[10-K] RCI HOSPITALITY HOLDINGS, INC. Files Annual Report
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended September 30 , 2025
| Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
Commission file number: 001-13992
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) (Zip Code)
(281 ) 397-6730
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
The | ||||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 1934 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 o No x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company o
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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes o No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $347,708,768 .
As of March 13, 2026, there were approximately 7,710,000 shares of common stock outstanding.
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Forward-looking statements may appear throughout this report, including without limitation, the following sections: Item 1 – “Business,” Item 1A – “Risk Factors,” and Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and, in particular, the risks discussed under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Important factors that in our view could cause material adverse effects on our financial condition and results of operations include, but are not limited to, the risks and uncertainties associated with (i) operating and managing an adult business, (ii) the business climates in cities where we operate, (iii) the success or lack thereof in launching and building our businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, (vi) the impact of the COVID-19 pandemic, (vii) our ability to regain and maintain compliance with the filing requirements of the SEC and the Nasdaq Stock Market, and (viii) numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
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TABLE OF CONTENTS
| Page No. | ||||||||
PART I | ||||||||
Item 1. | Business | 4 | ||||||
Item 1A. | Risk Factors | 10 | ||||||
Item 1B. | Unresolved Staff Comments | 23 | ||||||
Item 2. | Properties | 25 | ||||||
Item 3. | Legal Proceedings | 27 | ||||||
Item 4. | Mine Safety Disclosures | 27 | ||||||
PART II | ||||||||
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 28 | ||||||
Item 6. | [Reserved] | 30 | ||||||
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 | ||||||
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 52 | ||||||
Item 8. | Financial Statements and Supplementary Data | 52 | ||||||
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 106 | ||||||
Item 9A. | Controls and Procedures | 106 | ||||||
Item 9B. | Other Information | 108 | ||||||
PART III | ||||||||
Item 10. | Directors, Executive Officers and Corporate Governance | 111 | ||||||
Item 11. | Executive Compensation | 115 | ||||||
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 123 | ||||||
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 124 | ||||||
Item 14. | Principal Accounting Fees and Services | 126 | ||||||
PART IV | ||||||||
Item 15. | Exhibits, Financial Statement Schedules | 127 | ||||||
Item 16. | Form 10-K Summary | 130 | ||||||
Signatures | 131 | |||||||
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PART I
Item 1. BUSINESS.
OUR COMPANY
RCI Hospitality Holdings, Inc. is a holding company that, through its subsidiaries, engages in businesses that offer live adult entertainment and/or high-quality dining experiences to its guests. Our subsidiaries operated 71 establishments in 15 states as of September 30, 2025, including one club that was temporarily closed due to fire damage and one for rebranding. Together with its subsidiaries, RCI Hospitality Holdings, Inc. is collectively referred to as “RCIHH,” "RCI," the “Company,” “we,” “us,” or “our” in this report. We also operate a leading business communications company serving the multibillion-dollar adult nightclubs industry. RCIHH was incorporated in the State of Texas in 1994 and became public in 1995.
Our fiscal year ends on September 30. References to years 2025, 2024, and 2023 are for fiscal years ended September 30, 2025, 2024, and 2023, respectively. Our fiscal quarters chronologically end on December 31, March 31, June 30 and September 30.
OUR BUSINESS
Our subsidiaries operate several businesses, which we aggregate for financial reporting purposes into two reportable segments – Nightclubs and Bombshells. Businesses that are not included as Nightclubs or Bombshells are combined as “Other.” We adopted Accounting Standards Update 2023-07, Segment Reporting, as of September 30, 2025. Segment-related disclosures, except for those in Note 4 to our consolidated financial statements, relate to amounts exclusive of intersegment items.
During fiscal 2025, 2024, and 2023, consolidated revenues were $279.4 million, $295.6 million, and $293.8 million, respectively, generating diluted earnings per share of $1.23, $0.33, and $3.13, respectively.
The table below shows the number of Nightclubs and Bombshells open by state as of September 30, 2025:
| Nightclubs | Bombshells | Total | |||||||||||||||
| Arizona | 1 | — | 1 | ||||||||||||||
| Colorado | 6 | 1 | 7 | ||||||||||||||
| Florida | 4 | — | 4 | ||||||||||||||
| Illinois | 5 | — | 5 | ||||||||||||||
| Indiana | 1 | — | 1 | ||||||||||||||
| Kentucky | 1 | — | 1 | ||||||||||||||
| Louisiana | 1 | — | 1 | ||||||||||||||
| Maine | 1 | — | 1 | ||||||||||||||
| Michigan | 1 | — | 1 | ||||||||||||||
| Minnesota | 3 | — | 3 | ||||||||||||||
| New York | 4 | — | 4 | ||||||||||||||
| North Carolina | 2 | — | 2 | ||||||||||||||
| Pennsylvania | 2 | — | 2 | ||||||||||||||
| South Carolina | 1 | — | 1 | ||||||||||||||
| Texas | 26 | 10 | 36 | ||||||||||||||
| 59 | 11 | 70 | |||||||||||||||
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Nightclubs Segment
Our Nightclubs subsidiaries operate our adult entertainment nightclubs through several brands that target many different demographics of customers by providing a unique, quality entertainment environment. Our clubs do business as Rick’s Cabaret, Jaguars Club, Tootsie’s Cabaret, XTC Cabaret, Club Onyx, Hoops Cabaret and Sports Bar, Scarlett’s Cabaret, Diamond Cabaret, Cheetah Gentlemen's Club, PT's Showclub, Playmates Club, Country Rock Cabaret, Temptations Adult Cabaret, Foxy’s Cabaret, Vivid Cabaret, Downtown Cabaret, Cabaret East, The Seville, Silver City Cabaret, Heartbreakers Gentlemen's Club, Kappa Men’s Club, Baby Dolls, and Chicas Locas. We also operate one dance club under the brand name Studio 80. In 2025, we acquired clubs doing business as Flight Club, Platinum West, and Platinum Plus.
We generate revenue from our nightclubs through the sale of alcoholic beverages, food, and merchandise items; service in the form of cover charge, licensing fees, and room rentals; and through other related means such as ATM commissions and vending income, among others.
During fiscal 2025, our Nightclub segment sales mix was 40% service revenue; 43% alcoholic beverages; and 17% food, merchandise, and other. Segment gross margin (revenues less cost of goods sold, divided by revenues) was approximately 88.6%. Our Nightclubs segment revenue decreased by approximately 0.6% and income from operations increased by 20.1% compared to the prior year. Same-stores sales for Nightclubs in 2025 was -2.1%.
For a list of our nightclub locations, refer to Item 2—“Properties.”
Bombshells Segment
Our Bombshells segment operates a restaurant and bar concept that sets itself apart with décor that pays homage to all branches of the U.S. military. Locations feature local DJs, large outdoor patios, and more than 75 state-of-the-art flat screen TVs for watching your favorite sports. All food and drink menu items have military names. Bombshell Girls, with their military-inspired uniforms, are a key attraction. Their mission, in addition to waitressing, is to interact with guests and generate a fun atmosphere. During fiscal 2025, we opened two Bombshells locations in Denver, Colorado and Lubbock, Texas and closed three locations in Austin, Houston, and Spring, Texas, and one food hall in Denver, Colorado.
During fiscal 2025, Bombshells sales mix was 52% alcoholic beverages and 48% food, merchandise, and other. Segment gross margin (revenues less cost of goods sold, divided by revenues) was approximately 76.1%. Bombshells segment revenue decreased by 29.2%, while income from operations improved to a $177,000 income from a $10.8 million loss in the prior year. Same-stores sales for Bombshells in 2025 was -13.6%.
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For a list of our Bombshells locations, refer to Item 2—“Properties.”
Other Segment
We group together all businesses not belonging to either Nightclubs and Bombshells as Other reportable segment. This is made up of several wholly-owned subsidiaries composed primarily of our Media Group and Drink Robust. Our Media Group is the leading business communications company serving the multibillion-dollar adult nightclubs industry and the adult retail products industry. It owns a national industry convention and trade show; two national industry trade publications; two national industry award shows; and more than a dozen industry and social media websites. Included in the Media Group is ED Publications, publishers of the bimonthly ED (Exotic Dancer) Magazine, the only national business magazine serving the 2,000 adult nightclubs of North America, which collectively have revenue in excess of $5 billion, according to the Association of Club Executives (an industry lobbying organization that was founded by ED Publications in 1999). In addition, ED Publications produces the bimonthly StorErotica Magazine, which is mailed to over 2,500 adult retail stores and lingerie boutiques across the US. ED Publications, founded in 1991, also produces the Annual ED EXPO, the only convention and tradeshow in the world for the multi-billion-dollar adult nightclub industry. The Media Group produces two nationally recognized industry award shows for the readers of both ED Magazine and StorErotica Magazine, and maintains several B-to-B and consumer websites for both industries. Drink Robust is licensed to sell Robust Energy Drink in the United States.
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OUR STRATEGY
Our overall objective is to create value for our shareholders by developing and operating profitable businesses in the hospitality and related space. We strive to achieve that by providing an attractive price-value entertainment, dining experience, and top-notch service; by attracting and retaining quality personnel; and by focusing on unit-level operating performance.
In December 2024, we launched our five-year Back-to-Basics strategy where we focus on improving performance of existing clubs and Bombshells units to fuel our capital allocation priorities. For the allocation of our free cash flow, we currently divide it among club acquisitions (investing), share buybacks (financing), and dividends (financing). Our financial targets by fiscal 2029 are to achieve:
•Total revenues of $400 million
•Free cash flow of $75 million
•Shares outstanding of 7.5 million
Over a five-year period from fiscal 2020 through fiscal 2025, our income from operations increased at a compound annual growth rate (“CAGR”) of 62%, which was mainly caused by increasing revenue at a CAGR of 16% and decreasing impairment of assets at a CAGR of 13%. Excluding noncash and certain nonrecurring items, our non-GAAP diluted earnings per share improved at a CAGR of 33%. Net cash provided by operating activities improved by 26% and free cash flow also improved by 28% CAGR for the same period. We have steadily increased our quarterly dividend payments from $0.03 in fiscal 2016 to $0.07 in fiscal 2025. See discussions of our non-GAAP financial measures starting on page 45.
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During 2022, we achieved our highest financial performance in terms of profitability and cash flow due to government stimulus prompted by the pandemic and the fact that our restaurants and clubs were among the first to open and resume business operations. Compared to our record net income in 2022, our 2025 net income decreased by 77%. But for the same time period, our net cash from operating activities only decreased by 23%. We are managing this by carefully evaluating our Bombshells program in view of recent performance trends. Currently, we have one location that is under construction and do not plan to add anymore locations after that.
COMPETITION
The adult entertainment and the restaurant/sports bar businesses are highly competitive with respect to price, service and location. All of our nightclubs compete with a number of locally owned adult clubs, some of whose brands may have name recognition that equals that of ours. The names “Rick’s” and “Rick’s Cabaret,” “Tootsie’s Cabaret,” “XTC Cabaret,” “Scarlett’s,” “Silver City,” “Club Onyx,” “Downtown Cabaret,” “Temptations,” “The Seville,” “Jaguars,” “Hoops Cabaret,” “Foxy’s Cabaret,” "Studio 80," “Country Rock Cabaret,” “PT’s,” “Diamond Cabaret,” “Baby Dolls Saloon," "Baby Dolls," "Chicas Locas," "Rick's Rewards," and "Venice Cabaret" are proprietary. In the restaurant/sports bar business, “Bombshells” is also proprietary. We believe that the combination of our existing brand name recognition and the distinctive entertainment environment that we have created allows us to compete effectively in the industry and within the cities where we operate. Although we believe that we are well positioned to compete successfully, there can be no assurance that we will be able to maintain our high level of name recognition and prestige within the marketplace.
GOVERNMENTAL REGULATIONS
We are subject to various federal, state and local laws affecting our business activities. Particularly in Texas, the authority to issue a permit to sell alcoholic beverages is governed by the Texas Alcoholic Beverage Commission (“TABC”), which has the authority, in its discretion, to issue the appropriate permits. We presently hold a Mixed Beverage Permit and a Late Hour Permit at numerous Texas locations. Colorado, Minnesota, North Carolina, Louisiana, Arizona, Pennsylvania, Florida, New York, Kentucky, Maine, Indiana, and Illinois have similar laws that may limit the availability of a permit to sell alcoholic beverages or that may provide for suspension or revocation of a permit to sell alcoholic beverages in certain circumstances. It is our policy, prior to expanding into any new market, to take steps to ensure compliance with all licensing and regulatory requirements for the sale of alcoholic beverages, as well as the sale of food.
In addition to various regulatory requirements affecting the sale of alcoholic beverages, in many cities where we operate, the location of an adult entertainment cabaret is subject to restriction by city, county or other governmental ordinance. The prohibitions deal generally with distance from schools, churches and other sexually oriented businesses, and contain restrictions based on the percentage of residences within the immediate vicinity of the sexually oriented business. The granting of a sexually oriented business permit is not subject to discretion; the permit must be granted if the proposed operation satisfies the requirements of the ordinance. In all states where we operate, management believes we are in compliance with applicable city, county, state or other local laws governing the sale of alcohol and sexually oriented businesses.
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TRADEMARKS
Our rights to the trade names “RCI Hospitality Holdings, Inc.,” “Rick’s,” “Rick’s Cabaret,” “Tootsie’s Cabaret,” “Club Onyx,” “XTC Cabaret,” “Temptations,” “Jaguars,” “Downtown Cabaret,” “Cabaret East,” “Bombshells Restaurant and Bar,” “Vee Lounge,” “Mile High Men’s Club,” “Country Rock Cabaret,” “PT’s,” and “Diamond Cabaret” are established under common law, based upon our substantial and continuous use of these trade names in interstate commerce, some of which have been in use at least as early as 1987. We have registered our service mark, “RICK’S AND STARS DESIGN,” and the “BOMBSHELLS RESTAURANT & BAR” logo design with the United States Patent and Trademark Office. We have also obtained service mark registrations from the Patent and Trademark Office for “RICK’S AND STARS DESIGN” logo, “RCI HOSPITALITY HOLDINGS, INC.,” “RICK’S,” “RICK’S CABARET,” “CLUB ONYX,” “XTC CABARET,” “SCARLETT’S CABARET,” “SILVER CITY CABARET,” “BOMBSHELLS RESTAURANT AND BAR,” “THE SEVILLE CLUB,” “DOWN IN TEXAS SALOON,” “HOOPS CABARET,” “VEE LOUNGE,” “STUDIO 80,” “FOXY’S CABARET,” “EXOTIC DANCER,” “TOYS FOR TATAS,” “LA BOHEME GENTLEMAN'S CLUB,” “MILE HIGH MEN’S CLUB,” “MHMC logo,” “AFTER DARK,” “COUNTRY ROCK CABARET,” “PT’S,” “DIAMOND CABARET,” “CABARET ROYALE,” “BABY DOLLS SALOON,” “BABY DOLLS TOPLESS SALOON,” “BABY DOLLS,” “JAGUARS," and “BOMBSHELLS OFFICER’S CLUB” are registered through service mark registrations issued by the United States Patent and Trademark Office. As of this date, we have pending registration applications for the names “TOOTSIES CABARET,” “RICK'S REWARDS,” “VENICE CABARET,” “CHERRY CREEK FOOD HALL AND BREWERY,” and “THE MANSION.” We also own the rights to numerous trade names associated with our media division. There can be no assurance that these steps we have taken to protect our service marks will be adequate to deter misappropriation of our protected intellectual property rights.
EMPLOYEES AND INDEPENDENT CONTRACTORS
Our people are employed by the parent company or by its subsidiaries. Executive officers are employed by the registrant (parent company); shared services personnel and managers responsible for multiple clubs or restaurants are employed by RCI Internet Services, Inc. and SWR Consulting, Inc.; and the rest are employed by the individual operating entities. As of September 30, 2025, we had the following employees:
| Operations | |||||||||||||||||||||||
| Managers | Non-Managers | Corporate | Total | ||||||||||||||||||||
| Hourly | 60 | 2,874 | 8 | 2,942 | |||||||||||||||||||
| Salaried | 365 | 49 | 88 | 502 | |||||||||||||||||||
| 425 | 2,923 | 96 | 3,444 | ||||||||||||||||||||
Additionally, as of September 30, 2025, we had independent contractor entertainers who are self-employed and conduct business at our locations on a non-exclusive basis. Our entertainers at Rick’s Cabaret in Minneapolis, Minnesota and at Jaguars Club in Phoenix, Arizona may elect to act as commissioned employees. All employees and independent contractors sign arbitration non-class-action participation agreements, where allowed by federal and state laws. None of our employees are represented by a union. We consider our employee relations to be good.
We believe that the adult entertainment industry standard of treating entertainers as independent contractors provides us with safe harbor protection to preclude payroll tax assessment. We have prepared plans that we believe will protect our profitability in the event that the sexually oriented business industry is required in all states to convert entertainers, who are now independent contractors, into employees. See related discussion in “Risk Factors” below.
AVAILABLE INFORMATION
Our corporate website address is www.rcihospitality.com. Upon written request, we make available free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the SEC under the Securities Exchange Act of 1934, as amended (www.sec.gov). Information contained in the corporate website shall not be construed as part of this Form 10-K.
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Item 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our common stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occurs, our business, financial condition, or results of operations could be seriously harmed. The trading price of our common stock could, in turn, decline and you could lose all or part of your investment.
A summary of our risk factors is as follows:
Risks related to our business
◦We may deviate from our present capital allocation strategy.
◦We may need additional financing, or our business expansion plans may be significantly limited.
◦There is substantial competition in the nightclub entertainment industry, which may affect our ability to operate profitably or acquire additional clubs.
◦The adult entertainment industry is extremely volatile.
◦Private advocacy group actions targeted at the kind of adult entertainment we offer could result in limitations and our inability to operate in certain locations and negatively impact our business.
◦We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.
◦We are exposed to risks related to cyber security and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and employees or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs and litigation.
◦Our acquisitions may result in disruptions in our business and diversion of management’s attention.
◦The impact of new club or restaurant openings could result in fluctuations in our financial performance.
◦Our ability to grow sales through delivery orders is uncertain.
◦We incur significant costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives.
◦We have identified material weaknesses in our internal control over financial reporting.
◦We may have uninsured risks in excess of our insurance coverage or self-insurance.
◦We are subject to increasing legal complexity and could be party to litigation that could adversely affect us.
◦Our previous liability insurer may be unable to provide coverage to us and our subsidiaries.
◦The protection provided by our service marks is limited.
◦We are dependent on key personnel.
◦If we are not able to hire, develop, and retain qualified club and restaurant employees and/or appropriately plan our workforce, our growth plan and profitability could be adversely affected.
◦A failure to maintain food safety throughout the supply chain and food-borne illness concerns may have an adverse effect on our business.
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◦Our venture, expansion, and renovation projects may face significant inherent risks.
◦Other risk factors may adversely affect our financial performance.
Risks related to general macroeconomic and safety conditions
◦Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing war between Russia and Ukraine and the Israel-Hamas war.
◦If we are unable to maintain compliance with certain of our debt covenants or unable to obtain waivers, we may be unable to make additional borrowings and be declared in default where our debt will be made immediately due and payable. In addition, global economic conditions may make it more difficult to access new credit facilities.
◦We have recorded impairment charges in current and past periods and may record additional impairment charges in future periods.
Risks related to regulations and/or regulatory agencies
◦Our business operations are subject to regulatory uncertainties which may affect our ability to continue operations of existing nightclubs, acquire additional nightclubs, or be profitable.
◦The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. If federal or state law mandates that they be classified as employees, our business could be adversely impacted.
◦Our revenues could be significantly affected by limitations relating to permits to sell alcoholic beverages.
◦Activities or conduct at our nightclubs may cause us to lose necessary business licenses, expose us to liability, or result in adverse publicity, which may increase our costs and divert management’s attention from our business.
Risk related to our common stock
◦We must continue to meet NASDAQ Global Market Continued Listing Requirements, or we risk delisting.
◦We may be subject to allegations, defamations, or other detrimental conduct by third parties, which could harm our reputation and cause us to lose customers and/or contribute to a deflation of our stock price.
◦Our quarterly operating results may fluctuate and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
◦Anti-takeover effects of the issuance of our preferred stock could adversely affect our common stock.
◦Future sales or the perception of future sales of a substantial amount of our common stock may depress our stock price.
◦Our stock price has been volatile and may fluctuate in the future.
◦Cumulative voting is not available to our stockholders.
◦Our directors and officers have limited liability and have rights to indemnification.
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Details of our risk factors are as follows:
Risks related to our business
We may deviate from our present capital allocation strategy.
We believe that our present capital allocation strategy will provide us with optimized returns. However, implementation of our capital allocation strategy depends on the interplay of several factors such as our stock price, our outstanding common shares, the interest rates on our debt, and the rate of return on available investments. If these factors are not conducive to implementing our present capital allocation strategy, or we determine that adopting a different capital allocation strategy is in the best interest of shareholders, we reserve the right to deviate from this approach. There can be no assurance that we will not deviate from or adopt an alternative capital allocation strategy moving forward.
We may need additional financing, or our business expansion plans may be significantly limited.
If cash generated from our operations is insufficient to satisfy our working capital and capital expenditure requirements, we will need to raise additional funds through the public or private sale of our equity or debt securities. The timing and amount of our capital requirements will depend on a number of factors, including cash flow and cash requirements for nightclub acquisitions and new restaurant development. If additional funds are raised through the issuance of equity or convertible debt securities, the ownership percentage of our then-existing shareholders will be diluted. We cannot ensure that additional financing will be available on terms favorable to us, if at all. Any future equity financing, if available, may result in dilution to existing shareholders; and debt financing, if available, may include restrictive covenants. Any failure by us to procure timely additional financing, if needed, will have material adverse consequences on our business operations.
There is substantial competition in the nightclub entertainment industry, which may affect our ability to operate profitably or acquire additional clubs.
Our nightclubs face substantial competition. Some of our competitors may have greater financial and management resources than we do. Additionally, the industry is subject to unpredictable competitive trends and competition for general entertainment dollars. There can be no assurance that we will be able to remain profitable in this competitive industry.
The adult entertainment industry is extremely volatile.
Historically, the adult entertainment, restaurant and bar industry has been an extremely volatile industry. The industry tends to be extremely sensitive to the general local economy, in that when economic conditions are prosperous, adult entertainment industry revenues increase, and when economic conditions are unfavorable, entertainment industry revenues decline. Coupled with this economic sensitivity are the trendy personal preferences of the customers who frequent adult nightclubs. We continuously monitor trends in our customers’ tastes and entertainment preferences so that, if necessary, we can make appropriate changes which will allow us to remain one of the premiere adult nightclubs. However, any significant decline in general corporate conditions or uncertainties regarding future economic prospects that affect consumer spending could have a material adverse effect on our business. In addition, we have historically catered to a clientele base from the upper end of the market. Accordingly, further reductions in the amounts of entertainment expenses allowed as deductions from income under the Internal Revenue Code of 1954, as amended, could adversely affect sales to customers dependent upon corporate expense accounts.
Private advocacy group actions targeted at the kind of adult entertainment we offer could result in limitations in our inability to operate in certain locations and negatively impact our business.
Our ability to operate successfully depends on the protection provided to us under the First Amendment to the U.S. Constitution. From time to time, private advocacy groups have sought to target our nightclubs by petitioning for non-renewal of certain of our permits and licenses. Furthermore, private advocacy groups, which have influence on certain financial institutions, have swayed these institutions to not do business with us. In addition to possibly limiting our operations and financing options, negative publicity campaigns, lawsuits and boycotts could negatively affect our businesses and cause additional financial harm by discouraging investors from investing in our securities or requiring that we incur significant expenditures to defend our business.
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We rely heavily on information technology in our operations and any material failure, weakness, interruption, or breach of security could prevent us from effectively operating our business.
Our operations and corporate functions rely heavily on information systems, including point-of-sale processing, management of our supply chain, payment of obligations, collection of cash, electronic communications, data warehousing to support analytics, finance and accounting systems, mobile technologies to enhance the customer experience, and other various processes and procedures, some of which are handled by third parties. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security relating to these systems could result in delays in consumer service and reduce efficiency in our operations. These problems could adversely affect our results of operations, and remediation could result in significant, unplanned capital investments.
We are exposed to risks related to cyber security and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and employees or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs, and litigation.
Our technology systems contain personal, financial, and other information that is entrusted to us by our guests and employees, as well as financial, proprietary, and other confidential information related to our business, and a significant portion of our sales are by credit or debit cards. If our technology systems, or those of third-party services providers we rely upon, are compromised as a result of a cyber-attack (including whether from circumvention of security systems, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, or social engineering) or other external or internal method, it could result in an adverse and material impact on our reputation, operations, and financial condition. The cyber risks we face range from cyber-attacks common to most industries, to attacks that target us due to the confidential consumer information we obtain through our electronic processing of credit and debit card transactions. Such security breaches could also result in litigation or governmental investigation against us, as well as the imposition of penalties. These impacts could also occur if we are perceived either to have had an attack or to have failed to properly respond to an incident. Like many other customer facing companies we have experienced, and will likely continue to experience, attempts to compromise our information technology systems. Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate. While we continue to make significant investment in physical and technological security measures, employee training, and third-party services designed to anticipate cyber-attacks and prevent breaches, our information technology networks and infrastructure or those of our third-party vendors and other service providers could be vulnerable to damage, disruptions, shutdowns or breaches of confidential information due to criminal conduct, employee error or malfeasance, utility failures, natural disasters, or other catastrophic events. Due to these scenarios we cannot provide assurance that we will be successful in preventing such breaches or data loss.
We are subject to a variety of continually evolving and developing laws and regulations regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. The use and disclosure of such information is regulated and enforced at the federal, state and international levels, and these laws, rules and regulations are subject to change. Additionally, the information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and guest and employee expectations, or may require significant additional investments or time in order to do so. Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our information systems and records and that of our service providers.
As privacy and information security laws and regulations change or cyber risks evolve pertaining to data, we may incur significant additional costs in technology, third-party services, and personnel to maintain systems designed to anticipate and prevent cyber-attacks. As with many public companies, our defenses are under attack regularly. There might be minor intrusions from time to time. We have added certain preventive measures to reduce cyber risks. However, we cannot provide assurance that our security frameworks and measures will be successful in preventing future significant cyber-attacks or data loss. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, guests’ or other proprietary data or other breach
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of our information technology systems could result in fines, legal claims or proceedings including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and employees, any of which could have a material adverse effect on our business, financial condition and results of operations.
Our acquisitions may result in disruptions in our business and diversion of management’s attention.
We have made and may continue to make acquisitions of complementary nightclubs, restaurants or related operations. Any acquisitions will require the integration of the operations, products and personnel of the acquired businesses and the training and motivation of these individuals. Such acquisitions may disrupt our operations and divert management’s attention from day-to-day operations, which could impair our relationships with current employees, customers and partners. We may also incur debt or issue equity securities to pay for any future acquisitions. These issuances could be substantially dilutive to our stockholders. In addition, our profitability may suffer because of acquisition-related costs or amortization, or impairment costs for acquired goodwill and other intangible assets. If management is unable to fully integrate acquired business, products, or persons with existing operations, we may not receive the benefits of the acquisitions, and our revenues and stock trading price may decrease.
The impact of new club or restaurant openings could result in fluctuations in our financial performance.
Performance of any new club or restaurant location will usually differ from its originally targeted performance due to a variety of factors, and these differences may be material. New clubs and restaurants typically encounter higher customer traffic and sales in their initial months, which may decrease over time. Accordingly, sales achieved by new or reconcepted locations may not be indicative of future operating results. Additionally, we incur substantial pre-opening expenses each time we open a new establishment, which expenses may be higher than anticipated. Due to the foregoing factors, results for any one fiscal quarter are not necessarily indicative of results to be expected for any other fiscal quarter or for a full fiscal year.
Our ability to grow sales through delivery orders is uncertain.
Part of our strategy for restaurant growth is dependent on increased sales from guests that want our food delivered to them. We currently rely on third-party delivery providers for the ordering and payment platforms that receive guest orders and that send orders directly to our point-of-sale system. These platforms could be damaged or interrupted by technological failures, cyber-attacks, or other factors, which may adversely impact our sales through these channels.
Delivery providers generally fulfill delivery orders through drivers that are independent contractors. These drivers may make errors, fail to make timely deliveries, damage our food, or poorly represent our brands, which may lead to customer disappointment, reputational harm and unmet sales expectations. Our sales may also be adversely impacted if there is a shortage of drivers that are willing and available to make deliveries from our restaurants. We also incur additional costs associated with delivery orders, and it is possible that these orders could cannibalize more profitable in-restaurant visits or take-out orders.
We incur significant costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives.
We incur significant legal, accounting and other expenses that our non-public competition does not incur. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as well as new rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and effective disclosure controls and procedures. In particular, under Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation and testing on the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting. In performing this evaluation and testing, both our management and our independent registered public accounting firm concluded that our internal control over financial reporting is not effective as of September 30, 2025. We are, however, addressing this issue and remediating our material weaknesses. When we were to
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identify a material weakness, correcting that issue, and thereafter our continued compliance with Section 404 require that we incur substantial accounting expense and expend significant management efforts. Moreover, if we are not able to correct an internal control issue and comply with the requirements of Section 404 in a timely manner, or if in the future we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
We have identified material weaknesses in our internal control over financial reporting.
Management, including our Interim Chief Executive Officer and our Interim Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of September 30, 2025, and concluded that we did not maintain effective internal control over financial reporting. Management identified material weaknesses related to (1) ineffective design and operation of controls over certain information technology general controls, including change management and vendor management controls; (2) ineffective design and operation of controls, which include management review controls, over the accounting for business combinations and contingent liabilities; and (3) ineffective design and operation of controls, which include management review controls, over the impairment assessments over long-lived assets, definite- and indefinite-lived intangible assets, and goodwill. See Item 9A, “Controls and Procedures,” below. While certain actions have been taken to implement a remediation plan to address these material weaknesses and to enhance our internal control over financial reporting, if these material weaknesses are not remediated, it could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which could negatively affect investor confidence in our Company, and, as a result, the value of our common stock could be adversely affected.
We may have uninsured risks in excess of our insurance coverage or self-insurance.
Historically, we have maintained insurance in amounts we consider adequate for personal injury and property damage to which the business of the Company may be subject. During fiscal 2025, however, we self-insured certain general liability and liquor insurance coverage in a number of establishments due to increasingly prohibitive costs of such coverage. However, we still carry at least the minimum insurance coverage where it is required by law for licensing requirements. There can be no assurance that we will not have uninsured liabilities or liabilities in excess of the coverage provided by insurance or self-insurance, which liabilities may be imposed pursuant to the Texas “dram shop” statute or similar “dram shop” statutes or common law theories of liability in other states where we operate or expand. For example, the Texas “dram shop” statute provides a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to such person if it was apparent to the server that the individual being sold, served or provided with an alcoholic beverage was obviously intoxicated to the extent that he presented a clear danger to himself and others. An employer is not liable for the actions of its employee who over-serves if (i) the employer requires its employees to attend a seller training program approved by the TABC; (ii) the employee has actually attended such a training program; and (iii) the employer has not directly or indirectly encouraged the employee to violate the law. It is our policy to require that all servers of alcohol working at our clubs in Texas be certified as servers under a training program approved by the TABC, which certification gives statutory immunity to the sellers of alcohol from damage caused to third parties by those who have consumed alcoholic beverages at such establishment pursuant to the TABC. There can be no assurance, however, that uninsured liabilities may not arise in the markets in which we operate which could have a material adverse effect on the Company.
