 Months Ended		9 Months Ended
	Apr. 01, 2017 USD ($) ft²	Dec. 20, 2016 USD ($) Rent_Period	Jan. 31, 2015 USD ($) ft²	May 31, 2014 ft²	Oct. 31, 2013 USD ($) ft²	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Commitments And Contingencies [Line Items]
Area of land leased | ft²			2,000
Fixed monthly rent payment | $						$ 98,748	$ 5,718	$ 205,220	$ 17,053
Corporate Headquarters
Commitments And Contingencies [Line Items]
Area of land leased | ft²			2,000
Fixed monthly rent payment | $			$ 1,806
Lease expires date			Dec. 31, 2017
Nocatee Restaurant
Commitments And Contingencies [Line Items]
Area of land leased | ft²	3,400				2,900
Fixed monthly rent payment | $	$ 7,035				$ 1,100
Lease expires date	Mar. 31, 2023
Percentage increase in additional annual rent payment					6.00%
Initial term of lease	60 months				53 months
Additional term of lease					60 months
Youngerman Circle Restaurant
Commitments And Contingencies [Line Items]
Area of land leased | ft²				6,500
Fixed monthly rent payment | $		$ 10,000
Initial term of lease		20 years		10 years
Additional term of lease		5 years		1 year
Initial base rent payment percentage of net sales		7.50%		7.00%
Number of rent periods per year | Rent_Period		13

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Related-Party Transactions (Detail Textuals)	1 Months Ended			3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 31, 2015 USD ($)	Aug. 31, 2013 USD ($)	Jul. 31, 2013	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Mar. 24, 2017 USD ($)	Dec. 19, 2016 USD ($)	Jan. 31, 2015 ft²	May 31, 2014 ft²	Sep. 13, 2013 USD ($)
Related Party Transaction [Line Items]
Purchase price						$ 24,000
Revenue from related parties				$ 40,285	$ 9,092	123,343	$ 314,576
Proceeds from related party debt						206,324	783,323
Repayments of notes payable - related party						$ 206,324	783,323
Payments to acquire notes receivable							595,635
Area of land leased | ft²												2,000
Youngerman Circle Restaurant
Related Party Transaction [Line Items]
Area of land leased | ft²													6,500
Blue Victory Holdings
Related Party Transaction [Line Items]
Interest rate per annum				6.00%		6.00%
Proceeds from related party debt						$ 499,837
Repayments of notes payable - related party						473,589
Outstanding principal amount of credit facility				$ 26,248		$ 26,248
Seenu G Kasturi | Racing QSR, LLC
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				8.70%		8.70%			8.70%
Paradise on Wings Franchise Group, LLC | Seenu G Kasturi
Related Party Transaction [Line Items]
Purchase price						$ 24,000
Ownership percentage in common stock of company				50.00%		50.00%
DWG acquisitions LLC
Related Party Transaction [Line Items]
Accounts receivable				$ 3,056		$ 3,056		$ 14,568
Fund receivable from acquisitions				$ 37,093		$ 37,093
Seediv, LLC | Seenu G Kasturi
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue					22,105		70,610
Loan agreement | Blue Victory Holdings
Related Party Transaction [Line Items]
Maximum borrowing capacity														$ 1,000,000
Loan agreement | Revolving line of credit facility | Blue Victory Holdings
Related Party Transaction [Line Items]
Interest rate per annum														6.00%
Maximum borrowing capacity										$ 50,000				$ 1,000,000
Proceeds from related party debt								824,250
Repayments of notes payable - related party								824,250
Outstanding principal amount of credit facility				$ 16,103		$ 16,103		16,103
Loan agreement | Seenu G Kasturi | Blue Victory Holdings
Related Party Transaction [Line Items]
Equity interest held						90.00%
Ownership percentage in common stock of company				48.90%		48.90%
Subcontractor concession agreement | DWG acquisitions LLC | Jacksonville Jaguars, LLC
Related Party Transaction [Line Items]
Fee generated under concession agreement				$ 1,915		$ (2,680)
Subcontractor concession agreement | DWG acquisitions LLC | Levy Premium Foodservice Limited Partnership
Related Party Transaction [Line Items]
Subcontracting monthly fees		$ 2,000
Subcontractor concession agreement | DWG acquisitions LLC | Ovations Food Services, L.P.
Related Party Transaction [Line Items]
Extended term of agreement	2 years
Subcontracting monthly fees	$ 3,000
Revenue from related parties					15,000
Subcontractor concession agreement | DWG acquisitions LLC | Levy and Ovations
Related Party Transaction [Line Items]
Revenue from related parties							35,000
Franchise agreement | DWG acquisitions LLC
Related Party Transaction [Line Items]
Royalty revenue				$ 40,285	112,860	$ 123,343	418,344
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue					19,644		56,106
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi | Valdosta, Georgia
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue				$ 10,193	10,887	$ 32,224	35,308
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi | Tifton, Georgia
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue				$ 1,520	8,088	$ 1,520	28,010
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi | Fleming Island, Florida
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue					10,464		34,171
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi | Panama City Beach, Florida
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue				$ 14,013	14,786	$ 37,245	41,822
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi | Pensacola, Florida
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Revenue from related parties				$ 7,408	8,861	$ 22,152	22,809
Franchise agreement | DWG acquisitions LLC | Seenu G Kasturi | Kingsland, Georgia
Related Party Transaction [Line Items]
Ownership percentage in common stock of company				48.90%		48.90%
Royalty revenue				$ 8,671	$ 13,027	$ 30,202	34,509
Franchise fee							30,000
Sponsorship agreement | Jacksonville Jaguars, LLC
Related Party Transaction [Line Items]
Term of agreement			3 years
Notes receivable | Racing QSR, LLC
Related Party Transaction [Line Items]
Repayments of notes payable - related party							445,683
Payments to acquire notes receivable							$ 595,635	6,341	$ 121,638
Promissory notes
Related Party Transaction [Line Items]
Aggregate original principal amount				$ 26,248		$ 26,248		$ 216,469
Promissory notes | Blue Victory Holdings
Related Party Transaction [Line Items]
Interest rate per annum											6.00%
Aggregate original principal amount											$ 216,469
Promissory notes | Seediv, LLC | Blue Victory Holdings
Related Party Transaction [Line Items]
Ownership percentage in common stock of company											14.80%
Aggregate original principal amount											$ 216,469