We are subject to increasing legal complexity and could be party to litigation that could adversely affect us.
Increasing legal complexity will continue to affect our operations and results. We could be subject to legal proceedings that may adversely affect our business, including class actions, administrative proceedings, government investigations, employment and personal injury claims, claims alleging violations of federal and state laws regarding consumer, workplace and employment matters, wage and hour claims, discrimination and similar matters, landlord/tenant disputes, disputes with current and former suppliers, claims by current and former franchisees, contractors, data privacy claims and intellectual property claims (including claims that we infringed upon another party’s trademarks, or copyrights). Inconsistent standards imposed by governmental authorities can adversely affect our business and increase our exposure to litigation which could result in significant judgments, including punitive and liquidated damages, and injunctive relief.
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Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for an illness or injury they suffered as a result of a visit to our clubs or restaurants, or that we have problems with food quality or operations. As a Company, we take responsible alcohol service seriously. However, we are subject to "dram shop" statutes. These statutes generally allow a person injured by an intoxicated person to recover damages from an establishment that served alcoholic beverages to the intoxicated person. Some litigation against restaurant chains has resulted in significant judgments, including punitive damages, under dram shop statutes. Because a plaintiff may seek punitive damages, which may not be covered by insurance, this type of action could have an adverse impact on our financial condition and results of operations.
Litigation involving our relationship with contractors and the legal distinction between our contractors and us for employment law purposes, if determined adversely, could increase costs, negatively impact the business prospects of our operations and subject us to incremental liability for their actions.
Our operating results could also be affected by the following:
•The relative level of our defense costs and nature and procedural status of pending proceedings;
•The cost and other effects of settlements, judgments or consent decrees, which may require us to make disclosures or to take other actions that may affect perceptions of our brands and products;
•Adverse results of pending or future litigation, including litigation challenging the composition and preparation of our products, or the appropriateness or accuracy of our marketing or other communication practices; and
•The scope and terms of insurance or indemnification protections that we may have (if any).
Claims brought by government authorities have the potential to be especially disruptive to our business and operations. As described further under “Legal Matters” in Note 11 to our consolidated financial statements, on September 16, 2025, the Company was indicted in the Supreme Court of the State of New York, County of New York, along with two executive officers of the Company (Eric Langan, then Chief Executive Officer, and Bradley Chhay, then Chief Financial Officer, who each subsequently stepped down from those positions in November 2025), three employees of subsidiaries, and the Company’s subsidiaries Peregrine Enterprises, Inc. (the operator of Rick’s Cabaret in New York City), RCI Dining Services (37th Street), Inc. (the operator of Vivid Cabaret in New York City) and RCI 33rd Street Ventures, Inc. (the operator of Hoops Cabaret and Sports Bar in New York City). The indictment alleges that the defendants committed conspiracy, bribery, criminal tax fraud, and offering a false instrument for filing. These charges, which resulted from a previously disclosed investigation by the Office of the Attorney General of New York, allege that a tax auditor with the New York State Department of Taxation and Finance was provided complimentary admission to clubs, restaurant meals, private dances and travel expenses in exchange for the reduction of certain sales tax liabilities in connection with the use of “Dance Dollars.” The Company is continuing to evaluate the charges in the indictment and intends to vigorously defend itself against them, while also continuing to seek a just resolution. The charges are merely allegations, and the defendants are presumed innocent unless and until proven guilty in a court of law. It is not possible at this time to determine whether the Company will incur any fines, penalties, or liabilities in connection with the investigation. If, however, a government authority was to allege that illegal conduct was committed by the Company or any of its employees or executives, regardless of whether any such claims are valid, such claims have the potential to affect our business and defending such claims may be expensive and may divert time, attention and money away from our operations and hurt our performance. Further, adverse publicity resulting from these claims may negatively affect our business.
Our previous liability insurer may be unable to provide coverage to us and our subsidiaries.
As previously reported, the Company and its subsidiaries were insured under a liability policy issued by Indemnity Insurance Corporation, RRG (“IIC”) through October 25, 2013. The Company and its subsidiaries changed insurance companies on that date.
On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets, as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.
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On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must have been filed with the Receiver before the close of business on January 16, 2015, and that all pending lawsuits involving IIC as the insurer were further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer had insurance coverage under the liability policy with IIC. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100% of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As of September 30, 2025, we have no remaining unresolved claims out of the original 71 claims.
The protection provided by our service marks is limited.
Our rights to the trade names “RCI Hospitality Holdings, Inc.,” “Rick’s,” “Rick’s Cabaret,” “Tootsie’s Cabaret,” “Club Onyx,” “XTC Cabaret,” “Temptations,” “Jaguars,” “Downtown Cabaret,” “Cabaret East,” “Bombshells Restaurant and Bar,” “Vee Lounge,” “Mile High Men’s Club,” “Country Rock Cabaret,” “PT’s,” and “Diamond Cabaret” are established under common law, based upon our substantial and continuous use of these trade names in interstate commerce, some of which have been in use at least as early as 1987. We have registered our service mark, “RICK’S AND STARS DESIGN,” and the “BOMBSHELLS RESTAURANT & BAR” logo design with the United States Patent and Trademark Office. We have also obtained service mark registrations from the Patent and Trademark Office for “RICK’S AND STARS DESIGN” logo, “RCI HOSPITALITY HOLDINGS, INC.,” “RICK’S,” “RICK’S CABARET,” “CLUB ONYX,” “XTC CABARET,” “SCARLETT’S CABARET,” “SILVER CITY CABARET,” “BOMBSHELLS RESTAURANT AND BAR,” “THE SEVILLE CLUB,” “DOWN IN TEXAS SALOON,” “HOOPS CABARET,” “VEE LOUNGE,” “STUDIO 80,” “FOXY’S CABARET,” “EXOTIC DANCER,” “TOYS FOR TATAS,” “MILE HIGH MEN’S CLUB,” “MHMC logo,” “AFTER DARK,” “COUNTRY ROCK CABARET,” “PT’S,” “DIAMOND CABARET,” "CABARET ROYALE," BABY DOLLS SALOON," "BABY DOLLS TOPLESS SALOON," "BABY DOLLS," "JAGUARS," and BOMBSHELLS OFFICER’S CLUB are registered through service mark registrations issued by the United States Patent and Trademark Office. As of this date, we have pending registration applications for the names “TOOTSIES CABARET,” "RICK'S REWARDS," "VENICE CABARET," “CHERRY CREEK FOOD HALL AND BREWERY”, and “THE MANSION.” We also own the rights to numerous trade names associated with our media division. There can be no assurance that these steps we have taken to protect our service marks will be adequate to deter misappropriation of our protected intellectual property rights. Litigation may be necessary in the future to protect our rights from infringement, which may be costly and time consuming. The loss of the intellectual property rights owned or claimed by us could have a material adverse effect on our business.
We are dependent on key personnel.
Our future success is dependent, in a large part, on retaining the services of individuals who possess comprehensive knowledge of our industry. Eric Langan, our former President and Chief Executive Officer, and Bradley Chhay, our former Chief Financial Officer, have served these roles in the past, but both individuals stepped down as executive officers in November 2025. Travis Reese and Albert Molina have stepped in to fill these positions and Messrs. Langan and Chhay have remained with the Company in different roles. Our executive officers have vast experience in the adult nightclub and/or hospitality industries, with Mr. Molina having specialized familiarity with our accounting systems and how they affect our operations. The loss of key personnel could have a negative effect on our operating, marketing and financial performance if we are unable to find an adequate replacement with similar knowledge and experience within our industry. There can be no assurance that any of our key personnel will continue to be employed by us.
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If we are not able to hire, develop, and retain qualified club and restaurant employees and/or appropriately plan our workforce, our growth plan and profitability could be adversely affected.
We rely on our restaurant and club-level employees to consistently provide high-quality food and positive experiences to our guests. In addition, our ability to continue to open new restaurants depends on us attracting, hiring, developing, and retaining high-quality managers. Maintaining appropriate staffing in our restaurants requires precise workforce planning, which planning has become more complex due to predictive scheduling laws (also called “fair workweek” or “secure scheduling”) and “just cause” termination legislation in certain geographic areas where we operate, and the so-called “great resignation” trend. The market for qualified talent continues to be competitive and we must ensure that we continue to offer competitive wages, benefits, and workplace conditions to retain qualified employees. We have experienced and may continue to experience challenges in hiring and retaining restaurant and club employees and in maintaining full restaurant and or club staffing in various locations, which has resulted in longer wait times for guest orders and potentially decreased employee satisfaction. A shortage of qualified candidates who meet all legal work authorization and training requirements, failure to hire and retain new restaurant or club employees in a timely manner or higher than expected turnover levels could affect our ability to open new restaurants, grow sales at existing restaurants and clubs or meet our labor cost objectives. In addition, failure to adequately monitor and proactively respond to employee dissatisfaction could lead to poor guest satisfaction, higher turnover, litigation and unionization efforts, which could negatively impact our ability to meet our growth targets.
A failure to maintain food safety throughout the supply chain and food-borne illness concerns may have an adverse effect on our business.
Food safety is a top priority, and we dedicate substantial resources to ensuring that our guests enjoy safe, quality food products. However, food safety issues could be caused at the point of source or by food suppliers or distributors and, as a result, be out of our control. In addition, regardless of the source or cause, any report of food-borne illnesses such as E. coli, hepatitis A, trichinosis or salmonella, and other food safety issues including food tampering or contamination, at one of our restaurants or clubs could adversely affect the reputation of our brands and have a negative impact on our sales. Even instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the food service industry generally and adversely impact our sales. The occurrence of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.
Our venture, expansion, and renovation projects may face significant inherent risks.
Investment in certain projects we may undertake will be subject to the many risks inherent in the expansion or renovation of an existing enterprise or construction of a new enterprise, including unanticipated design, construction, regulatory, environmental and operating problems and lack of demand for our projects.
Our current and future projects could also experience:
•delays and significant cost increases;
•delays in obtaining or inability to obtain necessary permits, licenses and approvals;
•lack of sufficient, or delays in the availability of, financing;
•shortages of materials;
•shortages of skilled labor, work stoppages or labor disputes;
•poor performance or nonperformance by any third parties on whom we place reliance;
•unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems, including defective plans and specifications;
•weather interference, floods, fires or other casualty losses; and
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The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons. Actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these costs can increase over time as the project is built to completion.
We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.
Other risk factors may adversely affect our financial performance.
Other risk factors that could cause our actual results to differ materially from those indicated in the forward-looking statements by affecting, among many things, pricing, consumer spending and consumer confidence, include, without limitation, changes in economic conditions and financial and credit markets, credit availability, increased fuel costs and availability for our employees, customers and suppliers, health epidemics or pandemics or the prospects of these events (such as reports on avian flu or COVID-19), consumer perceptions of food safety, changes in consumer tastes and behaviors, governmental monetary policies, changes in demographic trends, terrorist acts, energy shortages and rolling blackouts, and weather (including, major hurricanes and regional snow storms) and other acts of God.
We are also subject to the general risks of inflation, increases in minimum wage, health care, and other benefits that may have a material adverse effect on our cost structure, and the disruption in our supply chain caused by several factors.
Risks related to general macroeconomic and safety conditions
Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing war and other geopolitical conflict.
Ongoing war and other geopolitical conflicts could have adverse effects on global macroeconomic conditions which could negatively impact our business, financial condition, and results of operations. These conflicts are highly unpredictable and have historically resulted in significant volatility in oil and natural gas prices worldwide.
If we are unable to maintain compliance with certain of our debt covenants or unable to obtain waivers, we may be unable to make additional borrowings and be declared in default where our debt will be made immediately due and payable. In addition, global economic conditions may make it more difficult to access new credit facilities.
Our liquidity position is, in part, dependent upon our ability to borrow funds from financial institutions and/or private individuals. Certain of our debts have financial covenants that require us to maintain certain operating income to debt service ratios. As of September 30, 2025, we were in compliance with all covenants. Due to the impact of macroeconomic, geopolitical, and health and safety factors, and the potential economic slowdown, our financial performance in future periods could be negatively impacted. A failure to comply with the financial covenants under our credit facility or obtain waivers would give rise to an event of default under the terms of certain of our debts, allowing the lenders to accelerate repayment of any outstanding debt.
We have recorded impairment charges in current and past periods and may record additional impairment charges in future periods.
Our nightclubs are often acquired with a purchase price based on historical EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). This results in certain nightclubs carrying a substantial amount of intangible asset value, mostly allocated to licenses and goodwill. Generally accepted accounting principles require periodic impairment review of indefinite-lived intangible assets, long-lived assets, and goodwill to determine if, or when events and circumstances indicate that, the fair value of these assets is not recoverable. As a result of our periodic impairment reviews, we recorded impairment charges of $5.3 million in 2025 (representing $3.8 million of SOB license impairment on six clubs and $1.6 million of property and equipment impairment on one food hall operated under the Bombshells segment); $38.5 million in 2024 (representing $8.9 million of goodwill impairment, $11.8 million of SOB license impairment on seven clubs, $10.6 million of property and equipment impairment on four clubs and nine Bombshells units, $6.5 million of operating lease right-of-use assets impairment on five Bombshells units, $693,000 of tradename impairment on one club, and $68,000 related to other assets); and $12.6 million in 2023 (representing $4.2 million of goodwill impairment, $6.5 million of SOB
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license impairment on eight clubs, $1.0 million of operating lease right-of-use asset on one club, $814,000 of software impairment on two investment projects, and $58,000 of property and equipment impairment on one club). If difficult market and economic conditions materialize over the next year and/or we experience a decrease in revenue at one or more nightclubs or restaurants, we could incur a decline in fair value of one or more of our nightclubs or restaurants. This could result in future impairment charges of up to the total value of our tangible and intangible assets, including goodwill. We actively monitor our clubs and restaurants for any indication of impairment.
Risks related to regulations and/or regulatory agencies
Our business operations are subject to regulatory uncertainties which may affect our ability to continue operations of existing nightclubs, acquire additional nightclubs, or be profitable.
Adult entertainment nightclubs are subject to local, state and federal regulations. Our business is regulated by local zoning, local and state liquor licensing, local ordinances, and state and federal time place and manner restrictions. The adult entertainment provided by our nightclubs has elements of speech and expression and, therefore, enjoys some protection under the First Amendment to the United States Constitution. However, the protection is limited to the expression, and not the conduct of an entertainer. While our nightclubs are generally well established in their respective markets, there can be no assurance that local, state and/or federal licensing and other regulations will permit our nightclubs to remain in operation or profitable in the future.
The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. If federal or state law mandates that they be classified as employees, our business could be adversely impacted.
The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. The Internal Revenue Service regulations and applicable state law guidelines regarding independent contractor classification are subject to judicial and agency interpretation, and it could be determined that the independent contractor classification is inapplicable. Further, if legal standards for classification of independent contractors change, it may be necessary to modify our compensation structure for these adult entertainers, including by paying additional compensation or reimbursing expenses. While we take steps to ensure that our adult entertainers are deemed independent contractors, if our adult entertainers are determined to have been misclassified as independent contractors, we would incur additional exposure under federal and state law, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings. Any of these outcomes could result in substantial costs to us, could significantly impair our financial condition and our ability to conduct our business as we choose, and could damage our ability to attract and retain other personnel.
Our revenues could be significantly affected by limitations relating to permits to sell alcoholic beverages.
We derive a significant portion of our revenues from the sale of alcoholic beverages. States in which we operate may have laws which may limit the availability of a permit to sell alcoholic beverages, or which may provide for suspension or revocation of a permit to sell alcoholic beverages in certain circumstances. The temporary or permanent suspension or revocations of any such permits would have a material adverse effect on our revenues, financial condition and results of operations. In all states where we operate, management believes we are in compliance with applicable city, county, state or other local laws governing the sale of alcohol.
Activities or conduct at our nightclubs may cause us to lose necessary business licenses, expose us to liability, or result in adverse publicity, which may increase our costs and divert management’s attention from our business.
We are subject to risks associated with activities or conduct at our nightclubs that are illegal or violate the terms of necessary business licenses. Some of our nightclubs operate under licenses for sexually oriented businesses and are afforded some protection under the First Amendment to the U.S. Constitution. While we believe that the activities at our nightclubs comply with the terms of such licenses, and that the element of our business that constitutes an expression of free speech under the First Amendment to the U.S. Constitution is protected, activities and conduct at our nightclubs may be found to violate the terms of such licenses or be unprotected under the U.S. Constitution. This protection is limited to the expression and not the conduct of an entertainer. An issuing authority may suspend or terminate a license for a nightclub found to have violated the license terms. Illegal activities or conduct at any of our nightclubs may result in negative publicity or litigation. Such consequences may increase our cost of doing business, divert management’s attention from our business and make an investment in our securities unattractive to current and potential investors, thereby lowering our profitability and our stock price.
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We have developed comprehensive policies aimed at ensuring that the operation of each of our nightclubs is conducted in conformance with local, state and federal laws. We have a “no tolerance” policy on illegal drug use in or around our facilities. We continually monitor the actions of entertainers, waitresses and customers to ensure that proper behavior standards are met. However, such policies, no matter how well designed and enforced, can provide only reasonable, not absolute, assurance that the policies’ objectives are being achieved. Because of the inherent limitations in all control systems and policies, there can be no assurance that our policies will prevent deliberate acts by persons attempting to violate or circumvent them. Notwithstanding the foregoing limitations, management believes that our policies are reasonably effective in achieving their purposes.
Risk related to our common stock
We must continue to meet NASDAQ Global Market Continued Listing Requirements, or we risk delisting.
Our securities are currently listed for trading on the NASDAQ Global Market. We must continue to satisfy NASDAQ’s continued listing requirements or risk delisting which would have an adverse effect on our business. If our securities are ever delisted from NASDAQ, they may trade on the over-the-counter market, which may be a less liquid market. In such case, our shareholders’ ability to trade or obtain quotations of the market value of shares of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities. Additionally, we are presently not in compliance with NASDAQ Listing Rule 5250(c)(1), which requires timely filing of all required periodic financial reports with the SEC. Although we intend to regain compliance with Listing Rule 5250(c)(1) by filing all such reports as soon as practicable, there is no assurance that we will be able to maintain compliance with Listing Rule 5250(c)(1) or any of the other NASDAQ continued listing requirements.
We may be subject to allegations, defamations, or other detrimental conduct by third parties, which could harm our reputation and cause us to lose customers and/or contribute to a deflation of our stock price.
We have been subject to allegations by third parties or purported former employees, negative internet postings, and other adverse public exposure on our business, operations and staff compensation. We may also become the target of defamations or other detrimental conduct by third parties or disgruntled former or current employees. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies, media or other organizations. We may be subject to government or regulatory investigation or other proceedings as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Any government or regulatory investigations initiated as a result of the above may cause a deflation in our stock price. Additionally, allegations, directly or indirectly against us, may be posted on the internet, including social media platforms by anyone, whether or not related to us, on an anonymous basis. Any negative publicity on us or our management can be quickly and widely disseminated. Social media platforms and devices immediately publish the content of their subscribers and participants post, often without filters or checks on accuracy of the content posted. Information posted may be inaccurate and adverse to us, and it may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose customers.
Our quarterly operating results may fluctuate and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September with the strongest operating results occurring from October through March. As a result, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly as a result of seasonality and the factors discussed above. Accordingly, results for any one fiscal quarter are not necessarily indicative of results to be expected for any other fiscal quarter or for any fiscal year and same-store sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely decrease.
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Anti-takeover effects of the issuance of our preferred stock could adversely affect our common stock.
Our board of directors has the authority to issue up to 1,000,000 shares of preferred stock in one or more series, to fix the number of shares constituting any such series, and to fix the rights and preferences of the shares constituting any series, without any further vote or action by the stockholders. The issuance of preferred stock by the board of directors could adversely affect the rights of the holders of our common stock. For example, such issuance could result in a class of securities outstanding that would have preferences with respect to voting rights and dividends and in liquidation over the common stock, and could (upon conversion or otherwise) enjoy all of the rights appurtenant to common stock. The board’s authority to issue preferred stock could discourage potential takeover attempts and could delay or prevent a change in control of the Company through merger, tender offer, proxy contest or otherwise by making such attempts more difficult to achieve or costlier. There are no issued and outstanding shares of preferred stock; there are no agreements or understandings for the issuance of preferred stock; and the board of directors has no present intention to issue preferred stock.
Future sales or the perception of future sales of a substantial amount of our common stock may depress our stock price.
The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in the public market, or as a result of the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of common stock.
Our stock price has been volatile and may fluctuate in the future.
The trading price of our securities may fluctuate significantly. This price may be influenced by many factors, including:
•our performance and prospects;
•the depth and liquidity of the market for our securities;
•investor perception of us and the industry in which we operate;
•changes in earnings estimates or buy/sell recommendations by analysts;
•general financial and other market conditions; and
•domestic economic conditions.
Public stock markets have experienced, and may experience, extreme price and trading volume volatility. These broad market fluctuations may adversely affect the market price of our securities.
Cumulative voting is not available to our stockholders.
Cumulative voting in the election of directors is expressly denied in our Articles of Incorporation. Accordingly, the holder or holders of a majority of the outstanding shares of our common stock may elect all of our directors.
Our directors and officers have limited liability and have rights to indemnification.
Our Articles of Incorporation and Bylaws provide, as permitted by governing Texas law, that our directors and officers shall not be personally liable to us or any of our stockholders for monetary damages for breach of fiduciary duty as a director or officer, with certain exceptions. The Articles further provide that we will indemnify our directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil litigation or criminal action brought against them on account of their being or having been its directors or officers unless, in such action, they are adjudged to have acted with gross negligence or willful misconduct.
The inclusion of these provisions in the Articles may have the effect of reducing the likelihood of derivative litigation against directors and officers and may discourage or deter stockholders or management from bringing a lawsuit against directors and officers for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders.
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The Articles provide for the indemnification of our officers and directors, and the advancement to them of expenses in connection with any proceedings and claims, to the fullest extent permitted by Texas law. The Articles include related provisions meant to facilitate the indemnitee’s receipt of such benefits. These provisions cover, among other things: (i) specification of the method of determining entitlement to indemnification and the selection of independent counsel that will in some cases make such determination, (ii) specification of certain time periods by which certain payments or determinations must be made and actions must be taken, and (iii) the establishment of certain presumptions in favor of an indemnitee.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
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Item 1C. CYBERSECURITY.
We rely heavily on information technology systems to operate and manage all key aspects of our business. We also process substantial volumes of sensitive customer and employee personal information, which if impacted by cyber threats could result in financial and reputational harms and regulatory sanction. We have developed and implemented, and update on an ongoing basis, a risk-based information security program designed to identify, assess and manage material risks from cybersecurity threats.
Risk Management and Strategy
We assess, identify, and manage material risks related to potential cyber attacks on or through our information systems that could adversely affect the confidentiality, integrity, or availability of our information systems or the information residing on those systems through various processes. These processes include a wide variety of controls, technologies, methods, systems, and other processes that are designed to prevent, detect, or mitigate data loss, theft, and misuse, and unauthorized access to, or other cyber attacks or vulnerabilities affecting, our data.
We have an information technology team, led by our Director of Information Technology, that is responsible for implementing and maintaining cybersecurity and data protection practices at the Company in close coordination with our senior management team. Our Director of Information Technology has more than 20 years of extensive work experience in technology, business systems, and operations. We seek to address cyber risks through a cross-functional approach, including relevant training for applicable employees and regular reviews and tests of our cybersecurity program that leverage work done by internal audit.
We use processes to oversee and identify material risks from cyber threats associated with our use of third-party technology and systems. We maintain processes to reduce the impact of a cyber attack at a third-party vendor. We maintain a cybersecurity incident response plan, which details the incident response procedures and points of contact related to the response processes. The response plan includes a decision-tree-based playbook, which is a supplement to the plan, and focuses on specific types of incidents and the appropriate response steps.
See Item 1A—"Risk Factors” for additional information about the risks to our business associated with a breach or compromise to our information security systems.
Governance
The Audit Committee receives periodic updates from our Director of Information Technology . These updates include matters such as ongoing changes in our external and internal cyber threat landscape, new technology trends and regulatory developments, evolving internal policies and practices used to manage and mitigate cyber and technology-related risks, and trends in various metrics that are used to help assess our overall cybersecurity program effectiveness.
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Item 2. PROPERTIES.
As of September 30, 2025, we own 88 real estate properties. On 60 of these properties, we operate clubs or restaurants, including those temporarily closed. We lease multiple other properties to third-party tenants. Eight of our owned properties are in locations where we previously operated clubs or are adjacent to acquired clubs, but now lease the buildings to third parties. Twenty are non-income-producing properties for corporate use (including our corporate office) or future club or restaurant locations, or may be offered for sale in the future. Eleven of our clubs and restaurants are in leased locations.
Our principal corporate office is located at 10737 Cutten Road, Houston, Texas 77066, consisting of a 21,000-square foot corporate office and an 18,000-square foot warehouse facility.
Below is a list of locations we operated as of September 30, 2025:
| Name of Establishment | Fiscal Year Acquired/Opened | ||||||||||
| Club Onyx, Houston, TX | 1995 | ||||||||||
| Rick’s Cabaret, Minneapolis, MN | 1998 | ||||||||||
| XTC Cabaret, Austin, TX | 1998 | ||||||||||
| Scarlett's Cabaret, San Antonio, TX | 1998 | ||||||||||
| Rick’s Cabaret, New York City, NY | 2005 | ||||||||||
| Club Onyx, Charlotte, NC | 2005 | (1) | |||||||||
| Jaguars Club, San Antonio, TX | 2006 | ||||||||||
| Rick’s Cabaret, Fort Worth, TX | 2007 | ||||||||||
| Tootsie’s Cabaret, Miami Gardens, FL | 2008 | ||||||||||
| Dallas Showclub, Dallas, TX | 2008 | ||||||||||
| Rick’s Cabaret, Round Rock, TX | 2009 | ||||||||||
| Cabaret East, Fort Worth, TX | 2010 | ||||||||||
| Rick’s Cabaret DFW, Fort Worth, TX | 2011 | ||||||||||
| Downtown Cabaret, Minneapolis, MN | 2011 | ||||||||||
| Silver City Cabaret, Dallas, TX | 2012 | ||||||||||
| Jaguars Club, Odessa, TX | 2012 | ||||||||||
| Jaguars Club, Phoenix, AZ | 2012 | ||||||||||
| Jaguars Club, Longview, TX | 2012 | ||||||||||
| Baby Dolls, Tye, TX | 2012 | ||||||||||
| Jaguars Club, Edinburg, TX | 2012 | (3) | |||||||||
| Chicas Locas, El Paso, TX | 2012 | (3) | |||||||||
| Studio 80, Fort Worth, TX | 2013 | (1) | |||||||||
| Bombshells, Dallas, TX | 2013 | ||||||||||
| Scarlett's Cabaret, Sulphur, LA | 2013 | ||||||||||
| Temptations, Beaumont, TX | 2013 | ||||||||||
| Vivid Cabaret, New York, NY | 2014 | (1) | |||||||||
| Rick’s Cabaret, Odessa, TX | 2014 | ||||||||||
| Foxy’s Cabaret, Austin TX | 2015 | ||||||||||
| The Seville, Minneapolis, MN | 2015 | ||||||||||
| Hoops Cabaret and Sports Bar, New York, NY | 2016 | (1) | |||||||||
| Bombshells, Highway 290 Houston, TX | 2017 | (1) | |||||||||
| Scarlett’s Cabaret, Washington Park, IL | 2017 | ||||||||||
| Scarlett’s Cabaret, Miami, FL | 2017 | ||||||||||
| Bombshells, Pearland, TX | 2018 | ||||||||||
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| Name of Establishment | Fiscal Year Acquired/Opened | ||||||||||
| Kappa Men’s Club, Kappa, IL | 2018 | ||||||||||
| Rick’s Cabaret, Chicago, IL | 2019 | ||||||||||
| Rick’s Cabaret, Pittsburgh, PA | 2019 | ||||||||||
| Bombshells I-10, Houston, TX | 2019 | ||||||||||
| Bombshells 249, Houston, TX | 2019 | ||||||||||
| Bombshells, Katy, TX | 2020 | ||||||||||
| Bombshells 59, Houston, TX | 2020 | ||||||||||
| Diamond Cabaret, Denver, CO | 2022 | (1) | |||||||||
| Scarlett's Cabaret, Denver, CO | 2022 | ||||||||||
| PT's Showclub, Denver, CO | 2022 | ||||||||||
Rick's Cabaret, Denver, CO | 2022 | (1) | |||||||||
| Diamond Cabaret, St. Louis, IL | 2022 | (1) | |||||||||
| Country Rock Cabaret, St. Louis, IL | 2022 | (1) | |||||||||
| PT's Showclub, Indianapolis, IN | 2022 | ||||||||||
| Rick's Cabaret, Raleigh, NC | 2022 | (1) | |||||||||
| Rick's Cabaret, Portland, ME | 2022 | ||||||||||
| PT's Showclub, Louisville, KY | 2022 | ||||||||||
| PT's Centerfold, Denver, CO | 2022 | ||||||||||
| Mansion Gentlemen's Club & Steakhouse, Newburgh, NY | 2022 | ||||||||||
| Bombshells, Arlington, TX | 2022 | ||||||||||
| Playmates Club, Miami, FL | 2022 | ||||||||||
| Cheetah Gentlemen's Club, Miami, FL | 2022 | ||||||||||
| PT's Showclub, Odessa, TX | 2022 | ||||||||||
| Heartbreakers Gentlemen's Club, Dickinson, TX | 2023 | ||||||||||
| Baby Dolls, Dallas, TX | 2023 | ||||||||||
| Chicas Locas, Dallas, TX | 2023 | ||||||||||
| Chicas Locas, Arlington, TX | 2023 | ||||||||||
| Chicas Locas, Houston, TX | 2023 | ||||||||||
| Baby Dolls, Fort Worth, TX | 2023 | (2) | |||||||||
| PT's Centerfold, Lubbock, TX | 2024 | ||||||||||
| Bombshells, Stafford, TX | 2024 | ||||||||||
| Bombshells, Denver, CO | 2025 | ||||||||||
| Flight Club, Inkster, MI | 2025 | ||||||||||
| Platinum West, West Columbia, SC | 2025 | ||||||||||
| Platinum Plus, Allentown, PA | 2025 | (1) | |||||||||
| Rick's Cabaret, Central City, CO | 2025 | ||||||||||
| Bombshells, Lubbock, TX | 2025 | ||||||||||
(1)Leased location.
(2)Temporarily closed due to fire.
(3)Closed or sold subsequent to September 30, 2025.
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Our property leases are typically for a fixed rental rate with contingent rent for certain locations. The lease terms generally have initial terms of 10 to 20 years with renewal terms of 5 to 20 years. At September 30, 2025, certain of the properties we own were collateral for mortgage debt amounting to approximately $150.6 million. We believe that our existing facilities, both owned and leased, are in good condition and adequate and suitable for the conduct of our business.
See related information in Notes 7 and 9 to our consolidated financial statements.
Item 3. LEGAL PROCEEDINGS.
See the “Legal Matters” section within Note 11 to our consolidated financial statements within this Annual Report on Form 10-K for the requirements of this Item, which section is incorporated herein by reference.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is quoted on the NASDAQ Global Market under the symbol “RICK.”
Holders
On March 13, 2026, the closing stock price for our common stock as reported by NASDAQ was $21.42, and there were 75 stockholders of record of our common stock (excluding broker held shares in “street name”). Currently, we estimate that there are approximately 11,400 stockholders having beneficial ownership in street name.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Colonial Stock Transfer Company, Inc., 66 Exchange Place, 1st Floor, Salt Lake City, Utah 84111.
Dividend Policy
Prior to 2016, we had not paid cash dividends on our common stock. Starting in March 2016, in conjunction with our share buyback program (see discussion below), our board of directors declared regular quarterly cash dividends. Below are our historical dividend payments:
| Quarterly Dividend per Share | |||||
| Second quarter 2016 through third quarter 2019 | $0.03 | ||||
| Fourth quarter 2019 | $0.04 | ||||
| First quarter 2020 | $0.03 | ||||
| Second quarter 2020 | $0.04 | ||||
| Third quarter 2020 | $0.03 | ||||
| Fourth quarter 2020 through first quarter 2022 | $0.04 | ||||
| Second quarter 2022 through first quarter 2023 | $0.05 | ||||
| Second quarter 2023 though third quarter 2024 | $0.06 | ||||
| Fourth quarter 2024 through first quarter 2026 | $0.07 | ||||
| Second quarter 2026 through current | $0.08 | ||||
During fiscal 2025, 2024, and 2023, we paid cash dividends totaling $2.5 million, $2.3 million, and $2.1 million, respectively.
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Purchases of Equity Securities by the Issuer
Our share repurchase activity during the three months ended September 30, 2025 was as follows:
| Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit)(1) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(2) | Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| July 1-31, 2025 | 27,939 | $ | 38.96 | 27,939 | $ | 10,788,525 | ||||||||||||||||||||
| August 1-31, 2025 | 29,400 | $ | 36.44 | 29,400 | $ | 9,717,204 | ||||||||||||||||||||
| September 1-30, 2025 | 15,400 | $ | 35.22 | 15,400 | $ | 9,174,873 | ||||||||||||||||||||
| 72,739 | $ | 37.15 | 72,739 | |||||||||||||||||||||||
(1) Prices include any commissions and transaction costs, excluding excise tax on stock buybacks.
(2) All shares were purchased pursuant to the repurchase plans approved by the board of directors as disclosed in our most recent Annual Report on Form 10-K.
Equity Compensation Plan Information
On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000. The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each to six members of management subject to the approval of the 2022 Plan.
See Note 13 to our consolidated financial statements for details.
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Stock Performance Graph
The following chart compares the five-year cumulative total stock performance of our common stock; the NASDAQ Composite Index (IXIC); the Russell 2000 Index (RUT); and the Dow Jones U.S. Restaurant & Bar Index (DJUSRU), our peer index. The graph assumes a hypothetical investment of $100 on September 30, 2020, in each of our common stock and each of the indices, and that all dividends were reinvested. The measurement points utilized in the graph consist of the last trading day as of September 30 each year, representing the last day of our fiscal year. The calculations exclude trading commissions and taxes. We have selected the Dow Jones U.S. Restaurant & Bar Index as our peer index since it represents a broader group of restaurant and bar operators that are more aligned to our core business operations. RICK is a component of the NASDAQ Composite Index and the Russell 2000 Index. The historical stock performance presented below is not intended to and may not be indicative of future stock performance.
| 9/30/2020 | 9/30/2021 | 9/30/2022 | 9/30/2023 | 9/30/2024 | 9/30/2025 | ||||||||||||||||||||||||||||||
| RCI Hospitality Holdings, Inc. | $ | 100.00 | $ | 336.19 | $ | 319.02 | $ | 296.39 | $ | 217.81 | $ | 149.49 | |||||||||||||||||||||||
| NASDAQ Composite Index | $ | 100.00 | $ | 129.38 | $ | 94.70 | $ | 118.37 | $ | 162.88 | $ | 202.91 | |||||||||||||||||||||||
| Dow Jones U.S. Restaurant & Bar Index | $ | 100.00 | $ | 122.58 | $ | 105.38 | $ | 120.03 | $ | 146.72 | $ | 146.83 | |||||||||||||||||||||||
| Russell 2000 Index | $ | 100.00 | $ | 146.21 | $ | 110.42 | $ | 118.40 | $ | 147.91 | $ | 161.60 | |||||||||||||||||||||||
Item 6. [RESERVED]
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand RCI Hospitality Holdings, Inc., our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes thereto contained in Item 8 – “Financial Statements and Supplementary Data” of this report. This overview summarizes the MD&A, which includes the following sections:
•Our Business — a general description of our business and the adult nightclub industry, our objective, our strategic priorities, our core capabilities, and challenges and risks of our business.
•Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates.
•Operations Review — an analysis of our Company’s consolidated results of operations for the three years presented in our consolidated financial statements.
•Liquidity and Capital Resources — an analysis of cash flows, aggregate contractual obligations, and an overview of financial position.
OUR BUSINESS
The following are our operating segments:
| Nightclubs | Our wholly-owned subsidiaries own and/or operate upscale adult nightclubs. These nightclubs are in Houston, Austin, San Antonio, Dallas, Fort Worth, Beaumont, Longview, Harlingen, Edinburg, Tye, Lubbock, Round Rock, El Paso and Odessa, Texas; Central City and Denver, Colorado; Charlotte and Raleigh, North Carolina; Minneapolis, Minnesota; New York and Newburgh, New York; Miami Gardens, Pembroke Park and Miami, Florida; Pittsburgh and Allentown, Pennsylvania; Phoenix, Arizona; Louisville, Kentucky; Portland, Maine; Indianapolis, Indiana; Washington Park, Kappa, Sauget and Chicago, Illinois; Inkster, Michigan; and West Columbia, South Carolina. No sexual contact is permitted at any of our locations. We also own and operate a Studio 80 dance club in Fort Worth, Texas. We also own and lease to third parties real properties that are adjacent to (or used to be locations of) our clubs. | ||||
| Bombshells | Our wholly-owned subsidiaries own and operate restaurants and sports bars in Houston, Dallas, Pearland, Tomball, Katy, Arlington, Stafford, and Lubbock, Texas, and Denver, Colorado, under the brand name Bombshells Restaurant & Bar. | ||||
| Other | Our wholly-owned subsidiaries own a media division (“Media Group”), including the leading trade magazine serving the multibillion-dollar adult nightclubs industry and the adult retail products industry. We also own an industry trade show, an industry trade publication and more than a dozen industry and social media websites. Included here is Drink Robust, which is licensed to sell Robust Energy Drink in the United States. | ||||
We generate our revenues from the sale of liquor, beer, wine, food, and merchandise; service revenues such as cover charges, membership fees, and facility use fees; and other revenues such as commissions from vending and ATM machines, real estate rental, valet parking, and other products and services for both nightclub and restaurant/sports bar operations. Other revenues include Media Group revenues for the sale of advertising content and revenues from our annual Expo convention, and Drink Robust sales. Our fiscal year-end is September 30.
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Upon initial adoption of ASU 2023-07 for the annual reporting period ended September 30, 2025 (see Note 2 to our consolidated financial statements), certain previously reported segment information have changed. There were no changes in consolidated amounts. Segment-related discussions and analyses in the MD&A relate to amounts exclusive of intersegment items.
Same-Store Sales. We calculate same-store sales by comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells. We consider the first six months of operations of a Bombshells unit to be the “honeymoon period” where sales are significantly higher than normal. We exclude from a particular month’s calculation units previously included in the same-store sales base that have closed temporarily for more than 15 days until its next full quarter of operations. We also exclude from the same-store sales base units that are being reconcepted or are closed due to renovations or remodels. Acquired units are included in the same-store sales calculation as long as they qualify based on the definitions stated above. Revenues outside of our Nightclubs and Bombshells reportable segments’ core business are excluded from same-store sales calculation.
Our goal is to use our Company’s assets—our brands, financial strength, and the talent and strong commitment of our management and employees—to become more competitive and to accelerate growth.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these consolidated financial statements requires our management to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates are based on management’s historical and industry experience and on various other assumptions that are believed to be reasonable under the circumstances. On a regular basis, we evaluate these accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results may differ from our estimates, and such differences could be material.
A full discussion of our significant accounting policies is contained in Note 2 to our consolidated financial statements, which is included in Item 8 – “Financial Statements and Supplementary Data” of this report. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our financial results. These estimates require our most difficult, subjective or complex judgments because they relate to matters that are inherently uncertain. We have reviewed these critical accounting policies and estimates and related disclosures with our Audit Committee.
Impairment of Long-Lived Assets
We review long-lived assets, such as property and equipment, and intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. These events or changes in circumstances include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the overall business, and significant negative industry or economic trends. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to the estimated undiscounted cash flows over the estimated remaining useful life of the primary asset included in the asset group. If the asset group is not recoverable, the impairment loss is calculated as the excess of the carrying value over the fair value. We define our asset group as an operating club or restaurant location, which is also our reporting unit or the lowest level for which cash flows can be identified. Key estimates in the undiscounted cash flow model include management’s estimate of the projected revenues and operating margins. Fair value is determined using the market, income, or cost approaches. If fair value is used to determine using the income approach, an additional key assumption is the selection of a weighted-average cost of capital to discount cash flows. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated.
During fourth quarter of 2025, we impaired one property for $1.6 million in property and equipment.
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During the third quarter of 2024, we impaired six properties for $4.8 million in property and equipment and $5.7 million in operating lease right-of-use assets. During the fourth quarter of 2024, we impaired ten properties for $5.8 million in property and equipment and $747,000 in operating lease right-of-use assets. These properties are predominantly comprised of leased Bombshells locations.
During the third quarter of 2023, we impaired one property for $58,000 for its property and equipment and $1.0 million for its operating lease right-of-use asset before the club's permanent closure. During the fourth quarter of 2023, we also recognized software impairments amounting to $814,000 related to two venture projects.
Key assumptions and estimates used in long-lived asset impairment testing, the most significant of which is our estimated future cash flows, may produce materially different amounts of fair value, which could significantly impact our results of operations.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets that have indefinite useful lives are tested annually for impairment during our fourth fiscal quarter and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired.
Our impairment calculations require management to make assumptions and to apply judgment in order to estimate fair values. If our actual results are not consistent with our estimates and assumptions, we may be exposed to impairments that could be material. We do not believe that there is a reasonable likelihood that there will be a change in the estimates or assumptions we used that could cause a material change in our calculated impairment charges.
For our goodwill impairment review, we have the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. This assessment is based on several factors, including industry and market conditions, overall financial performance, including an assessment of cash flows in comparison to actual and projected results of prior periods. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on our qualitative analysis, or if we elect to skip this step, we perform a Step 1 quantitative analysis to determine the fair value of the reporting unit. The fair value is determined using market-related valuation models, including discounted cash flows and comparable asset market values. Key estimates in the discounted cash flow model include management’s estimate of the projected revenues and operating margins, along with the selection of a weighted-average cost of capital to discount cash flows. We recognize goodwill impairment in the amount that the carrying value of the reporting unit exceeds the fair value of the reporting unit, not to exceed the amount of goodwill allocated to the reporting unit, based on the results of our Step 1 analysis. For the year ended September 30, 2025, we did not impair goodwill. For the year ended September 30, 2024, we identified four reporting units that were impaired and recognized a total goodwill impairment of $8.9 million. For the year ended September 30, 2023, we identified four reporting units that were impaired and recognized a total goodwill impairment of $4.2 million.
For indefinite- and definite-lived intangibles, specifically SOB licenses, we determine fair value by estimating the multiperiod excess earnings of the asset with key assumptions being similar to those used in the goodwill impairment valuation model. We recorded impairment charges for SOB licenses amounting to $3.8 million in 2025 related to six clubs, $11.8 million in 2024 related to seven clubs, and $6.5 million in 2023 related to eight clubs. For indefinite-lived tradename, we determine fair value by using the relief from royalty method. The fair value is then compared to the carrying value and an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. We recorded impairment charges for tradenames amounting to $0 in 2025, $693,000 in 2024 related to one club, and $0 in 2023.
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting, which requires the recognition of acquired tangible and identifiable intangible assets and assumed liabilities at their acquisition date fair values. These fair values are a result of valuation techniques that use significant assumptions that are subject to a high degree of judgment. The excess of the acquisition price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to acquired entities are included prospectively beginning with the date of acquisition. Acquisition-related costs are expensed as incurred.
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Stock-based Compensation
We recognize expense for stock-based compensation awards, which is equal to the fair value of the awards at grant date, ratably in selling, general and administrative expenses in our consolidated statements of income over their requisite service period. Calculating the grant date fair value of stock-based compensation awards requires the input of subjective assumptions. We determine the fair value of each stock option grant using the Black-Scholes option-pricing model with assumptions based primarily on historical data. Specific inputs to the model include the expected term of the stock options, stock price volatility, dividend yield, and risk-free interest rate.
We used our historical exercise and post-vesting expiration behavior of grantees on stock options awarded prior to the 2022 Plan which may not be reflective of current stock market environment and current mix of grantees. We estimated expected volatility based on historical volatility of the Company's stock price for a period equal to the award's expected term. We estimated expected dividend yield based on the current dividend payout activity and the exercise price (that is, the expected dividends that would likely be reflected in an amount at which the stock option would be exchanged). The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. We recognize forfeitures when they occur.
Income Taxes
We estimate certain components of our provision for income taxes including the recoverability of deferred tax assets that arise from temporary differences between the tax and book carrying amounts of existing assets and liabilities and their respective tax bases. These estimates include depreciation and amortization expense allowable for tax purposes, allowable tax credits for items such as taxes paid on employee tip income, effective rates for state and local income taxes, and the deductibility of certain other items, among others. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available. When necessary, we record a valuation allowance to reduce deferred tax assets to a balance that is more likely than not to be realized.
Legal and Other Contingencies
As mentioned in Item 3 – “Legal Proceedings” and in a more detailed discussion in Note 11 to our consolidated financial statements, we are involved in various suits and claims in the normal course of business. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. In the opinion of management, there was not at least a reasonable possibility that we may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected. In matters where there is insurance coverage, in the event we incur any liability, we believe it is unlikely we would incur losses in connection with these claims in excess of our insurance coverage.
In fiscal 2025, the Company self-insured a significant portion of expected losses under its general liability and liquor insurance programs due to increasingly prohibitive costs of such coverage from third-party insurers. The Company continues to purchase insurance for workers' compensation, property, auto, and business interruption, as well as the minimum insurance coverage where it is required by law for licensing requirements. We record a liability for unresolved claims and for an estimate of incurred but not reported claims including legal costs based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic conditions, the frequency and severity of claims development history, and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances.
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OPERATIONS REVIEW
Highlights of operations from fiscal 2025, 2024, and 2023 are as follows (in thousands, except percentages and per share amounts):
| 2025 | Inc (Dec) | 2024 | Inc (Dec) | 2023 | |||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||
| Consolidated | $ | 279,434 | (5.5) | % | $ | 295,604 | 0.6 | % | $ | 293,790 | |||||||||||||||||||
| Nightclubs | $ | 242,501 | (0.6) | % | $ | 243,864 | 3.0 | % | $ | 236,748 | |||||||||||||||||||
| Bombshells | $ | 35,810 | (29.2) | % | $ | 50,578 | (9.2) | % | $ | 55,723 | |||||||||||||||||||
| Same-store sales | |||||||||||||||||||||||||||||
| Consolidated | (3.5) | % | (5.1) | % | |||||||||||||||||||||||||
| Nightclubs | (2.1) | % | (2.1) | % | |||||||||||||||||||||||||
| Bombshells | (13.6) | % | (18.4) | % | |||||||||||||||||||||||||
| Income (loss) from operations | |||||||||||||||||||||||||||||
| Consolidated | $ | 30,267 | 61.0 | % | $ | 18,805 | (63.5) | % | $ | 51,484 | |||||||||||||||||||
| Nightclubs | $ | 69,569 | 20.1 | % | $ | 57,912 | (20.9) | % | $ | 73,174 | |||||||||||||||||||
| Bombshells | $ | 177 | 101.6 | % | $ | (10,783) | (265.8) | % | $ | 6,502 | |||||||||||||||||||
| Diluted earnings per share | $ | 1.23 | 272.7 | % | $ | 0.33 | (89.5) | % | $ | 3.13 | |||||||||||||||||||
| Non-GAAP diluted earnings per share* | $ | 2.12 | (55.1) | % | $ | 4.72 | (3.6) | % | $ | 4.90 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 49,418 | (11.6) | % | $ | 55,884 | (5.5) | % | $ | 59,130 | |||||||||||||||||||
| Free cash flow* | $ | 45,398 | (6.2) | % | $ | 48,421 | (8.9) | % | $ | 53,176 | |||||||||||||||||||
*Reconciliation and discussion of non-GAAP financial measures are included under the “Non-GAAP Financial Measures” section of this Item. These measures should be considered in addition to, rather than as a substitute for, U.S. GAAP measures.
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The following common size income statements present a comparison of our consolidated results of operations as a percentage of total revenues for the three most recently completed fiscal years:
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenues | |||||||||||||||||
| Sales of alcoholic beverages | 43.7 | % | 45.0 | % | 43.3 | % | |||||||||||
| Sales of food and merchandise | 14.3 | % | 15.1 | % | 14.9 | % | |||||||||||
| Service revenues | 34.7 | % | 33.3 | % | 35.3 | % | |||||||||||
| Other | 7.3 | % | 6.6 | % | 6.5 | % | |||||||||||
| Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
| Operating expenses | |||||||||||||||||
| Cost of goods sold | |||||||||||||||||
| Alcoholic beverages sold | 18.1 | % | 18.2 | % | 18.3 | % | |||||||||||
| Food and merchandise sold | 35.3 | % | 36.7 | % | 35.1 | % | |||||||||||
| Service and other | 0.3 | % | 0.3 | % | 0.2 | % | |||||||||||
| Total cost of goods sold (exclusive of items shown separately below) | 13.1 | % | 13.9 | % | 13.3 | % | |||||||||||
| Salaries and wages | 29.9 | % | 28.5 | % | 27.1 | % | |||||||||||
| Selling, general, and administrative | 38.6 | % | 33.7 | % | 31.7 | % | |||||||||||
| Depreciation and amortization | 5.4 | % | 5.2 | % | 5.2 | % | |||||||||||
| Impairments and other charges, net | 2.1 | % | 12.4 | % | 5.3 | % | |||||||||||
| Total operating expenses | 89.2 | % | 93.6 | % | 82.5 | % | |||||||||||
| Income from operations | 10.8 | % | 6.4 | % | 17.5 | % | |||||||||||
| Other income (expenses) | |||||||||||||||||
| Interest expense | (5.9) | % | (5.6) | % | (5.4) | % | |||||||||||
| Interest income | 0.2 | % | 0.2 | % | 0.1 | % | |||||||||||
| Non-operating gains, net | 0.3 | % | — | % | — | % | |||||||||||
| Income before income taxes | 5.5 | % | 0.9 | % | 12.2 | % | |||||||||||
| Income tax expense (benefit) | 1.6 | % | (0.1) | % | 2.3 | % | |||||||||||
| Net income | 3.9 | % | 1.0 | % | 9.9 | % | |||||||||||
†Percentages may not foot due to rounding in this and in all of the succeeding tables presenting percentages in this report. They represent their corresponding dollar values divided by the base. Percentage of revenue for individual cost of goods sold items pertains to their respective revenue line.
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Below is a table presenting the changes in each line item of the income statement for the last three fiscal years (dollar amounts in thousands):
| Better (Worse) | |||||||||||||||||||||||
| 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Sales of alcoholic beverages | $ | (11,000) | (8.3) | % | $ | 5,862 | 4.6 | % | |||||||||||||||
| Sales of food and merchandise | (4,635) | (10.4) | % | 700 | 1.6 | % | |||||||||||||||||
| Service revenues | (1,376) | (1.4) | % | (5,122) | (4.9) | % | |||||||||||||||||
| Other | 841 | 4.3 | % | 374 | 2.0 | % | |||||||||||||||||
| Total revenues | (16,170) | (5.5) | % | 1,814 | 0.6 | % | |||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Alcoholic beverages sold | 2,085 | 8.6 | % | (937) | (4.0) | % | |||||||||||||||||
| Food and merchandise sold | 2,242 | 13.7 | % | (931) | (6.0) | % | |||||||||||||||||
| Service and other | 21 | 5.3 | % | (115) | (40.8) | % | |||||||||||||||||
| Total cost of goods sold (exclusive of items shown separately below) | 4,348 | 10.6 | % | (1,983) | (5.1) | % | |||||||||||||||||
| Salaries and wages | 512 | 0.6 | % | (4,677) | (5.9) | % | |||||||||||||||||
| Selling, general, and administrative | (8,167) | (8.2) | % | (6,648) | (7.1) | % | |||||||||||||||||
| Depreciation and amortization | 317 | 2.1 | % | (244) | (1.6) | % | |||||||||||||||||
| Impairments and other charges, net | 30,622 | 83.7 | % | (20,941) | (134.0) | % | |||||||||||||||||
| Total operating expenses | 27,632 | 10.0 | % | (34,493) | (14.2) | % | |||||||||||||||||
| Income from operations | 11,462 | 61.0 | % | (32,679) | (63.5) | % | |||||||||||||||||
| Other income/expenses | |||||||||||||||||||||||
| Interest expense | 327 | 2.0 | % | (753) | (4.7) | % | |||||||||||||||||
| Interest income | 83 | 17.2 | % | 94 | 24.2 | % | |||||||||||||||||
| Non-operating gains/losses, net | 968 | 100.0 | % | — | — | % | |||||||||||||||||
| Income/loss before income taxes | 12,840 | 492.3 | % | (33,338) | (92.7) | % | |||||||||||||||||
| Income tax expense/benefit | (5,019) | * | 7,256 | * | |||||||||||||||||||
| Net income | $ | 7,821 | 259.1 | % | $ | (26,082) | (89.6) | % | |||||||||||||||
*Not meaningful.
Revenues
Consolidated revenues decreased by $16.2 million, or 5.5%, from 2024 to 2025 due mainly from closed units and the decrease in same-store sales, partially offset by sales from new units. From 2023 to 2024, consolidated revenues increased by $1.8 million, or 0.6%, due mainly from recently acquired clubs and a newly opened Bombshells, partially offset by a decrease in same-store sales and a sales decrease from locations that were closed or rebranded in 2024.
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Segment contribution to total revenues was as follows (dollar amounts in thousands):
| 2025 | Inc (Dec) | 2024 | Inc (Dec) | 2023 | |||||||||||||||||||||||||
| Nightclubs | |||||||||||||||||||||||||||||
| Sales of alcoholic beverages | $ | 103,495 | (2.1) | % | $ | 105,669 | 9.7 | % | $ | 96,325 | |||||||||||||||||||
| Sales of food and merchandise | 22,955 | 3.7 | % | 22,129 | 10.7 | % | 19,995 | ||||||||||||||||||||||
| Service revenues | 97,024 | (1.2) | % | 98,233 | (4.8) | % | 103,217 | ||||||||||||||||||||||
| Other revenues | 19,027 | 6.7 | % | 17,833 | 3.6 | % | 17,211 | ||||||||||||||||||||||
| 242,501 | (0.6) | % | 243,864 | 3.0 | % | 236,748 | |||||||||||||||||||||||
| Bombshells | |||||||||||||||||||||||||||||
| Sales of alcoholic beverages | 18,629 | (32.1) | % | 27,455 | (11.3) | % | 30,937 | ||||||||||||||||||||||
| Sales of food and merchandise | 17,016 | (24.3) | % | 22,477 | (6.0) | % | 23,911 | ||||||||||||||||||||||
| Service revenues | 55 | (75.2) | % | 222 | (38.3) | % | 360 | ||||||||||||||||||||||
| Other revenues | 110 | (74.1) | % | 424 | (17.7) | % | 515 | ||||||||||||||||||||||
| 35,810 | (29.2) | % | 50,578 | (9.2) | % | 55,723 | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Other revenues | 1,123 | (3.4) | % | 1,162 | (11.9) | % | 1,319 | ||||||||||||||||||||||
| $ | 279,434 | (5.5) | % | $ | 295,604 | 0.6 | % | $ | 293,790 | ||||||||||||||||||||
Nightclubs segment revenues. Nightclubs revenues decreased by 0.6% from 2024 to 2025 and increased by 3.0% from 2023 to 2024, as detailed below.
| 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||
Impact of 2.1% and 2.1% decrease in same-store sales, respectively, to total revenues | (2.0) | % | (2.0) | % | |||||||
New units | 2.5 | % | 7.6 | % | |||||||
| Closed units | (1.3) | % | (1.4) | % | |||||||
| Other | 0.2 | % | (1.3) | % | |||||||
Net Nightclubs revenue increase (decrease) | (0.6) | % | 3.0 | % | |||||||
Nightclubs segment sales mix for the three fiscal years, below:
| 2025 | 2024 | 2023 | |||||||||||||||
| Sales of alcoholic beverages | 42.7 | % | 43.3 | % | 40.7 | % | |||||||||||
| Sales of food and merchandise | 9.5 | % | 9.1 | % | 8.4 | % | |||||||||||
| Service revenues | 40.0 | % | 40.3 | % | 43.6 | % | |||||||||||
| Other | 7.8 | % | 7.3 | % | 7.3 | % | |||||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
The 2025 new units include three clubs, one of which was acquired in January 2025 and the other two in April 2025 (with one of the two transactions that did not close until June 2025 due to permitting delay). There were no new club acquisitions in 2024. The 2023 new units include six clubs, one of which was acquired in October 2022 and five acquired in March 2023. See Note 16 to our consolidated financial statements for more information on our club acquisitions.
Included in other revenues of the Nightclubs segment is real estate rental revenue amounting to $1.7 million in 2025, $1.7 million in 2024, and $1.8 million in 2023.
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Bombshells segment revenues. Bombshells revenues decreased by 29.2% from 2024 to 2025 and decreased by 9.2% from 2023 to 2024, as detailed below.
| 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||
Impact of 13.6% and 18.4% decrease in same-store sales, respectively, to total revenues | (8.8) | % | (16.9) | % | |||||||
| New units | 6.2 | % | 9.0 | % | |||||||
| Closed units | (26.5) | % | (1.1) | % | |||||||
| Other | — | % | (0.2) | % | |||||||
| Net Bombshells revenue decrease | (29.2) | % | (9.2) | % | |||||||
With underperforming Bombshells closed or sold, we expect same-store sales to improve going forward.
Bombshells segment sales mix for the three fiscal years is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Sales of alcoholic beverages | 52.0 | % | 54.3 | % | 55.5 | % | |||||||||||
| Sales of food and merchandise | 47.5 | % | 44.4 | % | 42.9 | % | |||||||||||
| Service and other revenues | 0.5 | % | 1.3 | % | 1.6 | % | |||||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Bombshells San Antonio was acquired from our franchisee in the second quarter of 2023. We also acquired a food hall in Greenwood Village, Colorado, during the first quarter of 2023. We opened Bombshells Stafford in the first quarter of 2024 and sold Bombshells San Antonio in the fourth quarter of 2024. During the first quarter of 2025, we closed two Bombshells locations in Houston, Texas, sold one Bombshells location in Austin, Texas, and also closed the food hall in Greenwood Village, Colorado. We opened one Bombshells location in Denver, Colorado, during the second quarter of 2025 and opened one Bombshells location in Lubbock, Texas, during the fourth quarter of 2025.
Other segment revenues. Other revenues included revenues from Drink Robust in all three fiscal years presented. Drink Robust sales were $129,000, $131,000, and $145,000 in fiscal 2025, 2024, and 2023, respectively, which exclude intercompany sales to Nightclubs and Bombshells units amounting to $260,000, $270,000, and $254,000 in fiscal 2025, 2024, and 2023, respectively. Media business revenues were $991,000, $1.0 million, and $1.1 million in fiscal 2025, 2024, and 2023, respectively.
Operating Expenses
Total operating expenses, as a percent of consolidated revenues, were 89.2%, 93.6%, and 82.5% for the fiscal year 2025, 2024, and 2023, respectively. Significant contributors to the change in operating expenses as a percent of revenues are explained below.
Cost of goods sold. Cost of goods sold includes cost of alcoholic and non-alcoholic beverages, food, cigars and cigarettes, merchandise, media printing/binding, and Drink Robust. As a percentage of consolidated revenues, consolidated cost of goods sold was 13.1%, 13.9%, and 13.3% for fiscal 2025, 2024, and 2023, respectively. See page 36 above for the breakdown of percentages for each line item of consolidated cost of goods sold as it relates to the respective consolidated revenue line. For the Nightclubs segment, cost of goods sold was 11.4%, 11.7%, and 11.1% for fiscal 2025, 2024, and 2023, respectively, which was primarily caused by shifts in sales mix among the three fiscal years. Bombshells cost of goods sold was 23.9%, 24.1%, and 22.4% for fiscal 2025, 2024, and 2023, respectively, which was mainly driven by food cost inflation.
Salaries and wages. Consolidated salaries and wages decreased by $512,000, or 0.6%, from 2024 to 2025 and increased by $4.7 million, or 5.9%, from 2023 to 2024. The dollar changes are mostly from newly acquired or constructed and closed locations. As a percentage of revenues, consolidated salaries and wages were 29.9%, 28.5%, and 27.1% in 2025, 2024, and 2023, respectively, mainly due to sales trend and the impact of fixed salaries on change in sales.
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By reportable segment, salaries and wages are broken down as follows (dollar amounts in thousands):
| 2025 | Inc (Dec) | 2024 | Inc (Dec) | 2023 | |||||||||||||||||||||||||
| Nightclubs | $ | 56,969 | 5.1 | % | $ | 54,217 | 7.4 | % | $ | 50,489 | |||||||||||||||||||
| Bombshells | 11,636 | (20.5) | % | 14,643 | (2.0) | % | 14,949 | ||||||||||||||||||||||
| Other | 502 | (12.1) | % | 571 | (5.5) | % | 604 | ||||||||||||||||||||||
| Corporate | 14,558 | (1.3) | % | 14,746 | 9.6 | % | 13,458 | ||||||||||||||||||||||
| $ | 83,665 | (0.6) | % | $ | 84,177 | 5.9 | % | $ | 79,500 | ||||||||||||||||||||
Unit-level manager payroll is included in salaries and wages of each location, while payroll for regional manager and above are included in Corporate.