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Judgments in Legal Proceedings (Detail Textuals) - USD ($)	1 Months Ended		3 Months Ended	9 Months Ended	12 Months Ended
	Aug. 31, 2016	Jan. 31, 2010	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Loss Contingencies [Line Items]
Gain on sale of investment in Paradise on Wings -related party			$ 24,000	$ 24,000	$ 82,642
2010 Settlement Agreement
Loss Contingencies [Line Items]
Litigation settlement amount		$ 250,000
Payments for legal settlement		$ 40,000
Settlement and Release Agreement | Joseph Cala
Loss Contingencies [Line Items]
Litigation settlement amount	$ 15,000
Amount payable of legal settlement					210,000
Stock issued during period for litigation settlements	35,000
Gain on sale of investment in Paradise on Wings -related party					$ 175,449

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Judgments in Legal Proceedings (Detail Textuals 1) - USD ($)			3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 11, 2011	Oct. 04, 2011	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 25, 2011
Loss Contingencies [Line Items]
Loss from legal proceedings			$ 24,000		$ 24,000		$ 82,642
Breach of guarantee
Loss Contingencies [Line Items]
Litigation settlement amount		$ 161,747
Litigation settlement expense	$ 33,000
Accrued interest of litigation settlement								$ 2,369
Loss from legal proceedings								$ 197,116
Interest expense			$ 2,841	$ 2,841	$ 8,431	$ 8,462

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Judgments in Legal Proceedings (Detail Textuals 2) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Jan. 31, 2015	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Judgment In Legal Proceedings [Abstract]
Loss contingency damages sought	$ 194,181			$ 111,539
Gain on sale of investment in Paradise on Wings -related party		$ 24,000	$ 24,000	82,642
Accrued legal settlement		153,961	153,961	148,105
Accrued interest outstanding		$ 31,836	31,836	25,980
Other expenses outstanding			$ 10,586	$ 10,586

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Subsequent Events (Detail Textuals) - Subsequent Event - USD ($)			1 Months Ended
	Oct. 04, 2017	Oct. 01, 2017	Oct. 18, 2017
Seediv, LLC | Racing QSR, LLC
Subsequent Event [Line Items]
Maximum purchase price of property	$ 2,000,000
Amount of deposit required with in ten days of agreement	$ 10,000
Seenu G Kasturi
Subsequent Event [Line Items]
Number of common shares issued		8,177
Non Executive Employees
Subsequent Event [Line Items]
Number of common shares issued			2,750