Salaries and wages as a percentage of segment revenue (except Corporate, which is based on consolidated revenues):
| 2025 | 2024 | 2023 | |||||||||||||||
| Nightclubs | 23.5 | % | 22.2 | % | 21.3 | % | |||||||||||
| Bombshells | 32.5 | % | 29.0 | % | 26.8 | % | |||||||||||
| Other | 44.7 | % | 49.1 | % | 45.8 | % | |||||||||||
| Corporate | 5.2 | % | 5.0 | % | 4.6 | % | |||||||||||
| 29.9 | % | 28.5 | % | 27.1 | % | ||||||||||||
Bombshells segment salaries and wages decreased in 2025 and 2024 but as a percentage of revenue it increased due to decrease in revenue.
Selling, general and administrative expenses. The components of consolidated selling, general and administrative expenses are in the tables below (dollar amounts in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| Taxes and permits | $ | 14,186 | 5.1 | % | $ | 16,177 | 5.5 | % | $ | 11,966 | 4.1 | % | |||||||||||||||||||||||
| Advertising and marketing | 11,512 | 4.1 | % | 12,461 | 4.2 | % | 11,928 | 4.1 | % | ||||||||||||||||||||||||||
| Supplies and services | 10,230 | 3.7 | % | 10,896 | 3.7 | % | 10,724 | 3.7 | % | ||||||||||||||||||||||||||
| Insurance | 15,024 | 5.4 | % | 13,059 | 4.4 | % | 10,268 | 3.5 | % | ||||||||||||||||||||||||||
| Lease | 6,406 | 2.3 | % | 7,099 | 2.4 | % | 7,206 | 2.5 | % | ||||||||||||||||||||||||||
| Legal | 14,476 | 5.2 | % | 4,155 | 1.4 | % | 3,742 | 1.3 | % | ||||||||||||||||||||||||||
| Utilities | 6,086 | 2.2 | % | 6,075 | 2.1 | % | 5,760 | 2.0 | % | ||||||||||||||||||||||||||
| Charge card fees | 6,976 | 2.5 | % | 6,968 | 2.4 | % | 7,090 | 2.4 | % | ||||||||||||||||||||||||||
| Security | 4,205 | 1.5 | % | 5,080 | 1.7 | % | 5,618 | 1.9 | % | ||||||||||||||||||||||||||
| Accounting and professional fees | 4,641 | 1.7 | % | 4,260 | 1.4 | % | 4,286 | 1.5 | % | ||||||||||||||||||||||||||
| Repairs and maintenance | 5,090 | 1.8 | % | 4,690 | 1.6 | % | 4,924 | 1.7 | % | ||||||||||||||||||||||||||
| Stock-based compensation | 1,373 | 0.5 | % | 1,882 | 0.6 | % | 2,588 | 0.9 | % | ||||||||||||||||||||||||||
| Other | 7,634 | 2.7 | % | 6,870 | 2.3 | % | 6,924 | 2.4 | % | ||||||||||||||||||||||||||
| $ | 107,839 | 38.6 | % | $ | 99,672 | 33.7 | % | $ | 93,024 | 31.7 | % | ||||||||||||||||||||||||
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By reportable segment, selling, general and administrative expenses are broken down as follows (dollar amounts in thousands):
| 2025 | Inc (Dec) | 2024 | Inc (Dec) | 2023 | |||||||||||||||||||||||||
| Nightclubs | $ | 69,994 | 1.8 | % | $ | 68,728 | 12.0 | % | $ | 61,363 | |||||||||||||||||||
| Bombshells | 13,621 | (26.7) | % | 18,578 | (1.8) | % | 18,928 | ||||||||||||||||||||||
| Other | 440 | 22.6 | % | 359 | (33.4) | % | 539 | ||||||||||||||||||||||
| Corporate | 23,784 | 98.1 | % | 12,007 | (1.5) | % | 12,194 | ||||||||||||||||||||||
| $ | 107,839 | 8.2 | % | $ | 99,672 | 7.1 | % | $ | 93,024 | ||||||||||||||||||||
Selling, general and administrative expenses as a percentage of segment revenue (except Corporate, which is based on consolidated revenues):
| 2025 | 2024 | 2023 | |||||||||||||||
| Nightclubs | 28.9 | % | 28.2 | % | 25.9 | % | |||||||||||
| Bombshells | 38.0 | % | 36.7 | % | 34.0 | % | |||||||||||
| Other | 39.2 | % | 30.9 | % | 40.9 | % | |||||||||||
| Corporate | 8.5 | % | 4.1 | % | 4.2 | % | |||||||||||
| 38.6 | % | 33.7 | % | 31.7 | % | ||||||||||||
The significant variances in selling, general and administrative expenses are as follows:
As a percentage of revenues, relatively fixed expenses tend to be higher in rate due to lower sales, while more variable expenses tend to keep their rates even if dollar amounts are increasing. Nightclubs expenses increased as a percentage of segment revenue due to newly acquired clubs. Bombshells expenses increased as a percentage of segment revenue due to lower sales.
Taxes and permits increased from 2023 to 2024 mainly due to the increase in the Texas patron tax but decreased from 2024 to 2025 due to closed locations.
Insurance expense increased due to the estimated self-insurance for general liability and liquor liability. Any unallocated self-insurance reserve remains in Corporate segment.
Legal expenses increased due mainly to the increase in ongoing cases, particularly the New York indictment.
Depreciation and amortization. Depreciation and amortization decreased by $317,000, or 2.1%, from 2024 to 2025 and increased by $244,000, or 1.6%, from 2023 to 2024. The increase from 2023 to 2024 was mainly caused by a decrease in the amortization of intangibles due to previous impairment, while the decrease from 2024 to 2025 was mainly caused by closed locations.
Impairments and other charges, net. The components of impairments and other charges, net are in the table below (dollars in thousands):
| 2025 | Inc (Dec) | 2024 | Inc (Dec) | 2023 | |||||||||||||||||||||||||
| Impairment of assets | $ | 5,340 | (86.1) | % | $ | 38,517 | 205.0 | % | $ | 12,629 | |||||||||||||||||||
| Settlement of lawsuits | 3,948 | 659.2 | % | 520 | (86.2) | % | 3,759 | ||||||||||||||||||||||
| Gain on sale of businesses and assets | (982) | (54.1) | % | (2,140) | 213.8 | % | (682) | ||||||||||||||||||||||
| Gain on insurance | (2,358) | 621.1 | % | (327) | 324.7 | % | (77) | ||||||||||||||||||||||
| $ | 5,948 | (83.7) | % | $ | 36,570 | 134.0 | % | $ | 15,629 | ||||||||||||||||||||
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The significant variances in impairments and other charges, net are discussed below:
During 2025, we recorded aggregate impairment charges amounting to $5.3 million related to SOB licenses of six clubs ($3.8 million) and property and equipment of one food hall ($1.6 million). During 2024, we recorded aggregate impairment charges amounting to $38.5 million related to goodwill of four clubs ($8.9 million), SOB licenses of seven clubs ($11.8 million), operating lease right-of-use assets of five Bombshells locations ($6.5 million), tradename of one club ($693,000), property and equipment of four clubs and nine Bombshells locations ($10.6 million). During 2023, we recorded aggregate impairment charges amounting to $12.6 million related to goodwill of four clubs ($4.2 million), SOB licenses of eight clubs ($6.5 million), operating lease right-of-use asset and property and equipment of a closed club ($1.1 million), and software of two investment projects ($814,000).
In 2025, we settled a consolidated class action lawsuit in Illinois for the alleged collection of customer fingerprints for $2.95 million, consisting of $1.25 million in cash and $1.7 million in VIP cards. In 2023, we recognized settlements with the New York Department of Labor amounting to $3.1 million related to the assessment by the New York Department of Labor for state unemployment insurance. See Note 11 to our consolidated financial statements.
Refer to dispositions in Note 16 to our consolidated financial statement for details on gains or losses on sale of businesses and assets.
In relation to insurance claims and recoveries, we recognized a $77,000 gain in 2023. Gains related to insurance recoveries are recognized when the contingencies related to the insurance claims have been resolved, which may be in a subsequent reporting period. We also partially recovered and recognized a $327,000 gain related to a fire in one of our clubs in Fort Worth, Texas, during 2024 and $2.3 million in 2025. See Note 15 to our consolidated financial statements.
Income from Operations
During fiscal 2025, 2024, and 2023, our consolidated operating margin was 10.8%, 6.4%, and 17.5%, respectively.
Below is a table which reflects segment contribution to income from operations (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Nightclubs | $ | 69,569 | $ | 57,912 | $ | 73,174 | |||||||||||
| Bombshells | 177 | (10,783) | 6,502 | ||||||||||||||
| Other | (169) | (137) | (1,380) | ||||||||||||||
| Corporate | (39,310) | (28,187) | (26,812) | ||||||||||||||
| $ | 30,267 | $ | 18,805 | $ | 51,484 | ||||||||||||
Nightclubs operating margin was 28.7%, 23.7%, and 30.9% in 2025, 2024, and 2023. Bombshells operating margin was 0.5%, (21.3)%, and 11.7% in 2025, 2024, and 2023, respectively.
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Excluding certain items, non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands). Refer to discussion of Non-GAAP Financial Measures on page 45.
| 2025 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 69,569 | $ | 177 | $ | (169) | $ | (39,310) | $ | 30,267 | |||||||||||||||||||
| Amortization of intangibles | 2,345 | 3 | — | 14 | 2,362 | ||||||||||||||||||||||||
| Settlement of lawsuits | 3,850 | 98 | — | — | 3,948 | ||||||||||||||||||||||||
| Impairment of assets | 3,790 | 1,550 | — | — | 5,340 | ||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | 303 | (1,188) | — | (97) | (982) | ||||||||||||||||||||||||
| Gain on insurance | (2,358) | — | — | — | (2,358) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 1,373 | 1,373 | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 77,499 | $ | 640 | $ | (169) | $ | (38,020) | $ | 39,950 | |||||||||||||||||||
| GAAP operating margin | 28.7 | % | 0.5 | % | (15.0) | % | (14.1) | % | 10.8 | % | |||||||||||||||||||
| Non-GAAP operating margin | 32.0 | % | 1.8 | % | (15.0) | % | (13.6) | % | 14.3 | % | |||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 57,912 | $ | (10,783) | $ | (137) | $ | (28,187) | $ | 18,805 | |||||||||||||||||||
| Amortization of intangibles | 2,334 | 137 | — | 23 | 2,494 | ||||||||||||||||||||||||
| Settlement of lawsuits | 465 | 25 | — | 30 | 520 | ||||||||||||||||||||||||
| Impairment of assets | 22,691 | 15,826 | — | — | 38,517 | ||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | (56) | (2,322) | — | 238 | (2,140) | ||||||||||||||||||||||||
| Gain on insurance | (327) | — | — | — | (327) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 1,882 | 1,882 | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 83,019 | $ | 2,883 | $ | (137) | $ | (26,014) | $ | 59,751 | |||||||||||||||||||
| GAAP operating margin | 23.7 | % | (21.3) | % | (11.8) | % | (9.5) | % | 6.4 | % | |||||||||||||||||||
| Non-GAAP operating margin | 34.0 | % | 5.7 | % | (11.8) | % | (8.8) | % | 20.2 | % | |||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 73,174 | $ | 6,502 | $ | (1,380) | $ | (26,812) | $ | 51,484 | |||||||||||||||||||
| Amortization of intangibles | 2,497 | 530 | 484 | 17 | 3,528 | ||||||||||||||||||||||||
| Settlement of lawsuits | 3,552 | 207 | — | — | 3,759 | ||||||||||||||||||||||||
| Impairment of assets | 11,815 | — | 814 | — | 12,629 | ||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | (734) | 77 | — | (25) | (682) | ||||||||||||||||||||||||
| Gain on insurance | (48) | — | — | (29) | (77) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 2,588 | 2,588 | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 90,256 | $ | 7,316 | $ | (82) | $ | (24,261) | $ | 73,229 | |||||||||||||||||||
| GAAP operating margin | 30.9 | % | 11.7 | % | (104.6) | % | (9.1) | % | 17.5 | % | |||||||||||||||||||
| Non-GAAP operating margin | 38.1 | % | 13.1 | % | (6.2) | % | (8.3) | % | 24.9 | % | |||||||||||||||||||
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Other Income/Expenses
Interest expense decreased by approximately $327,000 from 2024 to 2025 and increased by approximately $753,000 from 2023 to 2024. The decrease in interest expense in 2025 was primarily caused by a lower average year-over-year debt balance. The increase in interest expense was primarily caused by the significantly higher average debt balance from borrowings to finance our acquisitions in 2023 and the additional interest expense from construction loans in 2024 related to build-out projects.
We consider lease plus interest expense as our occupancy costs since most of our debts are for real properties where our clubs and restaurants are located. For occupancy cost purposes, we exclude non-real-estate-related interest expense. Total occupancy cost rate (total occupancy cost as a percentage of revenues) is shown in the table below.
| 2025 | 2024 | 2023 | |||||||||||||||
| Lease | 2.3 | % | 2.4 | % | 2.5 | % | |||||||||||
| Interest | 5.9 | % | 5.6 | % | 5.4 | % | |||||||||||
| Total occupancy cost | 8.1 | % | 8.0 | % | 7.9 | % | |||||||||||
Income Taxes
Income tax was approximately a $4.6 million expense in 2025, $410,000 benefit in 2024, and a $6.8 million expense in 2023. Our effective income tax rate was 29.8% in 2025, (15.7)% in 2024, and 19.0% in 2023. The components of our annual effective income tax rate are the following:
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal statutory income tax expense/benefit | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State income taxes, net of federal benefit | 10.2 | % | 8.0 | % | 3.3 | % | |||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||
| Goodwill impairment | — | % | 7.8 | % | 0.8 | % | |||||||||||
| Section 162(m) excess compensation | 1.3 | % | 6.5 | % | 0.5 | % | |||||||||||
| Meals and entertainment | 0.6 | % | 3.8 | % | 0.3 | % | |||||||||||
| Loss (gain) on sale of subsidiary stock | 0.8 | % | — | % | — | % | |||||||||||
| Other nontaxable or nondeductible items | 0.1 | % | 0.5 | % | 0.1 | % | |||||||||||
| Change in valuation allowance | 0.6 | % | 1.8 | % | — | % | |||||||||||
| Tax credits | |||||||||||||||||
| FICA tip credit | (10.4) | % | (63.3) | % | (4.9) | % | |||||||||||
| Work Opportunity Tax credits | (1.2) | % | (24.5) | % | (1.0) | % | |||||||||||
| Expiration of capital loss carryforwards | 3.0 | % | — | % | — | % | |||||||||||
| Stock-based compensation forfeiture | 1.3 | % | — | % | — | % | |||||||||||
| Return-to-provision and prior-period adjustments | 1.9 | % | 22.7 | % | (1.0) | % | |||||||||||
| Other | 0.5 | % | — | % | — | % | |||||||||||
| Total effective income tax rate | 29.8 | % | (15.7) | % | 19.0 | % | |||||||||||
The effective income tax rate difference from the statutory federal corporate tax rate of 21% comes from offsetting impact of state income tax, net of federal benefit, changes in the deferred tax asset valuation allowance, and tax credits that are mostly FICA tip credits. The effective income tax rate for fiscal 2024 was also affected by the low pretax income that caused a high offsetting rate for tax credits, whose dollar value does not change based on pretax income.
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Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the Company and helps management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:
Non-GAAP Operating Income and Non-GAAP Operating Margin. We calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, and (f) stock-based compensation. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations.
Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income attributable to RCIHH common stockholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, (f) gain on lease termination, (g) stock-based compensation, (h) the income tax effect of the above-described adjustments, and (i) change in deferred tax asset valuation allowance. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 22.7%, 0.0%, and 20.6% effective tax rate of the non-GAAP income before taxes for 2025, 2024, and 2023, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities.
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Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) impairment of assets, (g) settlement of lawsuits, (h) gain on lease termination, and (i) stock-based compensation. We believe that adjusting for such items helps management and investors better understand our operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess the unleveraged performance return on our investments. Adjusted EBITDA multiple is also used as a target benchmark for our acquisitions of nightclubs.
We also use certain non-GAAP cash flow measures such as free cash flow. See “Liquidity and Capital Resources” section for further discussion.
The following tables present our non-GAAP performance measures for the periods indicated (in thousands, except per share amounts and percentages):
| 2025 | 2024 | 2023 | |||||||||||||||
| Reconciliation of GAAP net income to Adjusted EBITDA | |||||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | 10,811 | $ | 3,011 | $ | 29,246 | |||||||||||
| Income tax expense (benefit) | 4,609 | (410) | 6,846 | ||||||||||||||
| Interest expense, net | 15,787 | 16,197 | 15,538 | ||||||||||||||
| Settlement of lawsuits | 3,948 | 520 | 3,759 | ||||||||||||||
| Impairment of assets | 5,340 | 38,517 | 12,629 | ||||||||||||||
| Gain on sale of businesses and assets | (982) | (2,140) | (682) | ||||||||||||||
| Depreciation and amortization | 15,078 | 15,395 | 15,151 | ||||||||||||||
| Gain on insurance | (2,358) | (327) | (77) | ||||||||||||||
| Gain on lease termination | (979) | — | — | ||||||||||||||
| Stock-based compensation | 1,373 | 1,882 | 2,588 | ||||||||||||||
| Adjusted EBITDA | $ | 52,627 | $ | 72,645 | $ | 84,998 | |||||||||||
| Reconciliation of GAAP net income to non-GAAP net income | |||||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | 10,811 | $ | 3,011 | $ | 29,246 | |||||||||||
| Amortization of intangibles | 2,362 | 2,494 | 3,528 | ||||||||||||||
| Settlement of lawsuits | 3,948 | 520 | 3,759 | ||||||||||||||
| Impairment of assets | 5,340 | 38,517 | 12,629 | ||||||||||||||
| Gain on sale of businesses and assets | (982) | (2,140) | (682) | ||||||||||||||
| Gain on insurance | (2,358) | (327) | (77) | ||||||||||||||
| Gain on lease termination | (979) | — | — | ||||||||||||||
| Stock-based compensation | 1,373 | 1,882 | 2,588 | ||||||||||||||
| Change in deferred tax asset valuation allowance | 64 | 143 | (176) | ||||||||||||||
| Net income tax effect | (867) | (410) | (5,068) | ||||||||||||||
| Non-GAAP net income | $ | 18,712 | $ | 43,690 | $ | 45,747 | |||||||||||
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| 2025 | 2024 | 2023 | |||||||||||||||
| Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share | |||||||||||||||||
| Diluted shares | 8,822,758 | 9,250,245 | 9,335,983 | ||||||||||||||
| GAAP diluted earnings per share | $ | 1.23 | $ | 0.33 | $ | 3.13 | |||||||||||
| Amortization of intangibles | 0.27 | 0.27 | 0.38 | ||||||||||||||
| Settlement of lawsuits | 0.45 | 0.06 | 0.40 | ||||||||||||||
| Impairment of assets | 0.61 | 4.16 | 1.35 | ||||||||||||||
| Gain on sale of businesses and assets | (0.11) | (0.23) | (0.07) | ||||||||||||||
| Gain on insurance | (0.27) | (0.04) | (0.01) | ||||||||||||||
| Gain on lease termination | (0.11) | — | — | ||||||||||||||
| Stock-based compensation | 0.16 | 0.20 | 0.28 | ||||||||||||||
| Change in deferred tax asset valuation allowance | 0.01 | 0.02 | (0.02) | ||||||||||||||
| Net income tax effect | (0.10) | (0.04) | (0.54) | ||||||||||||||
| Non-GAAP diluted earnings per share | $ | 2.12 | $ | 4.72 | $ | 4.90 | |||||||||||
| Reconciliation of GAAP operating income to non-GAAP operating income | |||||||||||||||||
| Income from operations | $ | 30,267 | $ | 18,805 | $ | 51,484 | |||||||||||
| Amortization of intangibles | 2,362 | 2,494 | 3,528 | ||||||||||||||
| Settlement of lawsuits | 3,948 | 520 | 3,759 | ||||||||||||||
| Impairment of assets | 5,340 | 38,517 | 12,629 | ||||||||||||||
| Gain on sale of businesses and assets | (982) | (2,140) | (682) | ||||||||||||||
| Gain on insurance | (2,358) | (327) | (77) | ||||||||||||||
| Stock-based compensation | 1,373 | 1,882 | 2,588 | ||||||||||||||
| Non-GAAP operating income | $ | 39,950 | $ | 59,751 | $ | 73,229 | |||||||||||
| Reconciliation of GAAP operating margin to non-GAAP operating margin | |||||||||||||||||
| GAAP operating margin | 10.8 | % | 6.4 | % | 17.5 | % | |||||||||||
| Amortization of intangibles | 0.8 | % | 0.8 | % | 1.2 | % | |||||||||||
| Settlement of lawsuits | 1.4 | % | 0.2 | % | 1.3 | % | |||||||||||
| Impairment of assets | 1.9 | % | 13.0 | % | 4.3 | % | |||||||||||
| Gain on sale of businesses and assets | (0.4) | % | (0.7) | % | (0.2) | % | |||||||||||
| Gain on insurance | (0.8) | % | (0.1) | % | — | % | |||||||||||
| Stock-based compensation | 0.5 | % | 0.6 | % | 0.9 | % | |||||||||||
| Non-GAAP operating margin | 14.3 | % | 20.2 | % | 24.9 | % | |||||||||||
The adjustments to reconcile net income attributable to RCIHH common stockholders to non-GAAP net income exclude the impact of adjustments related to noncontrolling interests, which is immaterial.
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LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2025, our cash and cash equivalents were $33.7 million as compared to $32.4 million at September 30, 2024. Due to the large volume of cash that we handle, we have very stringent cash controls. As of September 30, 2025, and 2024, we had negative working capital balances. We believe that we can borrow capital if needed but there can be no guarantee that additional liquidity will be readily available or available on favorable terms although we have unused credit facilities as of September 30, 2025.
We have not recently raised capital through the issuance of equity securities although we have used equity recently in our acquisitions. Instead, we use debt financing to lower our overall cost of capital and increase our return on stockholders’ equity. We have a history of borrowing funds in private transactions and from sellers in acquisition transactions and have secured traditional bank financing on our new development projects and refinancing of our existing notes payable. There can be no assurance though that any of these financing options would be presently available on favorable terms, if at all. We also have historically utilized these cash flows to invest in property and equipment, adult nightclubs, and restaurants/sports bars.
During 2023, we acquired six clubs at an aggregate acquisition date fair value of $72.3 million, of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and $16.0 million in equity (200,000 shares of our common stock with an acquisition date fair value of $12.8 million, discounted for lack of marketability due to the lock-up period).
We did not have any business acquisition in 2024.
During 2025, we acquired three clubs at an aggregate acquisition date fair value of $21.0 million, of which $13.0 million was in cash and $8.0 million in debt (with the same acquisition date fair value).
We expect to generate adequate cash flows from operations for the next 12 months from the issuance of this report.
The following table presents a summary of our net cash flows from operating, investing, and financing activities (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating | $ | 49,418 | $ | 55,884 | $ | 59,130 | |||||||||||
| Investing | (24,041) | (21,015) | (64,824) | ||||||||||||||
| Financing | (24,018) | (23,542) | (9,263) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 1,359 | $ | 11,327 | $ | (14,957) | |||||||||||
We require capital principally for the acquisition of new clubs, construction of new Bombshells, renovation of older units, and investments in technology. We also utilize capital to repurchase our common stock as part of our share repurchase program, based on our capital allocation strategy guidelines, and to pay our quarterly dividends.
Cash Flows from Operating Activities
Following are our summarized cash flows from operating activities (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Net income | $ | 10,839 | $ | 3,018 | $ | 29,100 | |||||||||||
| Depreciation and amortization | 15,078 | 15,395 | 15,151 | ||||||||||||||
| Deferred tax benefit | (1,004) | (6,450) | (1,781) | ||||||||||||||
| Stock-based compensation expense | 1,373 | 1,882 | 2,588 | ||||||||||||||
| Impairment of assets | 5,340 | 38,517 | 12,629 | ||||||||||||||
| Net change in operating assets and liabilities | 17,594 | 2,671 | (1,203) | ||||||||||||||
| Other | 198 | 851 | 2,646 | ||||||||||||||
| Net cash provided by operating activities | $ | 49,418 | $ | 55,884 | $ | 59,130 | |||||||||||
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Net cash flows from operating activities decreased from 2023 to 2024 and from 2024 to 2025 mainly due to the lower same-store sales, partially offset by the lower income taxes paid.
In the next five years, we expect interest payments on our debts to range from $15.0 million in the early years to $8.0 million annually in the latter years for debts we owe as of September 30, 2025.
See Note 12 for our operating lease payment schedule for the next five years and thereafter.
Cash Flows from Investing Activities
Following are our summarized cash flows from investing activities (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Proceeds from sale of businesses and assets | $ | 1,093 | $ | 1,969 | $ | 4,245 | |||||||||||
| Proceeds from notes receivable | 292 | 249 | 229 | ||||||||||||||
| Proceeds from insurance | 2,101 | 1,367 | 86 | ||||||||||||||
| Payments for property and equipment and intangible assets | (14,527) | (24,600) | (40,384) | ||||||||||||||
| Acquisition of businesses, net of cash acquired | (13,000) | — | (29,000) | ||||||||||||||
| Net cash used in investing activities | $ | (24,041) | $ | (21,015) | $ | (64,824) | |||||||||||
In 2025, we acquired three clubs for a combined sum of $21.0 million (with an aggregate acquisition date fair value of the same amount), of which $13.0 million was in cash and $8.0 million in debt (with an acquisition date fair value of the same amount).
In 2023, we acquired six clubs for a combined sum of $75.5 million (with an aggregate acquisition date fair value of $72.3 million), of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and 200,000 shares of our common stock in equity (with an acquisition date fair value of $12.8 million). We also acquired several real estate properties for club and Bombshells sites totaling $19.7 million, and invested $7.5 million for future casino locations.
As of September 30, 2025, 2024, and 2023, we had $7.9 million, $15.0 million, and $7.7 million in construction-in-progress related mostly to Bombshells units that open in subsequent periods.
See Note 16 to our consolidated financial statements for details of our acquisition and disposition activities.
Following is a reconciliation of our additions to property and equipment for the years ended September 30, 2025, 2024, and 2023 (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| New capital expenditures in new clubs and Bombshells units and equipment* | $ | 10,507 | $ | 17,137 | $ | 34,430 | |||||||||||
| Maintenance capital expenditures | 4,020 | 7,463 | 5,954 | ||||||||||||||
| Total capital expenditures, excluding business acquisitions | $ | 14,527 | $ | 24,600 | $ | 40,384 | |||||||||||
*Includes real estate, except those acquired through business acquisitions.
We expect capital expenditure payments in the range of $11.0 million to $16.0 million in 2026, $6.0 million to $8.0 million of which relate to maintenance capital expenditures to support our existing clubs and restaurants and our corporate office.
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Cash Flows from Financing Activities
Following are our summarized cash flows from financing activities (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Proceeds from debt obligations | $ | 10,888 | $ | 22,657 | $ | 11,595 | |||||||||||
| Payments on debt obligations | (20,502) | (23,001) | (15,650) | ||||||||||||||
| Purchase of treasury stock | (11,860) | (20,606) | (2,223) | ||||||||||||||
| Payment of dividends | (2,464) | (2,302) | (2,146) | ||||||||||||||
| Payment of loan origination costs | (80) | (290) | (239) | ||||||||||||||
| Distribution to noncontrolling interests | — | — | (600) | ||||||||||||||
| Net cash used in financing activities | $ | (24,018) | $ | (23,542) | $ | (9,263) | |||||||||||
See Note 9 to our consolidated financial statements for a detailed discussion of our debt obligations, including the future maturities of our debt obligations in the next five years and thereafter.
We purchased shares of our common stock representing 270,939 shares, 442,639 shares, and 34,086 shares in 2025, 2024, and 2023, respectively. We paid quarterly dividends of $0.05 per share in the first quarter of 2023. In the second quarter of 2023 through the third quarter of 2024, we increased our quarterly dividends to $0.06 per share. Then starting in the fourth quarter of 2024 through the first quarter of 2026, we increased our quarterly dividends to $0.07 per share. In the second quarter of 2026, we increased our quarterly dividends to $0.08 per share. We expect annual dividend payments of $2.5 million in 2026 based on our current quarterly dividend rate.
Non-GAAP Cash Flow Measure
We also use certain non-GAAP cash flow measures, such as free cash flow. We define free cash flow as net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy. See table below (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Net cash provided by operating activities | $ | 49,418 | $ | 55,884 | $ | 59,130 | |||||||||||
| Less: Maintenance capital expenditures | 4,020 | 7,463 | 5,954 | ||||||||||||||
| Free cash flow | $ | 45,398 | $ | 48,421 | $ | 53,176 | |||||||||||
| As a % of revenue | 16.2 | % | 16.4 | % | 18.1 | % | |||||||||||
We only include maintenance capital expenditures as a reduction from net cash flow from operating activities to arrive at free cash flow. This is because, based on our capital allocation strategy, acquisitions and development of our own clubs and restaurants are our primary uses of free cash flow.
Other than the impact of uncertainties caused by near-term macro environment, including supply chain challenges, and commodity and labor inflation, and the contractual obligations described above, we are not aware of any event or trend that would adversely impact our liquidity. In our opinion, working capital is not a true indicator of our financial status. Typically, businesses in our industry carry current liabilities in excess of current assets because businesses in our industry receive substantially immediate payment for sales, with nominal receivables, while inventories and other current liabilities normally carry longer payment terms. Vendors and purveyors often remain flexible with payment terms, providing businesses in our industry with opportunities to adjust to short-term business downturns. We consider the primary indicators of financial status to be the long-term trend of revenue growth, the mix of sales revenues, overall cash flow, profitability from operations and the level of long-term debt. We continue to monitor the macro environment and will adjust our overall approach to capital allocation as events and trends unfold.
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The following table presents a summary of such indicators (dollars in thousands):
| 2025 | Inc (Dec) | 2024 | Inc (Dec) | 2023 | |||||||||||||||||||||||||
| Sales of alcoholic beverages | $ | 122,124 | (8.3) | % | $ | 133,124 | 4.6 | % | $ | 127,262 | |||||||||||||||||||
| Sales of food and merchandise | 39,971 | (10.4) | % | 44,606 | 1.6 | % | 43,906 | ||||||||||||||||||||||
| Service revenues | 97,079 | (1.4) | % | 98,455 | (4.9) | % | 103,577 | ||||||||||||||||||||||
| Other revenues | 20,260 | 4.3 | % | 19,419 | 2.0 | % | 19,045 | ||||||||||||||||||||||
| Total revenues | $ | 279,434 | (5.5) | % | $ | 295,604 | 0.6 | % | $ | 293,790 | |||||||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | 10,811 | 259.1 | % | $ | 3,011 | (89.7) | % | $ | 29,246 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 49,418 | (11.6) | % | $ | 55,884 | (5.5) | % | $ | 59,130 | |||||||||||||||||||
| Adjusted EBITDA* | $ | 52,627 | (27.6) | % | $ | 72,645 | (14.5) | % | $ | 84,998 | |||||||||||||||||||
| Free cash flow* | $ | 45,398 | (6.2) | % | $ | 48,421 | (8.9) | % | $ | 53,176 | |||||||||||||||||||
| Debt (end of period) | $ | 235,781 | (1.0) | % | $ | 238,197 | (0.6) | % | $ | 239,751 | |||||||||||||||||||
*See definition and calculation of Adjusted EBITDA and Free Cash Flow under Non-GAAP Financial Measures and Liquidity and Capital Resources above.
We have not established financing other than the notes payable discussed in Note 9 to the consolidated financial statements. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise.
Share Repurchase
As part of our capital allocation strategy, we buy back shares in the open market or through negotiated purchases, as authorized by our board of directors. During fiscal years 2025, 2024, and 2023, we paid for treasury stock amounting to $11.9 million, $20.6 million, and $2.2 million, representing 270,939 shares, 442,639 shares, and 34,086 shares, respectively. On July 9, 2024, the board of directors approved a $25.0 million increase in the Company's share repurchase program. We have approximately $9.2 million remaining authorization to purchase additional shares as of September 30, 2025.
On November 21, 2025, the Company repurchased 821,000 shares of its own common stock from a single stockholder for $30.0 million, paid $8.0 million in cash and $22.0 million under a two-year unsecured promissory note.
For additional details regarding our board approved share repurchase plans, please refer to Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
IMPACT OF INFLATION
To the extent permitted by competition, we have managed to recover increased costs through price increases and may continue to do so. However, there can be no assurance that we will be able to do so in the future.
SEASONALITY
Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters). Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.
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GROWTH STRATEGY
We believe that we can continue to grow organically and through careful entry into markets with high growth potential. Our growth strategy includes acquiring existing clubs, opening new clubs after market analysis and developing new club concepts that are consistent with our management and marketing skills as our capital and manpower allow. We also strive to enter into businesses that complement our own, such as gaming, if they can enhance shareholder value.
In fiscal 2023, we acquired six clubs with an aggregate acquisition date fair value of $72.3 million, of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and 200,000 shares of our common stock in equity.
In fiscal 2024, we did not have any club business acquisitions but opened a new Bombshells location in Stafford, Texas in November 2023.
In fiscal 2025, we acquired three clubs with an aggregate acquisition date fair value of $21.0 million, of which $13.0 million was in cash and $8.0 million in debt.
See Note 16 to our consolidated financial statements.
We continue to evaluate opportunities to acquire new nightclubs and anticipate acquiring new locations that fit our business model as we have done in the past. The acquisition of additional clubs may require us to take on additional debt or issue our common stock, or both. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise. An inability to obtain such additional financing could have an adverse effect on our growth strategy.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The items in our financial statements subject to market risk are potential debt instruments with variable interest rates. We have certain debts that have variable interest rates in effect as of September 30, 2025. An increase in interest rates in the future may have a negative impact on our results of operations and cash flows. A hypothetical 10% change in interest rates would have had a $28,000 impact on the Company's annual results of operations and cash flows.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item begins on the next page.
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RCI HOSPITALITY HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Reports of Independent Registered Public Accounting Firms ( | 54 | ||||
Consolidated Financial Statements: | |||||
Consolidated Statements of Cash Flows for the years ended September 30, 2025, 2024, and 2023 | 57 | ||||
Consolidated Statements of Income for the years ended September 30, 2025, 2024, and 2023 | 58 | ||||
Consolidated Statements of Changes in Equity for the years ended September 30, 2025, 2024, and 2023 | 59 | ||||
Consolidated Balance Sheets at September 30, 2025, and 2024 | 60 | ||||
Notes to Consolidated Financial Statements | 61 | ||||
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
RCI Hospitality Holdings, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of RCI Hospitality Holdings, Inc. (the “Company”) as of September 30, 2025, the related consolidated statements of income, changes in equity and cash flows for the year ended September 30, 2025, and the related notes and schedule (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025, and the results of its operations and its cash flows for the year ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of September 30, 2025, based on the criteria established in internal control - integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 19, 2026, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of material weaknesses.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Emphasis of a Matter
As discussed in Note 11 of the consolidated financial statements, the Company was indicted and is currently subject to an ongoing regulatory investigation. The outcome and potential financial impact of this uncertainty is not estimable at this time, but could be material. Our opinion is not modified with respect to this matter.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Impairment of Goodwill and Indefinite-lived Intangible Assets
As discussed in Note 2 to the consolidated financial statements, the Company reviews goodwill and indefinite-lived intangible assets on an annual basis for impairment, or when events and circumstances indicate that the asset might be impaired. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value, and impairment of indefinite-lived intangible assets is recognized in the amount by which the carrying value of the assets exceed their fair value. If these assets are determined to be impaired, the amount of impairment recognized is the amount by which the carrying amount of the assets exceeds their fair value. Fair value is generally determined using forecasted cash flows discounted using an estimated weighted average cost of capital. As of September 30, 2025, the Company had goodwill of approximately $62.6 million, and indefinite-lived intangible assets of approximately $153.2 million. During the year ended September 30, 2025 the Company recorded an impairment of these assets of approximately $3.8 million.
We identified the evaluation of the impairment analysis of goodwill and indefinite-lived intangible assets as a critical audit matter. There was a high degree of subjective auditor judgment in evaluating the estimated undiscounted future cash flows used to test operating locations for recoverability and the determination of fair value of the relevant assets when required. Specifically, a high degree of subjective auditor judgment was required to evaluate future revenues, operating cash flows and the discount rate.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company’s goodwill and indefinite-lived intangible asset impairment process, including controls over the identification of relevant assets at risk of impairment, the determination of estimated undiscounted future cash flows and the fair value of individual reporting unit or asset, as necessary, and controls over the key assumptions as noted above. These procedures also included, among others, (1) testing management’s process for developing the fair value estimates of the reporting unit or assets; (2) evaluating the appropriateness of the underlying discounted and undiscounted cash flow models; (3) testing the completeness and accuracy of underlying data used in the models; and (4) evaluating the reasonableness of the significant assumptions used by management, including the future cash flows, growth rates and discount rates. Evaluating management’s significant assumptions related to future cash flows, growth rates and the discount rates involved, with the assistance of valuation specialists, evaluating whether the assumptions used by management were reasonable considering (1) the historical performance of the reporting unit; (2) the consistency with external market data; and (3) sensitivities over significant inputs and assumptions, including the development of a point estimate.
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
We have served as the Company’s auditor since 2019 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024).
March 19, 2026
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
RCI Hospitality Holdings, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of RCI Hospitality Holdings, Inc. (the “Company”) as of September 30, 2024, the related consolidated statements of income, changes in equity and cash flows for each of the years in the two-year period ended September 30, 2024, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We served as the Company’s auditor from 2019 to 2025.
Marlton, New Jersey
December 16, 2024, except for the effect of the adoption of ASU 2023-07 and ASU 2023-09 described in Note 2, Note 4, and Note 10 to the financial statements, as to which the date is March 19, 2026
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RCI HOSPITALITY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Years Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Deferred income tax benefit | ( | ( | ( | ||||||||||||||
| Gain on sale of businesses and assets | ( | ( | ( | ||||||||||||||
| Impairment of assets | |||||||||||||||||
| Amortization and writeoff of debt discount and issuance costs | |||||||||||||||||
| Credit loss expense on notes receivable | |||||||||||||||||
| Gain on insurance | ( | ( | ( | ||||||||||||||
| Noncash lease expense | |||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||
| Changes in operating assets and liabilities, net of business acquisitions: | |||||||||||||||||
| Receivables | ( | ||||||||||||||||
| Inventories | ( | ( | |||||||||||||||
| Prepaid expenses, other current, and other assets | ( | ( | ( | ||||||||||||||
| Accounts payable, accrued, and other liabilities | |||||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||
| Proceeds from sale of businesses and assets | |||||||||||||||||
| Proceeds from notes receivable | |||||||||||||||||
| Proceeds from insurance | |||||||||||||||||
| Payments for property and equipment and intangible assets | ( | ( | ( | ||||||||||||||
| Acquisition of businesses, net of cash acquired | ( | ( | |||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
Proceeds from debt obligations, including related party proceeds of $ | |||||||||||||||||
Payments on debt obligations, including related party payments of $ | ( | ( | ( | ||||||||||||||
| Purchase of treasury stock | ( | ( | ( | ||||||||||||||
| Payment of dividends | ( | ( | ( | ||||||||||||||
| Payment of loan origination costs | ( | ( | ( | ||||||||||||||
| Share in return of investment by noncontrolling partner | ( | ||||||||||||||||
| Net cash used in financing activities | ( | ( | ( | ||||||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ||||||||||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | |||||||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
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RCI HOSPITALITY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share and number of shares data)
| Years Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenues | |||||||||||||||||
| Sales of alcoholic beverages | $ | $ | $ | ||||||||||||||
| Sales of food and merchandise | |||||||||||||||||
| Service revenues | |||||||||||||||||
| Other | |||||||||||||||||
| Total revenues | |||||||||||||||||
| Operating expenses | |||||||||||||||||
| Cost of goods sold | |||||||||||||||||
| Alcoholic beverages sold | |||||||||||||||||
| Food and merchandise sold | |||||||||||||||||
| Service and other | |||||||||||||||||
| Total cost of goods sold (exclusive of items shown separately below) | |||||||||||||||||
| Salaries and wages | |||||||||||||||||
| Selling, general, and administrative | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Impairments and other charges, net | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Income from operations | |||||||||||||||||
| Other income (expenses) | |||||||||||||||||
| Interest expense | ( | ( | ( | ||||||||||||||
| Interest income | |||||||||||||||||
| Gain on lease termination and other, net | |||||||||||||||||
| Income before income taxes | |||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||
| Net income | |||||||||||||||||
| Net loss (income) attributable to noncontrolling interests | ( | ( | |||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | $ | $ | ||||||||||||||
| Earnings per share | |||||||||||||||||
| Basic and diluted | $ | $ | $ | ||||||||||||||
| Weighted average shares used in computing earnings per share | |||||||||||||||||
| Basic and diluted | |||||||||||||||||
See accompanying notes to consolidated financial statements.
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RCI HOSPITALITY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended September 30, 2025, 2024, and 2023
(in thousands, except per share and number of shares data)
| Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for business combination | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury shares | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Canceled treasury shares | ( | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payment of dividends ($ | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share in return of investment by noncontrolling partner | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury shares | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Canceled treasury shares | ( | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Excise tax on stock repurchases | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Payment of dividends ($ | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury shares | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Canceled treasury shares | ( | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Excise tax on stock repurchases | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Payment of dividends ($ | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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RCI HOSPITALITY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and number of shares)
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Receivables, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
| Notes receivable, net of current portion | |||||||||||
| Goodwill | |||||||||||
| Intangibles, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Current portion of debt obligations, net | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Deferred tax liability, net | |||||||||||
| Debt, net of current portion and debt discount and issuance costs | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 11) | |||||||||||
| Equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Total RCIHH stockholders’ equity | |||||||||||
| Noncontrolling interests | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
1. Nature of Business
RCI Hospitality Holdings, Inc. (the “Company,” “we,” “us,” or “our”) is a holding company incorporated in Texas in 1994. Our subsidiaries own and operate establishments that offer live adult entertainment, restaurant, and/or bar operations. These establishments are located in Houston, Austin, San Antonio, Dallas, Fort Worth, Tomball, Katy, Pearland, Dickinson, Odessa, Lubbock, Longview, Tye, Round Rock, Edinburg, El Paso, Harlingen, Arlington, Beaumont, and Stafford, Texas, as well as Central City and Denver, Colorado; Inkster, Michigan; Minneapolis, Minnesota; Pittsburgh and Allentown, Pennsylvania; Charlotte and Raleigh, North Carolina; New York and Newburgh, New York; Miami, Pembroke Park and Miami Gardens, Florida; Phoenix, Arizona; Sulphur, Louisiana; Portland, Maine; Louisville, Kentucky; Indianapolis, Indiana; Chicago, Washington Park, Sauget, and Kappa, Illinois; and West Columbia, South Carolina. The Company also owns and operates media businesses for the adult industry.
The Company’s corporate offices are located in Houston, Texas.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accounts are maintained and the consolidated financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries in which a controlling interest is owned. Intercompany accounts and transactions have been eliminated in consolidation.
Fiscal Year
Our fiscal year ends on September 30. References to years 2025, 2024, and 2023 are for fiscal years ended September 30, 2025, 2024, and 2023, respectively. Our fiscal quarters chronologically end on December 31, March 31, June 30 and September 30.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts in the consolidated financial statements and accompanying notes. Estimates and assumptions are based on historical experience, forecasted future events, and various other inputs that we believe to be reasonable under the circumstances. Estimates and assumptions may vary under different circumstances and conditions. We evaluate our estimates and assumptions on an ongoing basis.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments with a maturity of three months or less when purchased. The Company maintains deposits in several financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses related to amounts in excess of FDIC limits.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
Receivables
Inventories
Inventories include alcoholic beverages, energy drinks, food, and Company merchandise. Inventories are carried at the lower of cost (on a first-in, first-out (“FIFO”) basis), or net realizable value.
Property and Equipment
Goodwill and Other Intangible Assets
Goodwill and other intangible assets with indefinite lives are not amortized but reviewed on an annual basis for impairment. Definite-lived intangible assets are amortized on a straight-line basis over their estimated lives.
The costs of transferable licenses purchased through open markets are capitalized as indefinite-lived intangible assets. The costs of obtaining non-transferable licenses that are directly issued by local government agencies are expensed as incurred. Annual license renewal fees are expensed over their renewal term.
Goodwill and other intangible assets that have indefinite useful lives are tested annually for impairment during our fourth fiscal quarter and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
For our goodwill impairment review, we have the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. This assessment is based on several factors, including industry and market conditions, overall financial performance, including an assessment of cash flows in comparison to actual and projected results of prior periods. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on our qualitative analysis, or if we elect to skip this step, we perform a Step 1 quantitative analysis to determine the fair value of the reporting unit. The fair value is determined using market-related valuation models, including discounted cash flows and comparable asset market values. We recognize goodwill impairment in the amount that the carrying value of the reporting unit exceeds the fair value of the reporting unit, not to exceed the amount of goodwill allocated to the reporting unit, based on the results of our Step 1 analysis. For the year ended September 30, 2025, we did not identify any goodwill impairment for the reporting unit. For the year ended September 30, 2024, we recognized goodwill impairment loss totaling $8.9 million. For the year ended September 30, 2023, we recognized goodwill impairment loss of $4.2 million.
Impairment of Long-Lived Assets
During fiscal 2025, the Company impaired one location operated by Bombshells for property and equipment for $1.6 million. During fiscal 2024, the Company impaired four clubs and nine Bombshells for property and equipment totaling $10.6 million and five Bombshells locations for operating lease right-of-use assets totaling $6.5 million. During fiscal 2023, the Company impaired one club for operating lease right-of-use assets amounting to $1.0 million and property and equipment amounting to $58,000 , and two venture projects for software totaling $814,000 . See Notes 6, 7, and 12.
Fair Value of Financial Instruments
The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of receivables, accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of notes receivable and short and long-term debt also approximates fair value since these instruments bear market rates of interest. None of these instruments are held for trading purposes.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
Revenue Recognition
The Company recognizes revenue from the sale of alcoholic beverages, food and merchandise, service (which include cover charges, dance dollar surcharges, membership fees, and facility use fees, among others), and other revenues (which include commissions from vending and ATM machines, real estate rental, valet parking, and other products and services for both nightclub and restaurant/sports bar operations, among others) at the point-of-sale upon receipt of cash, check, or credit card charge, net of discounts and promotional allowances based on consideration specified in implied contracts with customers. Sales and liquor taxes collected from customers and remitted to governmental authorities are presented on a net basis in the accompanying consolidated statements of income. The Company recognizes revenue when it satisfies a performance obligation (point in time of sale) by transferring control over a product or service to a customer.
Commission revenues, such as ATM commission, are recognized when the basis for such commission has transpired. Revenues from the sale of magazines and advertising content are recognized when the issue is published and shipped. Revenues and external expenses related to the Company’s annual Expo convention are recognized upon the completion of the convention, which normally occurs during our fiscal fourth quarter. Lease revenue (included in other revenues) is recognized when earned (recognized over time) and is more appropriately covered by guidance under ASC 842, Leases. Lease revenue is generally recognized ratably over the term of the lease. A substantial portion of our lessor contracts are classified as operating lease and a number of them are month-to-month or short-term contracts.
Revenue from initial franchise and area development fees are recognized as the performance obligations are satisfied over the term of the franchise agreement. Franchise royalties and advertising contributions, which are a percentage of net sales of franchised restaurants, are recognized in the period the related sales occur.
Refer to Notes 5 and 12 for additional disclosures on revenues and leases, respectively.
Advertising and Marketing
Income Taxes
The Company and its subsidiaries are subject to U.S. federal income tax and income taxes imposed in the state and local jurisdictions where we operate our businesses. Deferred income taxes are determined using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.
U.S. GAAP creates a single model to address accounting for uncertainty in tax positions by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. We recognize penalties related to unrecognized tax benefits as a component of selling, general and administrative expenses, and recognize interest accrued related to unrecognized tax benefits in interest expense.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
Investments
Earnings Per Share
Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings or losses of the Company. Potential common stock shares consist of shares that may arise from outstanding dilutive common restricted stock, stock options and warrants (the number of which is computed using the treasury stock method) and from outstanding convertible debentures (the number of which is computed using the if-converted method). Diluted earnings per share considers the potential dilution that could occur if the Company’s outstanding common restricted stock, stock options, warrants and convertible debentures were converted into common stock that then shared in the Company’s earnings or losses (as adjusted for interest expense, that would no longer be incurred if the debentures were converted).
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting, which requires the recognition of acquired tangible and identifiable intangible assets and assumed liabilities at their acquisition date fair values. The excess of the acquisition price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to acquired entities are included prospectively beginning with the date of acquisition. Acquisition-related costs are expensed as incurred.
Share Repurchases
The Company accounts for treasury stock transactions using the cost method. When treasury shares are retired, we charge the excess of the repurchase price over the par value of the repurchased shares to additional paid-in capital. We also charge additional paid-in capital for any excise tax incurred related to share repurchases.
Stock-based Compensation
The Company recognizes all employee stock-based compensation in selling, general and administrative expenses in our consolidated statements of income. Equity-classified awards are measured at the grant date fair value of the award and recognized as expense over their requisite service period. The Company estimates grant date fair value of stock options using the Black-Scholes option-pricing model.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
The expected term was estimated using the historical exercise and post-vesting expiration behavior of grantees on stock options awarded prior to the 2022 Plan. The expected volatility was based on historical volatility of the Company's stock price for a period equal to the award's expected term. The expected dividend yield is based on the current dividend payout activity and the exercise price (that is, the expected dividends that would likely be reflected in an amount at which the stock option would be exchanged). The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. We recognize forfeitures when they occur.
Legal and Other Contingencies
The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. In the opinion of management, there was not at least a reasonable possibility that we may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims.
The Company maintains insurance that covers claims arising from risks associated with the Company’s business including claims for workers’ compensation, general liability, property, auto, and business interruption coverage. The Company has historically carried substantial insurance to cover such risks with large deductibles, with such policies being structured to limit our per-occurrence exposure. During fiscal 2025, however, we self-insured certain general liability and liquor insurance coverage in a number of establishments due to increasingly prohibitive costs of such coverage. However, we still carry at least the minimum insurance coverage where it is required by law for licensing requirements. We record a liability for unresolved claims and for an estimate of incurred but not reported claims including legal costs based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic conditions, the frequency and severity of claims development history, and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. The Company believes, and the Company’s experience has been, that such insurance policies have been sufficient to cover such risks.
Generally, the Company recognizes gain contingencies when they are realized or when all related contingencies have been resolved.
Fair Value Measurement
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels.
U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
•Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2 – Include other inputs that are directly or indirectly observable in the marketplace.
•Level 3 – Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The Company classifies its marketable securities as available-for-sale, which are reported at fair value. Realized gains and losses (including unrealized holding gains and losses) from securities classified as available-for-sale are included in
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
comprehensive income. The Company measures the fair value of its marketable securities based on quoted prices for identical securities in active markets, or Level 1 inputs.
In accordance with U.S. GAAP, the Company reviews its marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary. Should the decline be considered other than temporary, the Company writes down the cost basis of the security and include the loss in current earnings as opposed to an unrealized holding loss. No losses or other-than-temporary impairments in our marketable securities portfolio were recognized during the years ended September 30, 2025, 2024, and 2023.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to tangible property and equipment, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets. For these assets, the Company does not periodically adjust carrying value to fair value except in the event of impairment. If it is determined that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is included in impairments and other charges, net in the consolidated statements of operations.
Assets and liabilities that are measured at fair value on a nonrecurring basis are as follows (in thousands):
| Fair Value at Reporting Date Using | ||||||||||||||||||||||||||
| Description | September 30, 2025 | Quoted Prices in Active Markets for Identical Asset (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| Property and equipment | ||||||||||||||||||||||||||
| Indefinite-lived intangibles | ||||||||||||||||||||||||||
| Fair Value at Reporting Date Using | ||||||||||||||||||||||||||
| Description | September 30, 2024 | Quoted Prices in Active Markets for Identical Asset (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| Property and equipment | $ | $ | $ | $ | ||||||||||||||||||||||
| Indefinite-lived intangibles | ||||||||||||||||||||||||||
| Definite-lived intangibles | ||||||||||||||||||||||||||
| Unrealized Gain (Loss/Impairments†) Recognized | ||||||||||||||||||||
| Years Ended September 30, | ||||||||||||||||||||
| Description | 2025 | 2024 | 2023 | |||||||||||||||||
| Goodwill | $ | $ | ( | $ | ( | |||||||||||||||
| Property and equipment, net (including held for sale) | ( | ( | ( | |||||||||||||||||
| Indefinite-lived intangibles | ( | ( | ( | |||||||||||||||||
| Definite-lived intangibles | ( | ( | ||||||||||||||||||
| Operating lease right-of-use assets | ( | ( | ||||||||||||||||||
| Other assets | ( | |||||||||||||||||||
† Cumulative annual impairments based on interim and year-end testing.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
The significant unobservable inputs used in our level 3 fair value measurements are as follows:
| Range (Weighted Average) | ||||||||||||||||||||||||||||||||
| Areas | Valuation Techniques | Unobservable Input | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||
| Goodwill | Discounted cash flow | EBITDA multiple | ||||||||||||||||||||||||||||||
| Long-term revenue/EBITDA growth rate | ( | |||||||||||||||||||||||||||||||
| Weighted average cost of capital | ||||||||||||||||||||||||||||||||
| SOB licenses | Multiperiod excess earnings | Long-term revenue/EBITDA growth rate | ||||||||||||||||||||||||||||||
| Weighted average cost of capital | ||||||||||||||||||||||||||||||||
| Contributory asset charges rate | ||||||||||||||||||||||||||||||||
| Tradename | Relief-from-royalty method | Long-term revenue growth rate | ||||||||||||||||||||||||||||||
| Royalty rate | ||||||||||||||||||||||||||||||||
| Weighted average cost of capital | ||||||||||||||||||||||||||||||||
| Operating lease right-of-use assets | Discounted cash flow | Long-term EBITDA growth rate | None | ( | ||||||||||||||||||||||||||||
| Weighted average cost of capital | None | |||||||||||||||||||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
Impact of Recently Issued Accounting Standards
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify that an entity should measure the fair value of an equity security subject to contractual sale restriction the same way it measures an identical equity security that is not subject to such a restriction. The FASB said the contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not affect its fair value. The ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2022-03 on October 1, 2024. Our adoption of this ASU did not have a significant impact on our consolidated financial statements.
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. The ASU requires all companies to amortize leasehold improvements associated with common control leases over the asset's useful life to the common control group regardless of the lease term. It also allows private and certain not-for-profit entities to use the written terms and conditions of an agreement to account for common control leases without further assessing the legal enforceability of those terms. The guidance is effective for all entities in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. We adopted ASU 2023-01 on October 1, 2024. Our adoption of this ASU did not have a significant impact on our consolidated financial statements.
In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The objectives of the ASU are to (1) provide decision-useful information to investors and other allocators of capital in a joint venture's financial statements and (2) reduce diversity in practice. The FASB decided to require a joint venture to apply a new basis of accounting upon formation that will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments of this ASU are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. early adoptions is permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively. We adopted the provisions of ASU 2023-05 on October 1, 2024, and will apply them on future joint ventures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in the ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. The ASU applies to all public entities that are required to report segment information in accordance with ASC 280, and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We initially adopted the disclosure requirements of ASU 2023-07 during the annual reporting period ended September 30, 2025. Due to certain changes in the composition of reportable segments, we recast prior year information to conform to current year classification, as allowed by ASU 2023-07. See Note 4. Our adoption of this ASU did not have a significant impact on our consolidated financial statements.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies - continued
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Under the ASU, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). The amendments of the ASU are effective for public business entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard for annual financial statements that have not been issued or made available for issuance. We initially adopted the disclosure requirements of ASU 2023-09 during the annual reporting period ended September 30, 2025, on a retrospective basis. See Note 10.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which expands disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated statements of income in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, as clarified by ASU 2025-01, with early adoption permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of this guidance on our financial statement disclosures.
3. Supplemental Disclosure of Cash Flow Information
Presented below are supplemental cash flow information (in thousands).
| Years Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| CASH PAID DURING THE YEAR FOR: | |||||||||||||||||
| Interest paid, net of amounts capitalized | $ | $ | $ | ||||||||||||||
Income taxes paid (net of refunds of $ | $ | $ | $ | ||||||||||||||
| Non-cash investing and financing transactions: | |||||||||||||||||
| Debt incurred in connection with acquisition of businesses | $ | $ | $ | ||||||||||||||
| Debt incurred in connection with purchase of property and equipment | $ | $ | $ | ||||||||||||||
| Debt exchanged in connection with the sale of a restaurant location | $ | $ | $ | ||||||||||||||
| Notes receivable received as proceeds from sale of assets | $ | $ | $ | ||||||||||||||
| Issuance of shares of common stock for acquisition of business: | |||||||||||||||||
| Number of shares | |||||||||||||||||
| Fair value at acquisition date | $ | $ | $ | ||||||||||||||
| Adjustment to operating lease right-of-use assets related to new and renewed leases | $ | $ | $ | ||||||||||||||
| Adjustment to operating lease liabilities related to new and renewed leases | $ | $ | $ | ||||||||||||||
| Unpaid excise tax on stock repurchases | $ | $ | $ | ||||||||||||||
| Unpaid liabilities on capital expenditures | $ | $ | $ | ||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
4. Segment Information
The Company owns and operates adult nightclubs and Bombshells Restaurants and Bars. The Company has identified such segments based on how the chief operating decision maker assigns management responsibility, how financial information is regularly reviewed, the nature of the Company’s products, services and costs, regulatory environments, and how resources are allocated. There are no major distinctions in geographical areas served as all operations are in the United States. The Company's chief operating decision maker is its chief executive officer. The Company measures segment profit (loss) as income (loss) from operations. Segment assets are those assets controlled by each reportable segment. The Other category below includes our media and energy drink divisions that are not significant to the consolidated financial statements.
Below is the financial information related to the Company’s reportable segments (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Total | Nightclubs | Bombshells | Total | Nightclubs | Bombshells | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Third party | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Intersegment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other revenues, including intersegment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment revenues | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consolidated revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of goods sold, including intersegment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and wages | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling, general, and administrative, including intersegment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment and other charges, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other segment items | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment income (loss) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of segment income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (loss) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income (expense), net | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment income | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unallocated corporate overhead | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated income before income taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
4. Segment Information – continued
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Total | Nightclubs | Bombshells | Total | Nightclubs | Bombshells | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Segment capital expenditures | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation to consolidated capital expenditures | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other operating segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unallocated corporate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated capital expenditures | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment assets - end of year | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation to consolidated total assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other operating segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unallocated corporate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated total assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||
General corporate overhead include corporate salaries, health insurance and social security taxes for officers, legal, accounting and information technology employees, corporate taxes and insurance, legal and accounting fees, unallocated self-insurance reserve, depreciation and other corporate costs such as automobile and travel costs. Management considers these to be non-allocable costs for segment purposes.
Certain real estate assets previously wholly assigned to Bombshells have been subdivided and allocated to other future development or investment projects. Accordingly, those asset costs have been transferred out of the Bombshells segment.
5. Revenues
Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 4), are shown below (in thousands).
| 2025 | |||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Total | ||||||||||||||||||||
| Sales of alcoholic beverages | $ | $ | $ | $ | |||||||||||||||||||
| Sales of food and merchandise | |||||||||||||||||||||||
| Service revenues | |||||||||||||||||||||||
| Other revenues | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Recognized at a point in time | $ | $ | $ | $ | |||||||||||||||||||
| Recognized over time | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
5. Revenues - continued
| 2024 | |||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Total | ||||||||||||||||||||
| Sales of alcoholic beverages | $ | $ | $ | $ | |||||||||||||||||||
| Sales of food and merchandise | |||||||||||||||||||||||
| Service revenues | |||||||||||||||||||||||
| Other revenues | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Recognized at a point in time | $ | $ | $ | $ | |||||||||||||||||||
| Recognized over time | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Total | ||||||||||||||||||||
| Sales of alcoholic beverages | $ | $ | $ | $ | |||||||||||||||||||
| Sales of food and merchandise | |||||||||||||||||||||||
| Service revenues | |||||||||||||||||||||||
| Other revenues | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Recognized at a point in time | $ | $ | $ | $ | |||||||||||||||||||
| Recognized over time | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The Company does not have contract assets with customers. The Company’s unconditional right to consideration for goods and services transferred to the customer is included in receivables, net in our consolidated balance sheet. A reconciliation of contract liabilities with customers, included in accrued liabilities in our consolidated balance sheets, is presented below (in thousands):
| Balance at September 30, 2023 | Consideration Received (Refunded) | Recognized in Revenue | Balance at September 30, 2024 | Consideration Received | Recognized in Revenue | Balance at September 30, 2025 | |||||||||||||||||||||||||||||||||||
| Ad revenue | $ | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Expo revenue | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other (including franchise fees, see below) | ( | ( | |||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Contract liabilities with customers are included in accrued liabilities as unearned revenues in our consolidated balance sheets (see also Note 6), while the revenues associated with these contract liabilities are included in other revenues in our consolidated statements of income.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
5. Revenues - continued
On December 22, 2020, the Company signed a franchise development agreement with a group of private investors to open three Bombshells locations in San Antonio, Texas over a period of five years , and the right of first refusal for three more locations in Corpus Christi, New Braunfels, and San Marcos, all in Texas. Upon execution of the agreement, the Company collected $75,000 in development fees representing 100 % of the initial franchise fee of the first restaurant and 50 % of the initial franchise fee of the second restaurant. The first Bombshells franchised location opened in June 2022. On May 2, 2022, the Company signed a franchise development agreement with a private investor to open three Bombshells locations in the state of Alabama over a period of five years . Upon execution of the agreement, the Company received $50,000 in development fees representing 100 % of the initial franchise fee of the first restaurant. In February 2023, the Company purchased the franchised Bombshells unit in San Antonio, Texas, and in September 2024, was sold back to members of the former franchisee group. See Note 16.
6. Selected Account Information
The components of receivables, net are as follows (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Credit card receivables | $ | $ | |||||||||
| Income tax refundable | |||||||||||
| ATM in-transit | |||||||||||
| Current portion of notes receivable | |||||||||||
Other (net of allowance for doubtful accounts of $ | |||||||||||
| Total receivables, net | $ | $ | |||||||||
Notes receivable consist primarily of secured promissory notes executed between the Company and various buyers of our businesses and assets with interest rates ranging from 6 % to 9 % per annum and having original terms ranging from 1 to 20 years.
The components of prepaid expenses and other current assets are as follows (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Prepaid insurance | $ | $ | |||||||||
| Prepaid legal | |||||||||||
| Prepaid taxes and licenses | |||||||||||
| Prepaid rent | |||||||||||
| Other | |||||||||||
| Total prepaid expenses and other current assets | $ | $ | |||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
6. Selected Account Information - continued
The components of accrued liabilities are as follows (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Payroll and related costs | $ | $ | |||||||||
| Property taxes | |||||||||||
| Sales and liquor taxes | |||||||||||
| Insurance | |||||||||||
| Legal fees | |||||||||||
| Interest | |||||||||||
| Patron tax | |||||||||||
| Lawsuit settlement | |||||||||||
| Construction in progress | |||||||||||
| Estimated self-insurance liability | |||||||||||
| Unearned revenues | |||||||||||
| Other | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
The components of other long-term liabilities are as follows (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Estimated self-insurance liability | $ | $ | |||||||||
| Advances from creditors | |||||||||||
| Other | |||||||||||
| Total other long-term liabilities | $ | $ | |||||||||
The components of selling, general and administrative expenses are as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Taxes and permits | $ | $ | $ | ||||||||||||||
| Advertising and marketing | |||||||||||||||||
| Supplies and services | |||||||||||||||||
| Insurance | |||||||||||||||||
| Lease | |||||||||||||||||
| Legal | |||||||||||||||||
| Utilities | |||||||||||||||||
| Charge cards fees | |||||||||||||||||
| Security | |||||||||||||||||
| Accounting and professional fees | |||||||||||||||||
| Repairs and maintenance | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Other | |||||||||||||||||
| Total selling, general, and administrative expenses | $ | $ | $ | ||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
6. Selected Account Information - continued
The components of impairments and other charges, net are as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Impairment of assets | $ | $ | $ | ||||||||||||||
| Settlement of lawsuits | |||||||||||||||||
| Gain on sale of businesses and assets | ( | ( | ( | ||||||||||||||
| Gain on insurance | ( | ( | ( | ||||||||||||||
| Total impairments and other charges, net | $ | $ | $ | ||||||||||||||
7. Property and Equipment
Property and equipment consisted of the following (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Equipment | |||||||||||
| Furniture | |||||||||||
| Total property and equipment | |||||||||||
| Less accumulated depreciation and impairment | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Included in buildings and leasehold improvements above are construction-in-progress amounting to $7.9 million and $15.0 million as of September 30, 2025, and 2024, respectively, which are mostly related to Bombshells development projects.
Depreciation expense was approximately $12.7 million, $12.9 million, and $11.6 million for fiscal years 2025, 2024, and 2023, respectively. Impairment loss for property and equipment, including those later reclassified to assets held for sale, was $1.6 million, $10.6 million, and $58,000 for fiscal 2025, 2024, and 2023, respectively.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
8. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Indefinite useful lives: | |||||||||||
| Goodwill | $ | $ | |||||||||
| Licenses | |||||||||||
| Tradename and domain name | |||||||||||
| Total goodwill and other intangibles with indefinite lives | |||||||||||
| Amortization Period | |||||||||||||||||
| Definite useful lives: | |||||||||||||||||
| Discounted leases | Lease term | ||||||||||||||||
| Non-compete agreements | |||||||||||||||||
| Software | |||||||||||||||||
| Licenses | Lease term | ||||||||||||||||
| Leases acquired in-place | Lease term | ||||||||||||||||
| Total other intangibles with definite lives | |||||||||||||||||
| Total goodwill and other intangible assets | $ | $ | |||||||||||||||
Substantially all of our goodwill and other intangible assets belong to our Nightclubs segment.
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Definite- Lived Intangibles | Indefinite- Lived Intangibles | Goodwill | Definite- Lived Intangibles | Indefinite- Lived Intangibles | Goodwill | ||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Acquisitions | |||||||||||||||||||||||||||||||||||
| ( | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Dispositions | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Amortization | ( | — | — | ( | — | — | |||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
8. Goodwill and Other Intangible Assets - continued
Definite-lived intangible assets consist of the following (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Licenses | $ | $ | |||||||||
| Software | |||||||||||
| Leases acquired in-place | |||||||||||
| Discounted leases | |||||||||||
| Non-compete agreements | |||||||||||
| Distribution agreements | |||||||||||
| Total definite-lived intangibles | |||||||||||
| Less accumulated amortization and impairment | ( | ( | |||||||||
| Definite-lived intangibles, net | $ | $ | |||||||||
As of September 30, 2025 and 2024, the accumulated impairment balance of indefinite-lived intangibles was $32.6 million and $28.8 million, respectively, while the accumulated impairment balance of goodwill was $34.3 million and $34.3 million, respectively. As of September 30, 2025 and 2024, the gross amount of goodwill amounted to $97.0 million and $96.2 million, respectively. Future amortization expense related to definite-lived intangible assets that are subject to amortization at September 30, 2025 is: 2026 - $2.3 million; 2027 - $2.2 million; 2028 - $1.5 million; 2029 - $1.5 million; 2030 - $1.5 million; and thereafter - $8.7 million.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
9. Debt
Debt consisted of the following (in thousands):
| September 30, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
Note payable at | (b)(1)(4) | ||||||||||||||||
Note payable at | (b)(1) | ||||||||||||||||
Note payable at | (c) (2) | ||||||||||||||||
Note payable at | *(a)(3) | ||||||||||||||||
Notes payable at | (d)(5)(22) | ||||||||||||||||
Notes payable at | (d)(5)(22) | ||||||||||||||||
Notes payable at | (d)(5)(22) | ||||||||||||||||
Note payable at | (a)(6) | ||||||||||||||||
Note payable at | (b)(6) | ||||||||||||||||
Note payable at | (b)(6) | ||||||||||||||||
Note payable at | (b)(6) | ||||||||||||||||
Note payable at | (b)(7) | ||||||||||||||||
Note payable at | *(a)(8) | ||||||||||||||||
Note payable at | *(a)(9) | ||||||||||||||||
Note payable at | (b)(10) | ||||||||||||||||
Note payable at | (b)(10) | ||||||||||||||||
Note payable at | (b)(11) | ||||||||||||||||
Note payable at | (b)(12) | ||||||||||||||||
Note payable at | (a)(12) | ||||||||||||||||
Note payable at | *(a)(13) | ||||||||||||||||
Note payable at | (c)(14) | ||||||||||||||||
Note payable initially at | *(a)(15) | ||||||||||||||||
Note payable at | (a)(16) | ||||||||||||||||
Note payable initially at | *(a)(17) | ||||||||||||||||
Note payable at | *(a)(18) | ||||||||||||||||
Notes payable at | (a)(b)(20) | ||||||||||||||||
Note payable initially at | (d)(19)(27) | ||||||||||||||||
Note payable initially at | *(a)(21) | ||||||||||||||||
Note payable at | (a)(23) | ||||||||||||||||
Note payable at | (a)(24) | ||||||||||||||||
Note payable at | *(a)(25) | ||||||||||||||||
Note payable at | (b)(26) | ||||||||||||||||
Notes payable at | (b)(28)(29) | ||||||||||||||||
| Total debt | |||||||||||||||||
| Less unamortized debt discount and issuance costs | ( | ( | |||||||||||||||
| Less current portion | ( | ( | |||||||||||||||
| Total long-term portion of debt, net | $ | $ | |||||||||||||||
*These commercial bank debts are guaranteed by the Company’s former CEO. See Note 18.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
9. Debt - continued
Following is a summary of long-term debt at September 30 (in thousands):
| 2025 | 2024 | ||||||||||
| (a) Secured by real estate | $ | $ | |||||||||
| (b) Secured by stock in subsidiary | |||||||||||
| (c) Secured by other assets | |||||||||||
| (d) Unsecured | |||||||||||
| $ | $ | ||||||||||
(1)On May 8, 2017, in relation to the Scarlett’s acquisition, the Company executed two promissory notes with the sellers: (i) a 5 % short-term note for $5.0 million payable in lump sum after six months from closing date and (ii) a 12-year amortizing 8 % note for $15.6 million. The 12-year note is payable $168,343 per month, including interest. The Company has amended the $5.0 million short-term note payable several times, which has a remaining balance of $3.0 million, extending the maturity date and increasing the interest rate. Presently, the maturity date is October 1, 2027 and the interest rate is 8 % for its remaining term.
(2)On December 7, 2017, the Company borrowed $7.1 million from a lender to purchase an aircraft at 5.99 % interest. The transaction was partly funded by trading in an aircraft that the Company owned with a carrying value of $3.4 million, with an assumption of the old aircraft’s note payable liability of $2.0 million. The aircraft note is payable in 15 years with monthly payments of $59,869 , which includes interest. In March 2020, this loan was extended to September 2033.
(3) On September 30, 2021, we entered into a $99.1 million term loan refinancing $85.7 million of existing bank and seller-financed real estate debt and to provide $12.3 million in cash that will be used to pay off existing high-interest unsecured debt (“September 2021 Refinancing Note”), enabling those creditors to provide financing for the acquisition of 11 clubs and related real estate in fiscal 2022. The $99.1 million note has a term of 10 years with an initial interest rate of 5.25 % per annum for the first five years , then adjusted to a rate equal to the then weekly average yield of U.S. Treasury Securities plus 350 basis points, with a floor rate of 5.25 %. The note is payable in monthly payments of principal and interest of $668,051 , based on a 20-year amortization period, with the balance paid at maturity. In connection with the transaction, we wrote off to interest expense approximately $103,000 of unamortized debt issuance costs related to the paid-off debts. We also paid approximately $1.0 million in loan costs, approximately $567,000 of which is capitalized and will be amortized together with the remaining unamortized debt issuance costs of some of the existing refinanced debts for the term of the new note using the effective interest method. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
(4) On October 12, 2021, the Company amended the $5.0 million short-term note payable related to the Scarlett’s acquisition in May 2017, which had a balance of $3.0 million as of the amendment date, extending the maturity date to October 1, 2027. The amendment did not have an impact in the Company’s results of operations and cash flows.
(5) On October 12, 2021, we closed on a debt financing transaction with 28 investors for unsecured promissory notes with a total principal amount of $17.0 million, all of which bear interest at a rate of 12 % per annum. Of this amount, $9.5 million are promissory notes, payable interest only monthly (or quarterly) in arrears, with a final lump sum payment of principal and accrued and unpaid interest due on October 1, 2024. The remaining amount of the financing is $7.5 million in promissory notes, payable in monthly payments of principal and interest based on a 10-year amortization period, with the balance of the entire principal amount together with all accrued and unpaid interest due and payable in full on October 12, 2024. Included in the $17.0 million borrowing are two notes for $500,000 and $150,000 borrowed from related parties (see Note 18) and two notes for $500,000 and $300,000 borrowed from two non-officer employees in which the terms of the notes are the same as the rest of the lender group. See the October 25, 2023 extension of the term of the promissory notes, below.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
9. Debt - continued
(6) On October 18, 2021, in relation to an acquisition in fiscal 2022, the Company executed four seller-financed promissory notes. The first promissory note was a 10-year $11.0 million 6 % note payable in 120 equal monthly payments of $122,123 in principal and interest. The second promissory note was a 20-year $8.0 million 6 % note payable in 240 equal monthly payments of $57,314 in principal and interest. The third promissory note was a 10-year $1.2 million 5.25 % note payable in monthly payments of $8,086 in principal and interest based on a 20-year amortization period, with the balance payable at maturity date. The fourth note was a 20-year $1.0 million 6 % note payable in 240 equal monthly payments of $7,215 in principal and interest.
(7) On November 8, 2021, in relation to an acquisition in fiscal 2022, the Company executed a $1.0 million 7-year promissory note with an interest rate of 4.0 % per annum. The note is payable $13,669 per month, including principal and interest.
(8) On January 25, 2022, the Company borrowed $18.7 million from a bank lender for working capital purposes by executing a 10-year promissory note with an initial interest rate of 5.25 % per annum to be adjusted after five years to a rate equal to the weekly average yield on U.S. Treasury securities plus 3.98 % with a floor of 5.25 %. The note is payable in monthly payments of $126,265 in principal and interest to be adjusted after five years . The promissory note is secured by eleven real estate properties and is personally guaranteed by the Company's former CEO, Eric Langan (see Note 18). After the 10-year term, the remaining balance of principal and interest are payable at maturity date. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
(9) On March 1, 2022, the Company borrowed $2.6 million from a bank lender in relation to a purchase of real estate in fiscal 2022. The 21-year promissory note has an initial interest rate of 4.25 % per annum, repriced after five years and then again annually to prime plus 1 % with a floor rate of 4.25 %. The note is payable interest only during the first 12 months; then the next 48 months with $16,338 equal monthly payments of principal and interest; then the next 191 months at an equal monthly payment based on a 20-year amortization; with the balance of principal and interest payable at the 252nd month.
(10) On May 2, 2022, in relation to a club acquisition in fiscal 2022, the Company executed two seller-financed notes totaling $11.0 million, comprised of (1) $6.0 million under a 10 % three-year promissory note payable in 35 equal monthly payments of $79,290 in principal and interest based on a ten-year amortization schedule, with a balloon payment for the remaining principal plus accrued interest due at maturity and (2) $5.0 million under a 10 % ten-year interest-only promissory note payable in 119 equal monthly payments of $41,667 in interest, with a balloon payment of the total $5.0 million in principal plus accrued interest due at maturity.
(11) On July 21, 2022, the Company executed an $800,000 6 % seller-financed promissory note in relation to an acquisition of a club in Odessa, Texas, in fiscal 2022. The promissory note matures in July 2029 and is payable in 84 equal monthly installments of $11,687 of principal and interest.
(12) On July 27, 2022, in relation to an acquisition of a club in Hallandale Beach, Florida, in fiscal 2022, the Company executed two seller-financed promissory notes: (1) $10.0 million 6 % ten-year promissory note payable in 120 equal monthly payments of $111,020 in principal and interest, and (2) $5.0 million 6 % ten-year promissory note payable in 120 equal monthly payments of $55,510 in principal and interest.
(13) On August 18, 2022, in relation to a purchase of real estate for a future Bombshells location amounting to $2.1 million in fiscal 2022, the Company borrowed $1.6 million from a bank lender. The 5.25 % mortgage note is payable interest-only for eleven months and on its August 18, 2023 maturity date payable with the entire principal balance plus accrued interest. This note has been amended in August 2024 to an amortizing 7.79 % note with monthly installments of $14,959 of principal and interest and maturing in August 2039. The fixed 7.79 % interest for the first five years will then be adjusted annually to Wall Street Journal prime plus 0.25 %. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
9. Debt - continued
(14) On September 23, 2022, in connection with the purchase of an aircraft worth $3.5 million in fiscal 2022, the Company entered into a financing transaction for $2.8 million. The financing agreement bears an interest of 4.79 % per annum and payable in 240 monthly installments of principal and interest amounting to $18,298 .
(15) On October 10, 2022, in relation to a real estate purchase (see Note 16), the Company borrowed $2.3 million from a bank lender. The 18-month promissory note bore an initial interest rate of 6 % per annum adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5 % with a floor of 6 %. The promissory note was payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. The Company paid approximately $26,000 in debt issuance cost at closing. This promissory note was secured by the purchased real estate property.
(16) On October 26, 2022, in relation to a club acquisition (see Note 16), the Company executed a promissory note for $5.0 million with the seller. The 6 % 15-year promissory note is payable in 180 equal monthly payments of $42,193 in principal and interest. This promissory note is secured by the purchased real estate property.
(17) On November 18, 2022, in relation to a real estate purchase on September 12, 2022 (see Note 16), the Company borrowed $1.5 million from a bank lender. The 18-month promissory note bears an initial interest rate of 6 % per annum to be adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5 % with a floor of 6 %. The promissory note is payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. This promissory note is secured by the purchased real estate property. This note has been amended in August 2024 to an amortizing 7.79 % note with monthly installments of $14,248 of principal and interest and maturing in August 2039. The fixed 7.79 % interest for the first five years will then be adjusted annually to Wall Street Journal prime plus 0.25 %. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
(18) On December 20, 2022, the Company executed a promissory note for $3.3 million with a bank lender in relation to a purchase of a food hall property (see Note 16). The 6.67 % five-year promissory note is payable in 59 equal monthly installments of $22,805 in principal and interest, with the balance of principal and accrued interest payable at maturity. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
(19) On March 9, 2023, the Company closed a $10.0 million line-of-credit facility with a lender bank evidenced by a revolving promissory note, with an initial draw of $10.0 million at closing. The facility has an initial term of 24 months with a variable interest rate equal to the Wall Street Journal prime rate plus 1 %. On such date that the principal balance is repaid to an amount less than $5.0 million, the facility's revolver feature is activated where the Company may draw from the remaining availability up to a maximum of $5.0 million. The Company shall also pay a non-usage fee of 0.5 % based on the amount by which the average outstanding balance for the prior twelve months was less than $3.0 million or the amount by which the total aggregate advances during the prior twelve months totaled less than $3.0 million. The Company paid $115,000 in debt issuance costs, which is recorded as deferred charges to be amortized on a straight-line basis over 24 months. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan, including a compensating balance requirement of $3.0 million and a minimum tangible net worth requirement of $20.0 million. The compensating balance requirement does not contractually or legally restrict the withdrawal or use of cash.
(20) On March 16, 2023, in relation to the acquisition of five clubs with associated real estate, automated teller machines, and intellectual property (see Note 16), the Company executed nine secured promissory notes with a total principal amount of $25.5 million. Each of the nine promissory notes have an interest rate of 7 % per annum with a term of 10 years, payable in arrears in 120 equal monthly payments of principal and interest amounting to $296,077 per month in the aggregate. The holder of the $5.0 million promissory note related to the real estate properties may call due from the Company a principal payment of $1.0 million once in every calendar year.
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Notes to Consolidated Financial Statements
9. Debt - continued
(21) On June 18, 2023, in relation to a purchase of a retail parcel in a condominium property (see Note 16), the Company executed a promissory note for $2.9 million with a bank lender. The 7.12 % five-year promissory note is payable in monthly installments of $20,654 in principal and interest, with the balance of principal and accrued interest payable at maturity. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
(22) On October 25, 2023, the Company entered into a debt modification transaction under which 26 investors holding a total principal amount of $15.7 million in unsecured promissory notes agreed to extend the maturity dates of such notes, with no other changes to the terms and conditions of the original promissory notes, which original promissory notes were issued in October 2021 and had original maturity dates in October 2024. The transaction was effected by the 26 investors returning for cancellation their original promissory notes, with us issuing new amended and restated promissory notes to such investors. The original promissory notes will be deemed cancelled as of the end of the day on October 31, 2023, and the new amended promissory notes will have an original issue date, and be deemed effective, as of November 1, 2023.
Other than the extension of the maturity dates, there were no other changes to the terms and conditions of the original promissory notes (except for the reduction in principal, as described below, and the corresponding reduction in monthly installments of principal and interest). The new amended notes will continue to bear interest at the rate of 12 % per annum. Of the new amended promissory notes, $9.1 million are payable interest-only monthly (or quarterly) in arrears, with a final lump sum payment of principal and accrued and unpaid interest due on October 1, 2026. The remaining $6.6 million in promissory notes are payable in monthly payments of principal and interest based on a 10 -year amortization period, with the balance of the entire principal amount together with all accrued and unpaid interest due and payable in full on November 1, 2027. The original promissory notes that were returned and cancelled as consideration for the issuance of the $6.6 million in new amended promissory notes had an original principal amount of $7.5 million in October 2021. One promissory note with principal amounting to $500,000 was paid off on September 30, 2025 (see Note 18). The remaining promissory notes were extended on October 1, 2025 (see Note 19).
(23) On November 17, 2023, the Company closed on a construction loan agreement with a bank lender for a total amount of $7.2 million bearing an interest rate of 8.5 % per annum for the construction of a Bombshells restaurant in Rowlett, Texas. The promissory note is payable in 120 monthly payments, the first 18 months of which will be interest-only. The succeeding 101 monthly payments will be payable in equal installments of $63,022 in principal and interest, and the remaining balance in principal and accrued interest payable on the 120th month. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
(24) On April 30, 2024, the Company entered into a term loan with a bank lender for $20.0 million for additional working capital. The loan has a 10 -year term and an interest rate of 8.25 % per annum for the first five years , after which the interest rate is to be adjusted to a rate equal to the then weekly average yield on U.S. Treasury Securities plus 362 basis points, with a 6.5 % floor. The promissory note is payable in equal monthly installments of $170,408 for principal and interest, based on a 20 -year amortization period, during the first five years, after which the monthly payments shall adjust based on the new interest rate to continue until April 30, 2034, at which time the remaining principal amount and accrued interest shall be paid. The Company paid $356,000 in debt issuance costs at the time of closing. There are certain financial and non-financial covenants with which the Company is to be in compliance with related to this loan, including a minimum tangible net worth requirement of $25.0 million.
(25) On November 26, 2024, the Company converted a bank loan secured on October 10, 2022 to purchase real property into a construction loan with the same bank lender. The old loan had a remaining principal balance of $2.4 million. The new construction loan has maximum principal limit of $6.3 million and has a term of 204 months. The loan bears an interest rate of 6.99 % per annum for the first five years after which it will adjust annually to a new rate equal to the then-current Wall Street Journal Prime Rate plus 0.25 % per annum, with a floor of 6.99 % per annum. The loan is payable interest-only during the first 24 months, then payable for the next 36 months in equal installments of $60,162 in principal and interest, after which will be payable based on the adjusted interest rate for the next 143 months, with the remaining principal and accrued interest payable at maturity. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.
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Notes to Consolidated Financial Statements
9. Debt - continued
(26) On January 21, 2025, in relation to a club acquisition (see Note 16), the Company executed a promissory note for $5.0 million with the seller. The 8 % promissory note is payable in 59 monthly installments of $67,718 in principal and interest, with the balance of principal and accrued interest payable at maturity.
(27) On February 26, 2025, the Company extended its line-of-credit facility (see March 9, 2023, transaction above) with a lender bank for a maximum availability of $5.0 million to mature on March 9, 2027. All other terms and conditions in the original line-of-credit remain unchanged.
(28) On April 7, 2025, in relation to a club acquisition (see Note 16), the Company executed a seller-financed promissory note for $2.5 million bearing an interest of 7 % per annum. The promissory note matures in five years and is payable in equal monthly installments of $49,503 in principal and interest. The promissory note is secured by the assets included in the club acquisition.
(29) On June 7, 2025, in relation to a club acquisition (see Note 16), the Company executed a seller-financed promissory note for $500,000 bearing an interest of 7 % per annum. The promissory note matures in five years and is payable in equal monthly installments of $9,901 in principal and interest. The promissory note is secured by the assets included in the club acquisition.
Future maturities of debt obligations as of September 30, 2025, consist of the following (in thousands):
| Regular Amortization | Balloon Payments | Total Payments | |||||||||||||||
| 2026 | $ | $ | $ | ||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| 2029 | |||||||||||||||||
| 2030 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
10. Income Taxes
Income tax expense consisted of the following (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State and local | |||||||||||||||||
| Total current income tax expense | |||||||||||||||||
| Deferred | |||||||||||||||||
| Federal | ( | ( | ( | ||||||||||||||
| State and local | ( | ( | |||||||||||||||
| Total deferred income tax expense (benefit) | ( | ( | ( | ||||||||||||||
| Total income tax expense (benefit) | $ | $ | ( | $ | |||||||||||||
The Company and its subsidiaries do not operate in tax jurisdictions outside of the United States.
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Notes to Consolidated Financial Statements
10. Income Taxes - continued
Income tax expense (benefit) differs from the “expected” income tax expense computed by applying the U.S. federal statutory rate to earnings before income taxes for the years ended September 30 as a result of the following (dollars in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | %(2) | Amount | % | ||||||||||||||||||||||||||||||
| Federal statutory income tax expense | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
State and local income taxes, net of federal benefit(1) | % | % | % | ||||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Goodwill impairment | % | % | % | ||||||||||||||||||||||||||||||||
| Section 162(m) excess compensation | % | % | % | ||||||||||||||||||||||||||||||||
| Meals and entertainment | % | % | % | ||||||||||||||||||||||||||||||||
| Loss (gain) on sale of subsidiary stock | % | % | % | ||||||||||||||||||||||||||||||||
| Other nontaxable or nondeductible items | % | % | % | ||||||||||||||||||||||||||||||||
| Change in valuation allowance | % | % | % | ||||||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| FICA tip credit | ( | ( | % | ( | ( | % | ( | ( | % | ||||||||||||||||||||||||||
| Work Opportunity Tax credits | ( | ( | % | ( | ( | % | ( | ( | % | ||||||||||||||||||||||||||
| Expiration of capital loss carryforwards | % | % | % | ||||||||||||||||||||||||||||||||
| Stock-based compensation forfeiture | % | % | % | ||||||||||||||||||||||||||||||||
| Return-to-provision and prior-period adjustments | % | % | ( | ( | % | ||||||||||||||||||||||||||||||
Other(3) | % | % | % | ||||||||||||||||||||||||||||||||
| Total income tax expense (benefit) | $ | % | $ | ( | ( | % | $ | % | |||||||||||||||||||||||||||
(1) State taxes in New York, Florida, and Texas make up the majority of the tax effect in this category.
(2) For 2024, due to the low pretax income, insignificant dollar amounts appear to present greater than threshold percentages.
(3) Includes items that individually fail to meet the 5% of federal rate threshold.
The effective income tax rate difference from the statutory federal corporate tax rate of 21% comes from offsetting impact of state income tax, net of federal benefit, nontaxable and nondeductible items, changes in the deferred tax asset valuation allowance, tax credits, and return-to-provision adjustments (which are included in the related reconciling items previously mentioned). The effective income tax rate for fiscal 2024 was also affected by the low pretax income that caused a high offsetting rate for tax credits, whose dollar value does not change based on pretax income.
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Notes to Consolidated Financial Statements
10. Income Taxes - continued
Total income taxes paid, net of refunds, for the fiscal years ended September 30, in the following jurisdictions are presented below (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State and local | |||||||||||||||||
| Texas | |||||||||||||||||
| New York | |||||||||||||||||
| Florida | |||||||||||||||||
| Illinois | |||||||||||||||||
| Colorado | |||||||||||||||||
| Other* | |||||||||||||||||
| Total income taxes paid, net of refunds | $ | $ | $ | ||||||||||||||
* Includes tax jurisdictions that individually fail to meet the 5% threshold in all periods presented.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | $ | |||||||||
| Capital loss carryforwards | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Accrued expenses | |||||||||||
| Self-insurance reserve | |||||||||||
| Stock-based compensation | |||||||||||
| Other | |||||||||||
| Valuation allowance | ( | ( | |||||||||
| Total deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Intangibles | ( | ( | |||||||||
| Property and equipment | ( | ( | |||||||||
| Prepaid expenses | ( | ( | |||||||||
| Total deferred tax liabilities | ( | ( | |||||||||
| Net deferred tax liability | $ | ( | $ | ( | |||||||
At September 30, 2025, we had net operating loss carryforwards of $137,000 for federal income tax and $13,000 for state income tax with indefinite carryforward periods. We also had net operating loss carryforwards of $912,000 for state and local income taxes with a 20-year carryforward period. The state and local tax net operating loss carryforwards will begin to expire in 2028 if unused prior to that time.
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Notes to Consolidated Financial Statements
10. Income Taxes - continued
The Company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. We recognize accrued interest related to unrecognized tax benefits as a component of accrued liabilities. We recognize penalties related to unrecognized tax benefits as a component of selling, general and administrative expenses, and recognize interest accrued related to unrecognized tax benefits in interest expense.
The full balance of uncertain tax positions, if recognized, would affect the Company’s annual effective tax rate, net of any federal tax benefits. The Company does not have any uncertain tax position as of September 30, 2025, and 2024.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. The Company ordinarily goes through various federal and state reviews and examinations for various tax matters. Fiscal year ended September 30, 2022, and subsequent years remain open to federal tax examination.
On July 4, 2025, President Trump signed into law the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" (the "Act") and commonly referred to as the One Big Beautiful Bill Act. Among other things, the Act extends certain expiring, and in some cases expired, provisions of the 2017 Tax Cuts and Jobs Act. The Act also adjusted a number of provisions affecting businesses that were subject to sunsets, phase-outs, or phase-ins that would have taken effect in the absence of action by Congress or that have already taken effect. The Company has reviewed the changes from the Act and determined that any impact would be immaterial.
11. Commitments and Contingencies
Legal Matters
Indemnity Insurance Corporation
As previously reported, the Company and its subsidiaries were insured under a liability policy issued by Indemnity Insurance Corporation, RRG (“IIC”) through October 25, 2013. The Company and its subsidiaries changed insurance companies on that date.
On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.
On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must have been filed with the Receiver before the close of business on January 16, 2015, and that all pending lawsuits involving IIC as the insurer were further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer have insurance coverage under the liability policy with IIC. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100 % of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As of September 30, 2025, we have no remaining unresolved claims out of the original 71 claims.
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Notes to Consolidated Financial Statements
11. Commitments and Contingencies - continued
New York Indictment and Related Matters
On or about May 29, 2024, search warrants were executed on the Company’s corporate headquarters in Houston, Texas, three separate clubs in New York, New York, and for the mobile phone of three individuals (including two executive officers and a non-executive corporate employee) by the New York State Attorney General (“NY AG”) and the New York State Department of Taxation and Finance (“NY DTF”). On June 7, 2024, the Company received a subpoena from the NY AG requesting documents and other information with respect to certain clubs in New York and Florida. The Company cooperated with the NY AG during its investigation. As a result of this investigation, a non-executive corporate employee was placed on administrative leave during the pendency of an internal review process.
On or about September 16, 2025, the Company, three subsidiaries, and five employees, including two executive officers, were arraigned in connection with an indictment filed by the NY AG in which the defendants were variously charged with committing the crimes of Criminal Tax Fraud in the First Degree in violation of Tax Law §1806, a class B felony; Bribery in the Second Degree in violation of Penal Law §200.03, a class C felony; Criminal Tax Fraud in the Second Degree in violation of Tax Law §1805, a class C felony; Criminal Tax Fraud in the Third Degree in violation of Tax Law §1804, a class D felony; Criminal Tax Fraud in the Fourth Degree in violation of Tax Law §1803, a class E felony; Conspiracy in the Fourth Degree in violation of Penal Law §105.10, a class E felony; and Offering a False Instrument for Filing in the First Degree in violation of Penal Law §175.35(1). According to the NY AG, "an investigation by the Office of the Attorney General revealed that RCI executives bribed an auditor with the NY DTF to avoid paying over $8 million in sales taxes to New York City and the state from 2010 to 2024."
On November 25, 2025, the board of directors convened and approved a resolution for Eric Langan and Bradley Chhay to step down as CEO and CFO of the Company, respectively, effective November 28, 2025. In the same meeting, the board nominated and approved the appointment of Travis Reese and Albert Molina as Interim President and CEO and Interim CFO, respectively. Messrs. Langan and Chhay remain employed with the Company and will be focusing on operational improvement and strategic efforts as Head of M&A and Head of Corporate Development, respectively. On January 29, 2026, Mr. Langan stepped down as Chairman of the Company’s board of directors. Mr. Langan was replaced by Mr. Reese as Chairman. Mr. Langan remains a member of the board of directors. The non-executive corporate employee mentioned above continues to be on administrative leave during the pendency of the indictment. The defendants entered a plea of not guilty to all of the charges and are vigorously defending themselves against the charges in court. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the indictment.
On or about May 20, 2025, the Company received a subpoena from the U.S. Securities and Exchange Commission ("SEC") seeking certain documents and information related to the NY AG investigation and NY DTF issues. The Company is cooperating with the SEC and its investigation. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the SEC investigation.
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Notes to Consolidated Financial Statements
11. Commitments and Contingencies - continued
Shareholder Class and Derivative Actions
In September 2025, a putative securities class action was filed against RCI Hospitality Holdings, Inc. and certain of its officers in the Southern District of Texas, Houston Division. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and 10b-5 promulgated thereunder based on alleged materially false and misleading statements made in the Company’s SEC filings and disclosures as they relate to the indictment filed by the NY AG and other related issues. The complaints seek unspecified damages, costs, and attorneys’ fees. This lawsuit is captioned Hernandez v. RCI Hospitality Holdings, Inc., et al. (filed September 21, 2025, naming the Company, Eric S. Langan, and Bradley Chhay). The various plaintiffs sought an order for the appointment of a lead plaintiff and to consolidate the purported class actions. An order has not yet been entered appointing a lead plaintiff or consolidating. The Company has not yet answered or otherwise responded to the complaint, but intends on moving to dismiss the operative pleading for failure to state a claim upon which relief can be granted. The Company intends to continue to vigorously defend against this action. This action is in its early stage, and a potential loss cannot yet be estimated.
On November 17, 2025, a shareholder derivative action was filed in Harris County District Court against officers and directors Eric S. Langan, Yura Barabash, Bradley Chhay, Luke Lirot, Elaine J. Martin, Arthur A. Priaulx, Travis Reese, and RCI Hospitality Holdings, Inc., as nominal defendant. The action alleges that the individual officers and directors made or caused the Company to make a series of materially false and/or misleading statements and omissions related to the indictment filed by the NY AG and other related issues and engaged in or caused the Company to, inter alia, fail to maintain internal controls over its business and financial reporting sufficient to ensure the accuracy of its public filings. The action asserts claims for breach of fiduciary duty and unjust enrichment. The complaint seeks injunctive relief, damages, restitution, costs, and attorneys’ fees. The case, Ayers v. Langan, et al., is in its early stage, and a potential loss cannot yet be estimated.
On March 2, 2026, a shareholder derivative action was filed in the Eleventh Division of the Texas Business Court against officers and directors Eric S. Langan, Yura Barabash, Bradley Chhay, Luke Lirot, Elaine J. Martin, Arthur A. Priaulx, Travis Reese, and Ahmed Anakar. The action alleges that the individual officers and directors breached their fiduciary duties by failing to adequately monitor issues related to the indictment filed by the NY AG and other related issues. The action asserts claims for breaches of fiduciary duties respectively owed by the directors and officers. The complaint seeks injunctive relief, damages, restitution, costs, and attorneys’ fees. The case, Taylor v. Langan, et al., is in its early stage, and a potential loss cannot yet be estimated.
Illinois BIPA Matter
On April 14, 2025, the Company's subsidiaries, RCI Management Services, Inc., Pooh Bah Enterprises, Inc., and RCI Dining Services (Harvey), Inc. (collectively, "Defendants") entered into a class action settlement agreement to resolve claims under the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seg., arising from the alleged collection of customer fingerprints at Rick's Cabaret in Chicago and Scarlett's Cabaret in Washington Park, Illinois. The settlement resolves two consolidated cases: Rapp et al. v. RCI Management Services, Inc. et al., Case No. 22LA0884 (St. Clair County, Illinois) and Loera v. Pooh Bah Enterprises, Inc., Case No. 2021CH04759 (Cook County, Illinois).
Under the terms of the agreement, and without admitting any liability, Defendants will provide a settlement fund valued at approximately $2.95 million, consisting of $1.25 million in cash and $1.7 million in VIP cards. The settlement includes payments to class members submitting valid claims, attorneys' fees of up to 40 % of the fund, incentive awards to named plaintiffs, and administrative costs. Any unclaimed funds remaining after payment of valid claims, fees, and costs will revert to the Defendants. The Company denies all allegations of wrongdoing. The settlement remains subject to final court approval.
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Notes to Consolidated Financial Statements
11. Commitments and Contingencies - continued
Other
On June 23, 2014, Mark H. Dupray and Ashlee Dupray filed a lawsuit against Pedro Antonio Panameno and our subsidiary, JAI Dining Services (Phoenix), Inc. (“JAI Phoenix”), in the Superior Court of Arizona for Maricopa County. The complaint alleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix and asserted claims against JAI Phoenix under theories of common law dram shop negligence and dram shop negligence per se. Following a jury trial, in April 2017, the court entered judgment in favor of the plaintiffs and awarded compensatory and punitive damages, allocating approximately $1.4 million in compensatory damages and $4.0 million in punitive damages to JAI Phoenix. JAI Phoenix filed post-trial motions, which were denied in August 2017, and subsequently filed a notice of appeal in September 2017. In June 2018, the Arizona Court of Appeals heard the matter and, on November 15, 2018, issued a decision vacating the jury’s verdict and remanding the case for a new trial.
The retrial was held in June 2025. The jury found Mr. Panameno 94 % responsible and JAI Phoenix 6 % responsible. The jury awarded total damages of $5.1 million and punitive damages of $125,000 . Based on the jury’s allocation of fault, JAI Phoenix is responsible for $332,884 of the total award. Under applicable law, plaintiffs retain the right to appeal; however, it is not known at this time whether an appeal will be filed, but if an appeal is filed, the Company will vigorously defend.
In March 2023, the New York State Department of Labor assessed a final judgment against one of our subsidiaries in a state unemployment tax matter for the years 2009-2022. The assessment of $2.8 million, which was recorded by the Company during the quarter ended March 31, 2023, was issued in final notice by the NY DOL after several appeals were denied by the Supreme Court of the State of New York, Appellate Division, Third Department (see Note 6). In September 2023, the NY DOL assessed another of our subsidiaries for approximately $280,000 on the same matter for the period January 2015 through June 2022. We recorded this latter assessment during the quarter ended September 30, 2023.
As set forth in the risk factors as disclosed in this report, the adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. While we take steps to ensure that our adult entertainers are deemed independent contractors, from time to time, we are named in lawsuits related to the alleged misclassification of entertainers. Claims are brought under both federal and where applicable, state law. Based on the industry standard, the manner in which the independent contractor entertainers are treated at the clubs, and the entertainer license agreements governing the entertainer’s work at the clubs, the Company believes that these lawsuits are without merit. Lawsuits are handled by attorneys with an expertise in the relevant law and are defended vigorously.
General
In the regular course of business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state, and local environmental, labor, health and safety laws and regulations. We assess the probability that we could incur liability in connection with certain of these lawsuits. Our assessments are made in accordance with generally accepted accounting principles, as codified in ASC 450-20, and is not an admission of any liability on the part of the Company or any of its subsidiaries. In certain cases that are in the early stages and in light of the uncertainties surrounding them, we do not currently possess sufficient information to determine a range of reasonably possible liability. In matters where there is insurance coverage, in the event we incur any liability, we believe it is unlikely we would incur losses in connection with these claims in excess of our insurance coverage.
Settlement of lawsuits for the years ended September 30, 2025, 2024, and 2023 total $3.9 million, $520,000 , and $3.8 million, respectively. As of September 30, 2025 and 2024, the Company has accrued $4.2 million and $2.0 million in accrued liabilities, respectively, related to settlement of lawsuits.
Lease Commitments
See Note 12.
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Notes to Consolidated Financial Statements
11. Commitments and Contingencies - continued
Self-insurance Liability
In fiscal 2025, the Company started self-insuring a significant portion of expected losses under its general liability and liquor insurance programs due to increasingly prohibitive costs of such coverage from third-party insurers. The Company continues to purchase insurance for workers' compensation, property, auto, and business interruption, as well as the minimum insurance coverage where it is required by law for licensing requirements.
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Notes to Consolidated Financial Statements
11. Commitments and Contingencies - continued
We record a liability for unresolved claims and for an estimate of incurred but not reported claims including legal costs based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic conditions, the frequency and severity of claims development history, and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. We recorded estimated self-insurance expense amounting to $9.6 million during the fiscal year ended September 30, 2025. As of September 30, 2025, the Company has self-insurance liability amounting to $9.6 million.
12. Leases
The Company leases certain facilities and equipment under operating leases per ASC 842. These leases include renewal or termination options for varying periods which we deemed reasonably certain to exercise. This determination is based on our consideration of certain economic, strategic and other factors that we evaluate at lease commencement date and reevaluate throughout the lease term.
Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments and additional lease payments contingent on sales. The variable portion of lease payments is not included in our right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling, general and administrative expenses in our consolidated statement of income.
We have elected to apply the short-term lease exception for all underlying asset classes, which mainly includes equipment leases. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. We do not include significant restrictions or covenants in our lease agreements, and residual value guarantees are generally not included within our operating leases.
Future maturities of operating lease liabilities as of September 30, 2025 are as follows (in thousands):
| Principal Portion | Interest Portion | Total Payments | |||||||||||||||
| October 2025 - September 2026 | $ | $ | $ | ||||||||||||||
| October 2026 - September 2027 | |||||||||||||||||
| October 2027 - September 2028 | |||||||||||||||||
| October 2028 - September 2029 | |||||||||||||||||
| October 2029 - September 2030 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
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Notes to Consolidated Financial Statements
12. Leases – continued
Total lease expense under ASC 842 is included in selling, general and administrative expenses in our consolidated statement of income, except for sublease income which is included in other revenue, for the years ended September 30, 2025, 2024, and 2023 as follows (in thousands, except years and percentages):
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating lease expense – fixed payments | $ | $ | $ | ||||||||||||||
| Variable lease expense | |||||||||||||||||
Short-term equipment and other lease expense (includes $ | |||||||||||||||||
| Total lease expense, net | $ | $ | $ | ||||||||||||||
| Other information: | |||||||||||||||||
| Operating cash outflows from operating leases | $ | $ | $ | ||||||||||||||
| Weighted average remaining lease term | |||||||||||||||||
| Weighted average discount rate | % | % | % | ||||||||||||||
In relation to certain rent concessions that we received from certain of our lessors in view of the COVID-19 pandemic, we accounted for those rent concessions as deferral of payments as if the lease is unchanged. Any reduction in total lease expense during the period caused by either an extension of the lease term or a forgiveness of certain lease payments is accounted for as variable lease payment adjustments.
We recorded impairment charges of operating lease right-of-use assets amounting to $0 , $6.5 million, and $1.0 million during fiscal years 2025, 2024, and 2023, respectively.
We recorded third-party operating lease revenue 1.7 million, $1.7 million, and $1.8 million for fiscal 2025, 2024, and 2023, respectively. Minimum future base rentals are as follows: $1.5 million for 2026, $1.2 million for 2027, $1.0 million for 2028, $1.0 million for 2029, $423,000 for 2030, and $240,000 thereafter.
13. Stock-based Compensation
On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000 . The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each to six members of management subject to the approval of the 2022 Plan.
Stock-based compensation expense for fiscal 2025, 2024, and 2023, which is included in corporate segment selling, general and administrative expenses, amounted to $1.4 million, $1.9 million, and $2.6 million, respectively, with related tax benefit amounting to $121,000 , $444,000 , and $616,000 , respectively. As of September 30, 2025, we had unrecognized compensation cost amounting to $589,000 related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of approximately four months .
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Notes to Consolidated Financial Statements
13. Stock-based Compensation – continued
The February 9, 2022 stock options vest over four years with the first 20 % having vested on the approval of the 2022 Plan at the 2022 annual stockholders' meeting on August 23, 2022, and 20 % vesting on February 9 of each year thereafter, provided however that the options will be subject to earlier vesting under certain events set forth in the Plan, including without limitation a change in control. All of the options will expire, if not vested, at the end of five years . The weighted average grant-date fair value of the stock options was $31.37 . No
The following table summarizes information about stock option activity during fiscal 2025 under the 2022 Plan:
| Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Outstanding at September 30, 2024 | |||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | |||||||||||||||||||||||
| Forfeited | ( | $ | |||||||||||||||||||||
| Outstanding at September 30, 2025 | $ | $ | |||||||||||||||||||||
| Exercisable at September 30, 2025 | $ | $ | |||||||||||||||||||||
14. Employee Retirement Plan
The Company sponsors a Simple IRA plan (the “Plan”), which covers all of the Company’s corporate employees. The Plan allows corporate employees to contribute up to the maximum amount allowed by law, with the Company making a matching contribution of up to 3 % of the employee’s salary. Expenses related to matching contributions to the Plan approximated $280,000 , $280,000 , and $287,000 for the years ended September 30, 2025, 2024, and 2023, respectively.
15. Insurance Recoveries
We partially recovered and recognized a $327,000 gain related to a fire in one of our clubs in Fort Worth, Texas, during the fourth quarter of 2024. We wrote off the net carrying value of the assets destroyed in the said events and recorded corresponding recovery of losses or gains in as much as the insurers have paid us or where contingencies relating to the insurance claims have been resolved.
In relation to these casualty events, we recorded the following in our consolidated financial statements (in thousands):
| Included in | 2025 | 2024 | 2023 | ||||||||||||||||||||
| Consolidated statements of income – gain | |||||||||||||||||||||||
| Business interruption | $ | ( | $ | $ | |||||||||||||||||||
| Property | Impairments and other charges, net | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Consolidated statements of cash flows | |||||||||||||||||||||||
| Proceeds from business interruption insurance claims | Operating activity | $ | $ | $ | |||||||||||||||||||
| Proceeds from property insurance claims | Investing activity | $ | $ | $ | |||||||||||||||||||
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Notes to Consolidated Financial Statements
14. Insurance Recoveries – continued
The net property insurance gain/loss amount in fiscal 2025, 2024, and 2023 was net of assets written off and expenses amounting to $14,000 , $845,000 , and $9,000 , respectively.
16. Acquisitions and Dispositions
2023 Acquisitions
Lubbock Property
On October 10, 2022, the Company purchased real estate in Lubbock, Texas amounting to $3.4 million for a future Bombshells location. The Company paid $1.2 million in cash at closing and obtained bank financing for the $2.3 million remainder (see Note 9). The site includes extra land that will be listed for sale once the Bombshells unit is completed.
Heartbreakers Gentlemen's Club
On October 26, 2022, the Company completed the acquisition of a club in Dickinson, Texas for a total agreed acquisition price of $9.0 million (with an acquisition date fair value of $8.9 million based on certain legal contingencies that existed pre-acquisition). The acquisition includes (1) $2.5 million for the adult entertainment business covered in a stock purchase agreement paid fully in cash at closing and (2) $6.5 million for the real estate property covered in a real estate purchase agreement paid $1.5 million in cash at closing and $5.0 million under a 6 % 15-year promissory note (see Note 9). In the stock purchase agreement, the Company acquired 100 % of the capital stock of the company which owned the adult entertainment business. The acquisition gives the Company its first adult club in the Galveston, Texas area market.
The following is our allocation of the fair value of the acquisition price (in thousands) as of October 26, 2022:
| Current assets | $ | ||||
| Property and equipment | |||||
| Licenses | |||||
| Tradename | |||||
| Accrued liability | ( | ||||
| Deferred tax liability | ( | ||||
| Total net assets acquired | |||||
| Goodwill | |||||
| Acquisition price fair value | $ | ||||
We believe that in this acquisition goodwill represents the existing customer base of the club in the area and the added synergy profitability expansion when we implement the Company's processes into the club. Goodwill, licenses, and tradename will not be amortized but will be tested at least annually for impairment. Approximately $1.5 million of the recognized goodwill will be deductible for tax purposes.
In connection with this acquisition, we incurred approximately $23,000 in acquisition-related expenses during 2023, which is included in selling, general and administrative expenses in our consolidated statement of income. From the date of acquisition until September 30, 2023, the club contributed revenues $2.0 million and loss from operations of $3.1 million, which are included in our consolidated statement of income. The Company is not providing supplemental pro forma disclosures for this acquisition as it does not materially contribute to the consolidated operations of the Company.
Aurora CO Property
On November 8, 2022, the Company purchased real estate in Aurora, Colorado amounting to $850,000 in cash for a future Bombshells location.
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Notes to Consolidated Financial Statements
16. Acquisitions and Dispositions - continued
Central City CO Casino Properties
On December 5, 2022, the Company purchased real estate in Central City, Colorado amounting to $2.5 million in cash for the development of a Rick's Cabaret Steakhouse and Casino business.
On February 6, 2023, the Company purchased real estate in Central City, Colorado amounting to $2.2 million in cash for the development of another casino business.
Mark IV Property
On December 16, 2022, the Company purchased real estate in Fort Worth, Texas amounting to $2.4 million in cash. The property has two buildings, one of which the Company is leasing out to an existing tenant and the other building the Company is remodeling for future adult club operations.
Grange Food Hall
On December 20, 2022, the Company purchased a food hall property in Greenwood Village, Colorado for $5.3 million, including direct transaction costs and net of certain accrued taxes amounting to $102,000 . The purchase price was paid $1.9 million in cash at closing and $3.3 million under a 6.67 % five-year promissory note (see Note 9). The Company allocated $2.1 million to land, $2.6 million to building improvements, $98,000 to furniture, fixtures and equipment, and $565,000 to in-place leases based on their relative fair values. The in-place lease intangible has a weighted average amortization period of 1.7 years.
Bombshells San Antonio
On February 7, 2023, the Company completed the acquisition of a previously franchised Bombshells location in San Antonio, Texas for a total acquisition price of $3.2 million. The transaction was effected through a membership interest purchase agreement under which a subsidiary of the Company purchased 100 % of the issued and outstanding membership interests of the target limited liability company that owns and operates the Bombshells location from the six previous owners of the entity (the "Sellers"). At acquisition date, the Sellers were paid $1.2 million in cash and were issued six seller-financed promissory notes totaling $2.0 million (see Note 9). The Company allocated the acquisition price $61,000 to inventory, $2.7 million to property and equipment, and $480,000 to favorable lease intangible and right-of-use assets (which both have amortizable life of 13.4 years), net of lease liability.
Baby Dolls-Chicas Locas
On March 16, 2023, the Company and certain of its subsidiaries completed the acquisition of five gentlemen's clubs, five related real estate properties, associated intellectual properties, and certain automated teller machines for a total agreed acquisition price of $66.5 million, payable with a total of $25.0 million in cash, a total of $25.5 million in 10-year 7 % seller financing promissory notes, and 200,000 restricted shares of common stock based on an $80 per share price, subject to lock-up, leak out restrictions. The five clubs, which are all located in Texas, were purchased through four different asset purchase agreements and one stock purchase agreement, under each of which a newly formed wholly-owned subsidiary of the Company acquired from each club-owning entity all of the tangible and intangible assets and personal property used in the business of that club, except for certain excluded assets. The fair value of the common stock consideration was discounted due to lack of marketability during the lock-up period. The cash consideration at closing was partially funded by the $10.0 million line of credit secured by the Company on March 9, 2023 (see Note 9).
The fair value of the consideration transferred is as follows:
| Cash | $ | ||||
| Notes payable | |||||
| Common stock | |||||
| Total consideration fair value | $ | ||||
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Notes to Consolidated Financial Statements
16. Acquisitions and Dispositions - continued
We recognized the assets and liabilities for this acquisition based on our estimates of their acquisition date fair values, all in our Nightclub reportable segment. Upon finalization of our valuation of the assets acquired in this transaction, we reallocated certain amounts from goodwill to indefinite-lived intangible assets. Based on the allocation of the fair value of the acquisition price, measurement period adjustments, and subject to any working capital adjustments, the amount of goodwill is estimated at $4.3 million. Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed, which is essentially the forward earnings potential of the acquired entities. This acquisition also gives the Company a bigger market share in the Hispanic demographic in the Texas metropolitan areas. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $4.3 million of the recognized goodwill will be deductible for tax purposes.
The following is our allocation of the fair value of the acquisition price (in thousands) as of March 16, 2023:
| Current assets | $ | ||||
| Property and equipment | |||||
| Licenses | |||||
| Tradename | |||||
| Accounts payable | ( | ||||
| Total net assets acquired | |||||
| Goodwill | |||||
| Acquisition price fair value | $ | ||||
Licenses and tradenames will not be amortized but will be tested at least annually for impairment.
In connection with this acquisition, we incurred approximately $304,000 in acquisition-related expenses during 2023, which is included in selling, general and administrative expenses in our consolidated statement of income. During fiscal 2025, 2024, and 2023 (from the date of acquisition), the five acquired clubs contributed the following, which are included in our consolidated statements of income (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenues | $ | $ | $ | ||||||||||||||
| Income from operations | $ | $ | $ | ||||||||||||||
The following table presents the unaudited pro forma combined results of operations of the Company and the five acquired clubs and related assets in the March 16, 2023 acquisition transaction above as though the acquisition occurred at the beginning of fiscal 2022 (in thousands, except per share amount and number of shares):
| 2025 | 2024 | 2023 | |||||||||||||||
| Pro forma revenues | $ | $ | $ | ||||||||||||||
| Pro forma net income attributable to RCIHH common stockholders | $ | $ | $ | ||||||||||||||
| Pro forma earnings per share - basic and diluted | $ | $ | $ | ||||||||||||||
| Pro forma weighted average number of common shares outstanding - basic and diluted | |||||||||||||||||
The above unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2022. The unaudited pro forma financial information reflects material, nonrecurring adjustments directly attributable to the acquisition including acquisition-related expenses, interest expense, and any related tax effects. The unaudited pro forma financial information includes adjustments related to changes in recognized expenses caused by the fair value of
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Notes to Consolidated Financial Statements
16. Acquisitions and Dispositions - continued
assets acquired, such as depreciation and amortization and related tax effects. Pro forma net income and pro forma earnings per share include the impact of acquisition-related expenses and interest expense related to the $10.0 million line-of-credit facility (see Note 9) and the nine seller-financed notes in the acquisition as if they were incurred as of the first day of fiscal 2022. Pro forma weighted average number of common shares outstanding includes the impact of 200,000 shares of our common stock issued as partial consideration for the acquisition. Since the results of operations during fiscal 2025 and 2024 were subsequent to the fiscal year of acquisition and that fiscal 2024 fully includes the results of operations of the five acquired clubs, the amounts presented for fiscal 2025 and 2024 above do not reflect any pro forma adjustments.
Arapahoe Street, Denver CO Property
On June 20, 2023, the Company purchased a restaurant parcel located in a condominium building in Denver, Colorado amounting to $4.6 million for a future Bombshells location. The purchase price was paid $1.7 million in cash and $2.9 million under a 7.12 % five-year promissory note (see Note 9).
Non-Income-Producing Properties
•On October 11, 2022, the Company purchased a hangar in Arcola, Texas amounting to $754,000 in cash.
•On February 6, 2023, in view of the increasing business presence of the Company in the Denver, Colorado area, the Company acquired a non-income-producing corporate property for $458,000 in cash, to be used for office space and employee housing.
•On August 3, 2023, the Company purchased real estate and office space in Central City, Colorado amounting to $2.9 million in cash to house administrative operations in the region.
2023 Dispositions
On November 4, 2022, the Company received $1.0 million from the Texas Department of Transportation for one of the Company's club properties in Lubbock, Texas due to eminent domain.
On June 29, 2023, the Company sold a property with a carrying value of $1.1 million for $1.5 million in cash. The Company used $904,000 of the proceeds to pay off a loan related to the property.
2024 Acquisitions
Non-Income-Producing Properties
•On October 24, 2023, the Company purchased an administrative building in Central City, Colorado for $1.0 million in cash.
•On October 24, 2023, the Company purchased a vacant lot in Central City, Colorado for $65,000 in cash.
2024 Dispositions
South Houston Property
On May 31, 2024, the Company sold parking lot properties with a combined carrying value of $74,000 related to a previously owned club in South Houston, Texas for $160,000 in cash. The Company paid approximately $9,500 in closing costs related to the transaction.
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Notes to Consolidated Financial Statements
16. Acquisitions and Dispositions - continued
Airplane
On June 6, 2024, the Company sold an aircraft with a carrying value of approximately $2.0 million for $1.8 million in cash. The Company paid approximately $53,000 in closing costs related to the transaction. The proceeds of the sale were used to pay off related debt.
Bombshells San Antonio
Effective September 1, 2024, the Company sold Bombshells San Antonio to members of its former franchisee group for a noncash exchange of the Company's membership interest in the owner-subsidiary for the forgiveness of notes payable to the former franchisee group members. The transaction resulted in a $2.3 million gain, which is included in impairments and other charges, net in our consolidated statements of income.
2025 Acquisitions
Flight Club
On January 21, 2025, the Company completed the acquisition of a club in the Detroit, Michigan, market for a total agreed acquisition price of $11.0 million, consisting of $3.0 million in cash and $5.0 million in a seller-financed 8.0 % promissory note (see Note 9) for the club, and $3.0 million in cash for the associated real estate through asset purchase agreements.
The preliminary fair value of the consideration is as follows (in thousands):
| Cash | $ | ||||
| Note payable | |||||
| Total fair value of consideration | $ | ||||
We recognized the assets and liabilities for this acquisition based on our estimates of their acquisition date fair values in our Nightclubs reportable segment. We have not finalized our valuation of the tangible and identifiable intangible assets acquired in this transaction. As of the release of this report, the fair value of the acquired tangible and identifiable intangible assets are provisional pending the completion of the final valuations for those assets. Based on the allocation of the preliminary fair value of the acquisition price and subject to any working capital adjustments, the amount of goodwill is estimated at $613,000 . Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired, which is essentially the forward earnings potential of the acquired club and our entry into a new market. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $613,000 of the recognized goodwill will be deductible for income tax purposes.
The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of January 21, 2025:
| Current assets | $ | ||||
| Property and equipment | |||||
| Licenses | |||||
| Tradename | |||||
| Total net assets acquired | |||||
| Goodwill | |||||
| Total fair value of net assets acquired | $ | ||||
Licenses and tradename will not be amortized but will be tested at least annually for impairment.
In connection with this acquisition, we incurred approximately $141,000 in acquisition-related expenses in fiscal 2025, which are included in selling, general and administrative expenses in our consolidated statements of income.
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Notes to Consolidated Financial Statements
16. Acquisitions and Dispositions - continued
From the date of acquisition until September 30, 2025, the acquired club contributed the following, which are included in our consolidated statements of income (in thousands):
| Revenues | $ | ||||
| Income from operations | $ | ||||
The seller has not provided the fiscal 2024 financial statements, therefore, we could not provide supplemental pro forma information for the combined entities.
Platinum West and Platinum Plus
On April 7, 2025, the Company completed the acquisition of a club in West Columbia, South Carolina, for a total purchase price of $8.0 million, consisting of $3.75 million cash and $2.5 million in a seller-financed 7 % promissory note (see Note 9) for the club, and $1.75 million cash for the associated real estate. On June 13, 2025, the Company completed the acquisition of a club in Allentown, Pennsylvania, for a total purchase price of $2.0 million, consisting of $1.5 million cash and $500,000 in seller-financed 7 % promissory note (see Note 9). The acquisitions were completed through asset purchase agreements. The Allentown club transaction was completed several weeks after the West Columbia club due to delays in the issuance of licenses.
The preliminary fair value of the consideration is as follows (in thousands):
| Cash | $ | ||||
| Notes payable | |||||
| Total fair value of consideration | $ | ||||
We recognized the assets and liabilities for this combined acquisition based on our estimates of their acquisition date fair values in our Nightclubs reportable segment. We have not finalized our valuation of the tangible and identifiable intangible assets acquired in this transaction. As of the release of this report, the fair value of the acquired tangible and identifiable intangible assets are provisional pending the completion of the final valuations for those assets. Based on the allocation of the preliminary fair value of the acquisition price and subject to any working capital adjustments, the amount of goodwill is estimated at $201,000 . Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired, which is essentially the forward earnings potential of the acquired club and our entry into a new market. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $201,000 of the recognized goodwill will be deductible for income tax purposes.
The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of acquisition date:
| Current assets | $ | ||||
| Property and equipment | |||||
| Licenses | |||||
| Tradename | |||||
| Operating lease right-of-use asset | |||||
| Favorable lease asset | |||||
| Lease liability | ( | ||||
| Total net assets acquired | |||||
| Goodwill | |||||
| Total fair value of net assets acquired | $ | ||||
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Notes to Consolidated Financial Statements
16. Acquisitions and Dispositions - continued
Licenses and tradename will not be amortized but will be tested at least annually for impairment.
In connection with this combined acquisition, we incurred approximately $103,000 in acquisition-related expenses in fiscal 2025, which are included in selling, general and administrative expenses in our consolidated statements of income.
From the date of acquisition until September 30, 2025, the acquired clubs contributed the following, which are included in our consolidated statements of income (in thousands):
| Revenues | $ | ||||
| Income from operations | $ | ||||
The seller has not provided the fiscal 2024 financial statements, therefore, we could not provide supplemental pro forma information for the combined entities.
2025 Dispositions
Sale of Bombshells Austin
On November 14, 2024, the Company sold Bombshells Austin for $70,000 in cash and $60,000 in a 6 % 12-month promissory note (see Note 9). The Company recognized a $1.3 million gain on the sale due in part to an impairment of its operating lease right-of-use asset in a prior year.
Sale of Aurora CO Property
On March 31, 2025, the Company sold a real estate property in Aurora, Colorado, for $825,000 . The Company recognized a loss of $153,000 on the sale, net of closing costs.
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Notes to Consolidated Financial Statements
17. Quarterly Results of Operations (Unaudited)
The following tables summarize unaudited quarterly data for fiscal 2025, 2024, and 2023 (in thousands, except share and per share data):
| For the Three Months Ended | |||||||||||||||||||||||
| December 31, 2024 | March 31, 2025 | June 30, 2025 | September 30, 2025 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
Income (loss) from operations(1) | $ | $ | $ | $ | ( | ||||||||||||||||||
Net income (loss) attributable to RCIHH stockholders(1) | $ | $ | $ | $ | ( | ||||||||||||||||||
Earnings (loss) per share(1) | |||||||||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ( | ||||||||||||||||||
| Weighted average shares used in computing earnings (loss) per share | |||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||
| Dividends per share declared and paid | $ | $ | $ | $ | |||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||||
| December 31, 2023 | March 31, 2024 | June 30, 2024 | September 30, 2024 | ||||||||||||||||||||
Revenues(2) | $ | $ | $ | $ | |||||||||||||||||||
Income (loss) from operations(2) | $ | $ | $ | ( | $ | ||||||||||||||||||
Net income (loss) attributable to RCIHH stockholders(2) | $ | $ | $ | ( | $ | ||||||||||||||||||
Earnings (loss) per share(2) | |||||||||||||||||||||||
| Basic and diluted | $ | $ | $ | ( | $ | ||||||||||||||||||
| Weighted average shares used in computing earnings (loss) per share | |||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||
| Dividends per share declared and paid | $ | $ | $ | $ | |||||||||||||||||||
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
17. Quarterly Results of Operations (Unaudited) – continued
| For the Three Months Ended | |||||||||||||||||||||||
| December 31, 2022 | March 31, 2023 | June 30, 2023 | September 30, 2023 | ||||||||||||||||||||
Revenues(3) | $ | $ | $ | $ | |||||||||||||||||||
Income from operations(3) | $ | $ | $ | $ | |||||||||||||||||||
Net income attributable to RCIHH stockholders(3) | $ | $ | $ | $ | |||||||||||||||||||
Earnings per share(3) | |||||||||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average shares used in computing earnings per share | |||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||
| Dividends per share declared and paid | $ | $ | $ | $ | |||||||||||||||||||
| (1) | Fiscal year 2025 results of operations were mainly impacted by $ | ||||
| (2) | Fiscal year 2024 results of operations were mainly impacted by $ | ||||
| (3) | Fiscal year 2023 results of operations were mainly impacted by the | ||||
Our nightclub operations are normally affected by seasonal factors. Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters). Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.
18. Related Party Transactions
Presently, our director and former Chairman, President, and CEO, Eric Langan, personally guarantees all of the commercial bank indebtedness of the Company. Mr. Langan receives no compensation or other direct financial benefit for any of the guarantees. The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of September 30, 2025 and 2024 was $139.6 million and $135.3 million, respectively.
Included in the $17.0 million borrowing on October 12, 2021 (see Note 9) are notes borrowed from related parties—one note for $500,000 (Ed Anakar, President of RCI Management Services, Inc. and our Director of Operations) and another note for $150,000 (from a brother of the Company's former CFO, Bradley Chhay, see above) in which the terms of the notes are the same as the rest of the lender group. Refer to Note 9 for October 2023 extension of term of promissory notes. As of September 30, 2025, the amount borrowed from Ed Anakar has been fully paid.
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RCI HOSPITALITY HOLDINGS, INC.
Notes to Consolidated Financial Statements
18. Related Party Transactions – continued
We used the services of Tall Oak Custom Furniture and Nottingham Barrels and Furniture, previously Nottingham Creations, all furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Tall Oak Custom Furniture and Nottingham Barrels and Furniture are owned by a brother of Eric Langan (as was Nottingham Creations). Amounts billed to us for goods and services provided by Tall Oak Custom Furniture, Nottingham Barrels and Furniture, and Nottingham Creations were approximately $19,477 in fiscal 2025, $350,000 in fiscal 2024, and $195,000 in fiscal 2023. As of September 30, 2025, 2024, and 2023, we owed Tall Oak Custom Furniture, Nottingham Barrels and Furniture, and Nottingham Creations $3,312 , $18,700 , and $10,700 respectively, in unpaid billings.
TW Mechanical LLC (“TW Mechanical”) provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 2025, 2024, and 2023. A son-in-law of Eric Langan owns a 50 % interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were approximately $555 , $16,491 , and $443,295 for the fiscal years 2025, 2024, and 2023, respectively. Amounts billed directly to the Company were approximately $4,615 , $3,160 , and $9,430 for the fiscal years 2025, 2024, and 2023, respectively. As of September 30, 2025, 2024, and 2023, the Company owed TW Mechanical approximately $0 , $0 , and $0 respectively, in unpaid direct billings.
19. Subsequent Events
Share Repurchase
Subsequent to September 30, 2025, through March 13, 2026, we purchased 153,061 shares of the Company's common stock pursuant to our share repurchase plan, excluding the November 21, 2025, repurchase below, at a cost of $3.7 million. These shares were subsequently retired.
On November 21, 2025, the Company repurchased 821,000 shares of its own common stock from a single stockholder for $30.0 million, paid $8.0 million in cash and $22.0 million under a two-year 12 % unsecured promissory note.
Debt
On October 1, 2025, the Company entered into a debt modification transaction with 22 investors by extending their promissory notes' maturity date to October 2028. Two new investors joined with a combined $2.1 million and two existing investors increased their participation by a combined $250,000 . The promissory notes continue to bear a 12 % annual interest rate with interest-only monthly installments until full balance at maturity.
Dispositions
On October 7, 2025, the Company sold 100 % of the common stock of a club subsidiary located in Harlingen, Texas, for $600,000 . The sale did not include the real estate where the club is located. The Company recognized a loss of approximately $17,000 on the sale.
On February 6, 2026, the Company sold a club located in Edinburg, Texas, for $1.1 million recognizing a $219,000 loss on the sale. Proceeds from the sale were used to pay down certain related debt.
Investment
On November 17, 2025, the Company entered into a strategic partnership with an adult club entrepreneur by accepting a 49 % interest in one of our clubs in Austin, Texas, for $1.8 million in cash. This partnership will strengthen our Austin club with more local management and marketing expertise.
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RCI HOSPITALITY HOLDINGS, INC.
Schedule of Valuation and Qualifying Accounts
(Amounts in Thousands)
| Balance at beginning of year | Charged to costs and expenses(1) | Deductions(2) | Balance at end of year | ||||||||||||||||||||
| Allowance for doubtful operating receivables | |||||||||||||||||||||||
| Fiscal 2023 | $ | $ | $ | ( | $ | ||||||||||||||||||
| Fiscal 2024 | $ | $ | $ | ( | $ | ||||||||||||||||||
| Fiscal 2025 | $ | $ | $ | ( | $ | ||||||||||||||||||
| Allowance for credit losses on notes receivable | |||||||||||||||||||||||
| Fiscal 2023 | $ | $ | $ | $ | |||||||||||||||||||
| Fiscal 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Fiscal 2025 | $ | $ | $ | $ | |||||||||||||||||||
Deferred tax asset valuation allowance(3) | |||||||||||||||||||||||
| Fiscal 2023 | $ | $ | ( | $ | $ | ||||||||||||||||||
| Fiscal 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Fiscal 2025 | $ | $ | $ | $ | |||||||||||||||||||
| (1) | Charged to bad debts or credit losses expense (under other selling, general and administrative expenses) in the consolidated statements of income. | ||||
| (2) | Write off of gross amount against allowance. | ||||
| (3) | Included in deferred tax liability, net in the consolidated balance sheets. | ||||
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements with accountants on accounting and financial disclosure.
Item 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this report, an evaluation was carried out by certain members of Company management, with the participation of the Interim Chief Executive Officer (“CEO”) and the Interim Chief Financial Officer (“CFO”) of the effectiveness of the Company’s disclosure controls and procedures (as defined in Securities and Exchange Commission’s (“SEC”) Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of September 30, 2025. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO and the CFO, to allow timely decisions regarding required disclosures.
Due to material weaknesses in internal control over financial reporting described below, management concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2025. Notwithstanding the existence of these material weaknesses, management believes that the consolidated financial statements in this annual report filed on Form 10-K present, in all material respects, the Company’s financial condition as reported, in conformity with United States Generally Accepted Accounting Principles (“U.S. GAAP”).
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of September 30, 2025, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We have identified material weaknesses in internal control related to (1) ineffective design and operation of controls over certain information technology general controls ("ITGCs"), including program change management and vendor management controls; (2) ineffective design and operation of controls, which include management review controls, over the accounting for business combinations and contingent liabilities; and (3) ineffective design and operation of controls, which include management review controls, over the impairment assessments over long-lived assets, definite- and indefinite-lived intangible assets, and goodwill. The identified ITGC control deficiencies resulted from two factors. First, the Company's procedures governing program change management were insufficiently documented, resulting in controls that could not be consistently evidenced. Second, the Company relies on third-party IT service providers for certain key components of the technology infrastructure supporting its financial reporting processes. Specifically, certain service providers supporting applications within the Company's revenue cycle were unable to provide System and Organization Controls ("SOC") reports, thus management was unable to effectively evaluate the design and operating effectiveness of
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the internal controls maintained by these service providers. Consequently, certain business process controls were determined to be ineffective, limited to the extent those controls rely upon information processed within, or subject to, the control environments of the applicable third-party service providers.
These deficiencies may have an impact on our financial statements, account balances, and disclosures. Based on our evaluation, our management, with the participation of our CEO and our CFO, concluded that our internal control over financial reporting was not effective as of September 30, 2025.
Following identification of these material weaknesses, and prior to filing this Annual Report on Form 10-K, we completed additional procedures as deemed necessary for the year ended September 30, 2025. Based on these procedures, management believes that the consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S. GAAP. Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K.
The Company’s independent registered public accounting firm, CBIZ CPAs P.C., has expressed an unqualified opinion on our consolidated financial statements and an adverse opinion on our internal control over financial reporting as of September 30, 2025, in the audit report that appears at the end of Part II of this Annual Report on Form 10-K.
Remediation Plan for Existing Material Weaknesses
Management is committed to the remediation of the material weaknesses described above.
Review of Accounting for Business Combinations and Contingent Liabilities
Management has re-evaluated the design of its controls over the accounting for business combinations and will continue to implement enhancements to improve the precision, documentation, and timeliness of review procedures. Management has re-evaluated the design of its controls over the accounting for legal contingencies and will implement enhancements to improve the clarity and quality of documentation supporting review of legal contingencies, including related legal fees and unasserted claims.
Review of Impairment Assessments over Long-lived Assets, Definite- and Indefinite-lived Intangibles Assets, and Goodwill
Given the inherently subjective nature of the assumptions underlying the valuation models used in impairment analyses, management will re-evaluate the review procedures to strengthen the validation and documentation of such assumptions.
Information Technology General Controls
As a result of the material weakness and its ongoing remediation efforts, Management is enhancing change monitoring procedures and evaluating alternative procedures where SOC reports are not available for certain third party application vendors.
Further, Management is committed to enhanced quarterly reporting on the remediation measures to the Audit Committee of the board of directors.
It is our belief that these added controls will effectively remediate the existing material weaknesses.
The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of fiscal 2026.
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Changes in Internal Control Over Financial Reporting
During fiscal year 2025, the Company completed several business combinations as described in Note 16 - Acquisitions and Dispositions to our audited Consolidated Financial Statements.
•On January 21, 2025, the Company and certain of its subsidiaries completed the acquisition of a club in Detroit, Michigan.
•On April 7, 2025, and another delayed closing date on June 13, 2025, the Company and certain of its subsidiaries completed the acquisition of two clubs, one in West Columbia, South Carolina, and another in Allentown, Pennsylvania.
The scope of management’s assessment of the effectiveness of the Company’s disclosure controls and procedures for fiscal year-end 2025 did not include the internal control over the financial reporting of these acquisitions, in accordance with the SEC’s staff guidance that permits exclusion of acquisitions from their final assessment of internal control over financial reporting for the fiscal year in which the acquisition occurred. Due to the size, breadth and complexity of the acquisition of these businesses, management’s evaluation of internal control over financial reporting for the fiscal year ended September 30, 2025, did exclude those internal control activities. The businesses are wholly owned subsidiaries whose total assets and total revenues are excluded from management’s assessment and represent approximately 4% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2025.
Except for the remediation efforts as discussed above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. OTHER INFORMATION.
Insider Trading Agreements
None of our officers or directors, as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, adopted terminated
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Stockholders and Board of Directors of
RCI Hospitality Holdings, Inc.
Adverse Opinion on Internal Control over Financial Reporting
We have audited RCI Hospitality Holdings, Inc.’s (the "Company") internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses described in the subsequent paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in Management's Annual Report on Internal Control Over Financial Reporting:
•The Company had ineffective design and operation of controls over certain information technology general controls (“ITGCs”), including program change management and vendor management controls to ensure:
1.For certain key financially relevant service providers, IT program and data changes affecting the Company’s financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate; and
2.For certain key financially relevant service providers, System and Organization Controls (SOC) reports were obtained and reviewed.
As a result of the above deficiencies, automated process-level and manual controls, including the remaining ITGCs, that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective.
•Ineffective design and operation of controls, which include management review controls, over the accounting for business combinations and contingent liabilities.
•Ineffective design and operation of controls, which include management review controls, over the Company's impairment assessments over long lived assets, definite and indefinite lived intangible assets; and goodwill.
These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal 2025 consolidated financial statements and financial statement schedule, and this report does not affect our report dated March 19, 2026 on those consolidated financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheet as of September 30, 2025 and the related statement of income, changes equity, and cash flows and the related financial statement schedule as of and for the year ended September 30, 2025 of the Company and our report dated March 19, 2026 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
Explanatory Paragraph – Excluded Subsidiaries
As described in “Management’s Annual Report on Internal Control Over Financial Reporting”, management has excluded the Company’s acquisition of three businesses that occurred during the year ended September 30, 2025 from its assessment of internal control over financial reporting as of September 30, 2025 because these entities were acquired by the Company in purchase business combinations during the year ended September 30, 2025. We have also excluded these three
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businesses from our audit of internal control over financial reporting. These businesses are wholly owned subsidiaries whose combined total assets and total revenues represent approximately 4% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2025.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Management’s Annual Report on Internal Control Over Financial Reporting". Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
Marlton, New Jersey
March 19, 2026
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
DIRECTORS AND EXECUTIVE OFFICERS
Our directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected and qualified. Officers are appointed by the board of directors annually and serve at the discretion of the board of directors (subject to any existing employment agreements). There is no family relationship between or among any of our directors and executive officers. Our board of directors consists of six persons. The following table sets forth our directors and executive officers as of March 19, 2026:
| Name | Age | Position | ||||||||||||
| Eric S. Langan | 57 | Director | ||||||||||||
Travis Reese | 56 | Director, Chairman, Interim President and Chief Executive Officer | ||||||||||||
Albert Molina | 56 | Interim Chief Financial Officer | ||||||||||||
| Luke Lirot | 69 | Director | ||||||||||||
| Yura Barabash | 51 | Director | ||||||||||||
Elaine J. Martin | 69 | Director | ||||||||||||
| Arthur Allan Priaulx | 85 | Director | ||||||||||||
Eric S. Langan has been a director since 1998. He has also been our Head of Mergers & Acquisitions since November 2025, and prior to that, he was our President and CEO since 1999. He began his career in the hospitality industry in 1989 and has developed significant expertise in sports bar/restaurants and adult entertainment nightclubs, including related areas of real estate development and finance. Mr. Langan built the XTC Cabaret nightclub brand and merged it into RCI in 1998, expanding the scope of the company. He has been instrumental in bringing professional marketing, management, finance, and technology practices and systems to the gentlemen’s club industry. As one of the original founders of the National Association of Club Executives (ACE), Mr. Langan has been an active member of its board of directors since 1999. Through these activities, Mr. Langan has acquired the knowledge and skills necessary to successfully operate adult entertainment businesses.
Involvement in certain legal proceedings: On September 21, 2020, as part of the settlement of a civil administrative proceeding with the SEC, the Company, Mr. Langan, and Phil Marshall (our former chief financial officer) agreed, without admitting or denying the findings, to a cease-and-desist order regarding certain sections of the Securities Exchange Act of 1934 and certain rules promulgated thereunder.
The SEC’s order as to the Company, Mr. Langan, and Mr. Marshall found that, from fiscal 2014 through 2019, the Company failed to disclose a total of $615,000 in executive compensation in the form of perquisites. According to the order, these undisclosed perquisites included the cost of the personal use of the Company’s aircraft and Company-provided vehicles, reimbursements for personal airline flights, charitable corporate contributions to the school two of Mr. Langan’s children attended, and housing costs and meal allowance for Mr. Marshall. In addition, the order found that the Company failed to disclose related party transactions involving Mr. Langan’s father and brother and a director’s brother. The order further found that the Company failed to keep books and records that allowed it to report, and lacked sufficient internal controls concerning, these executive perquisites and related party transactions.
The SEC’s order as to the Company, Mr. Langan, and Mr. Marshall found that the Company and Mr. Langan violated, and Mr. Langan and Mr. Marshall caused the Company to violate, the proxy solicitation provisions of Section 14(a) of the Securities Exchange Act of 1934 and Rules 14a-3 and 14a-9 thereunder. The order further found that the Company violated, and Mr. Langan and Mr. Marshall caused the Company to violate, the reporting provisions of Section 13(a) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder, the books and records provisions of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and the disclosure controls provision of Rule 13a-15(a) under the Exchange Act. The Company, Mr. Langan, and Mr. Marshall agreed, without admitting or denying the SEC’s findings, to a cease-and-desist order and to pay civil penalties in the amounts of $400,000, $200,000, and $35,000, respectively.
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On September 16, 2025, the Company was indicted in the Supreme Court of the State of New York, County of New York, along with Mr. Langan, Bradley Chhay, three employees of subsidiaries, and the Company’s subsidiaries Peregrine Enterprises, Inc. (the operator of Rick’s Cabaret in New York City), RCI Dining Services (37th Street), Inc. (the operator of Vivid Cabaret in New York City) and RCI 33rd Street Ventures, Inc. (the operator of Hoops Cabaret and Sports Bar in New York City). The indictment alleges that the defendants committed conspiracy, bribery, criminal tax fraud and offering a false instrument for filing. These charges, which resulted from a previously disclosed investigation by the Office of the Attorney General of New York, allege that a tax auditor with the New York State Department of Taxation and Finance was provided complimentary admission to clubs, restaurant meals, private dances, and travel expenses in exchange for the reduction of certain sales tax liabilities in connection with the use of “Dance Dollars.”
Travis Reese was appointed Interim President and Chief Executive Officer in November 2025 and Chairmen of the Board in January 2026. Until that date, he served as our Executive Vice President since 1999. He has also served as a director since 1999. Throughout his time with the Company, Mr. Reese has served many different roles, including without limitation overseeing information technology, working to create the company’s intranet, permit tracking, and incident reporting systems as well as other technology platforms the Company uses. Additionally, with his family history in military and aviation, he created the Company’s Bombshells Restaurant and Sports Bar concept in 2013. Mr. Reese has been involved in the adult entertainment industry since 1992. His experience and knowledge in this industry is essential to the board’s oversight of our businesses.
Albert Molina was appointed Interim Chief Financial Officer in November 2025. He has previously served as the Company’s Director of Financial Reporting since August 2016, and has worked extensively on SEC and financial reporting during his time at the Company. Prior to joining the Company, Mr. Molina managed the financial reporting and technical accounting departments of a publicly traded multi-unit restaurant company (2010-2016) and a publicly traded retail chain (2007-2010), both in Houston, Texas. From 2005 through 2006, he served as controller of a publicly traded call center company based in Miami, Florida. From 2003 through 2004, he was senior financial analyst for a satellite TV company based in Fort Lauderdale, Florida. He started his career in the Philippines, first as an auditor with Ernst & Young-Manila (1990-1995), then as finance and accounting manager of a multinational sportswear company (1995-2002). Mr. Molina is a Certified Public Accountant, licensed in the Philippines.
Luke Lirot became a director on July 31, 2007. Mr. Lirot received his law degree from the University of San Francisco in 1986. After serving as an intern in the San Francisco Public Defender’s Office in 1986, Mr. Lirot returned to Florida and established a private law practice where he continues to practice and specializes in adult entertainment issues. He is a past President of the First Amendment Lawyers’ Association and has actively participated in numerous state and federal legal matters. Mr. Lirot represents as counsel scores of individuals and entities within our industry. Having practiced in this area for over 30 years, he is aware of virtually every type of legal issue that can arise, making him an important member of the board.
Yura Barabash became a director on September 19, 2017. Since October 2021, he has served as the Vice President of Business Development at AVI-SPL, the leading global provider of digital enablement solutions, based in Florida. Mr. Barabash brings with him extensive corporate finance experience across various industries both domestically and internationally. He has played a key role in numerous equity and debt financings, as well as mergers and acquisitions in the United States, Latin America, China, and the European Union. From August 2019 to January 2021, Mr. Barabash was a Chief Operating Officer of Gingko Online Learning LLC, private online language learning company in Florida and a consultant to Chengdu Gingko Education Management, educational management company in Chengdu, China. From 2016 to June 2019, he was a Senior Vice President of Finance at Motorsport Network LLC (www.motorsportnetwork.com) in Miami, the largest motorsport digital media company in the world. Earlier in his career, Mr. Barabash held investment banking roles at Primary Capital, Rodman & Renshaw, and Merrill Lynch. He holds a B.A. from Sevastopol City University in Ukraine and a Master in International Affairs from Columbia University in New York City, and is fluent in Russian. Mr. Barabash completed the Cybersecurity Governance course at MIT Sloan and the Audit and Compensation Committees programs at Harvard Business School Executive Education.
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Elaine J. Martin became a director on August 8, 2019. She is co-founder and general partner of two privately-held Houston area businesses for which she provides a broad array of management and accounting functions on a day-to-day basis. In 1993, she co-founded Medco Manufacturing LLC, which develops, manufactures and sells, under Food and Drug Administration (FDA) guidelines, equipment and disposable products used by plastic surgeons in domestic and international markets. In 1989, Ms. Martin co-founded Aero Tech Aviation LLC, which trains foreign nationals for the Federal Aviation Administration (FAA) Air Frame and Power Plant examination, for their license to repair US-origin aircraft. Earlier in her career, she was a Registered Nurse specializing in cosmetic surgery. Ms. Martin received her BS in Biology and Chemistry from Houston Baptist University. Her volunteer activities have included serving as a member of the board of directors of Texas A&M University Mothers’ Club (Aggie Moms). Ms. Martin’s business acumen and experience running companies make her an important member of the board.
Arthur Allan Priaulx became a director on August 8, 2019. He has more than 45 years of experience in the communications industry. Earlier in his career, he was Vice President and General Manager of King Features Division of Hearst Corporation, in charge of worldwide newspaper activities and product licensing. He was also publisher of American Banker, a leading trade publication in the financial services industry, when it was owned by Thomson Financial. In 1993, he founded Resource Media Group, a New York-based financial media and investor relations firm. His clients included a wide range of companies, including RCI Hospitality Holdings, Inc., for which he provided public and investor relations services from 1994 to 2013. Mr. Priaulx has been retired since 2014. He attended Dartmouth College and University of Southampton in the U.K. He has also completed graduate-level courses at INSEAD Business School in France and the Wharton School of the University of Pennsylvania. His volunteer activities have included serving as national vice president of United Cerebral Palsy.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
We have an Audit Committee whose members are Yura Barabash, Elaine Martin, and Arthur Allan Priaulx. All members of the Audit Committee are independent directors. The purpose of the Audit Committee is to (i) oversee our accounting and financial reporting processes, our disclosure controls and procedures and system of internal controls and audits of our consolidated financial statements, (ii) oversee the relationship with our independent auditors, including appointing or changing our auditors and ensuring their independence, and (iii) provide oversight regarding significant financial matters. The Audit Committee meets privately with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our outside independent registered public accounting firm. Yura Barabash serves as the Audit Committee’s financial expert.
In August 2015, our board adopted a new charter for the Audit Committee. A copy of the Audit Committee Charter can be found on our website at www.rcihospitality.com/investor. The Charter establishes the independence of our Audit Committee and sets forth the scope of the Audit Committee’s duties. The Audit Committee conducts an ongoing review of our financial reports and other financial information prior to their being filed with the SEC, or otherwise provided to the public. The Audit Committee also reviews our systems, methods and procedures of internal controls in the areas of: financial reporting, audits, treasury operations, corporate finance, managerial, financial and SEC accounting, compliance with law, and ethical conduct. NASDAQ Stock Market Rules require all members of the Audit Committee to be independent. The Audit Committee is objective, and reviews and assesses the work of our independent registered public accounting firm and our internal accounting department.
NOMINATING COMMITTEE
We have a Nominating Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash, and Arthur Allan Priaulx. In July 2004, the board unanimously adopted a Charter with regard to the process to be used for identifying and evaluating nominees for director. The Charter establishes the independence of our Nominating Committee and sets forth the scope of the Nominating Committee’s duties. NASDAQ Stock Market Rules require all members of the Nominating Committee to be independent. Pursuant to its Charter, the Committee has the power and authority to consider board nominees and proposals submitted by our stockholders and to establish any procedures, including procedures to facilitate stockholder communication with the board of directors, and to make any such disclosures required by applicable law in the course of exercising such authority. A copy of the Nominating Committee’s Charter can be found on our website at www.rcihospitality.com/investor.
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COMPENSATION COMMITTEE
We have a Compensation Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash, and Arthur Allan Priaulx. In June 2014, the Compensation Committee adopted a Charter with regard to the Compensation Committee’s responsibilities, including evaluating, reviewing and determining the compensation of our Chief Executive Officer and other executive officers. A copy of the Compensation Committee’s Charter can be found on our website at www.rcihospitality.com/investor.
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own beneficially more than ten percent of our common stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3, 4 and 5 furnished to us during the fiscal year ended September 30, 2025, we believe that the directors, executive officers, and greater than ten percent beneficial owners have complied with all applicable filing requirements during the fiscal year ended September 30, 2025.
CODE OF ETHICS
We have adopted a code of ethics for our principal executive and senior financial officers, a copy of which can be found on our website at www.rcihospitality.com.
INSIDER TRADING POLICIES
We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities that applies to all of RCI Hospitality Holdings, Inc.’s directors, officers and employees, and also applies to other key employees of subsidiaries of RCI Hospitality Holdings, Inc., as determined by our Chief Compliance Officer. We do not presently have written procedures for the repurchase of our securities. We believe that our insider trading policy and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19.1 to this Form 10-K.
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Item 11. EXECUTIVE COMPENSATION.
COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and analysis describes the material elements of the Company’s compensation programs as they relate to our executive officers who are listed in the compensation tables appearing below. This compensation discussion and analysis focuses on the information contained in the following tables and related footnotes. The individuals who served as the Company’s Chief Executive Officer and Chief Financial Officer during fiscal 2025, as well as any other individuals included in the Summary Compensation Table, are referred to as “named executive officers” ("NEOs").
Overview of Compensation Committee Role and Responsibilities
The Compensation Committee of the board of directors oversees our compensation plans and policies, reviews and approves all decisions concerning the named executive officers’ compensation, which may further be approved by the board, and administers our stock option and equity plans, including reviewing and approving stock option grants and equity awards under the plans. The Compensation Committee’s membership is determined by the board and is composed entirely of independent directors.
Management plays a role in the compensation-setting process. The most significant aspects of management’s role are to evaluate employee performance and recommend salary levels and equity compensation awards. Our Chief Executive Officer often makes recommendations to the Compensation Committee and the board concerning compensation for other executive officers. Our Chief Executive Officer is a member of the board but does not participate in board decisions regarding any aspect of his own compensation. The Compensation Committee can retain independent advisors or consultants.
Compensation Committee Process
The Compensation Committee reviews executive compensation in connection with the evaluation and approval of an employment agreement, an increase in responsibilities or other factors. With respect to equity compensation awarded to other employees, the Compensation Committee or the board may grant stock options, often after receiving a recommendation from our Chief Executive Officer. The Compensation Committee also evaluates proposals for incentive and performance equity awards, and other compensation.
Compensation Philosophy
The Compensation Committee emphasizes the important link between the Company’s performance, which ultimately affects stockholder value, and the compensation of its executives. Therefore, the primary goal of the Company’s executive compensation policy is to try to align the interests of the executive officers with the interests of the stockholders. In order to achieve this goal, the Company attempts to (i) offer compensation opportunities that attract and retain executives whose abilities and skills are critical to the long-term success of the Company and reward them for their efforts in ensuring the success of the Company, (ii) align the Company’s compensation programs with the Company’s long-term business strategies and objectives, and (iii) provide variable compensation opportunities that are directly linked to the Company’s performance and stockholder value, including an equity stake in the Company. Our named executive officers’ compensation utilizes two primary components — base salary and long-term equity compensation — to achieve these goals. Additionally, the Compensation Committee may award discretionary bonuses to certain executives based on the individual’s contribution to the achievement of the Company’s strategic objectives.
Setting Executive Compensation
We fix executive base compensation at a level we believe enables us to hire and retain individuals in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business goals. We also take into account the compensation that is paid by companies that we believe to be our competitors and by other companies with which we believe we generally compete for executives.
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In establishing compensation packages for executive officers, numerous factors are considered, including the particular executive’s experience, expertise and performance, our company’s overall performance and compensation packages available in the marketplace for similar positions. In arriving at amounts for each component of compensation, our Compensation Committee strives to strike an appropriate balance between base compensation and incentive compensation. The Compensation Committee also endeavors to properly allocate between cash and non-cash compensation and between annual and long-term compensation.
The Role of Shareholder Say-on-Pay Votes
At our annual meeting of shareholders held on August 18, 2025, approximately 94% of the shareholders who voted (including abstentions) on the “say-on-pay” proposal approved the compensation of our named executive officers, as disclosed in the proxy statement. Although this advisory shareholder vote on executive compensation is non-binding, the Compensation Committee will consider the outcome of the vote when making future compensation decisions for named executive officers.
Base Salary
The Company provides executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. Subject to the provisions contained in employment agreements with executive officers concerning base salary amounts, base salaries of the executive officers are established based upon compensation data of comparable companies in our market, the executive’s job responsibilities, level of experience, individual performance and contribution to the business. We believe it is important for the Company to provide adequate fixed compensation to highly qualified executives in our competitive industry. In making base salary decisions, the Compensation Committee uses its discretion and judgment based upon personal knowledge of industry practice but does not apply any specific formula to determine the base salaries for the executive officers.
Retirement Savings Plan
The Company maintains a retirement savings plan for the benefit of our executives and employees. Our Simple IRA Plan is intended to qualify as a defined contribution arrangement under the Internal Revenue Code (the “Code”). Participants may elect to defer a percentage of their eligible pretax earnings each year or contribute a fixed amount per pay period up to the maximum contribution permitted by the Code. All participants’ plan accounts are 100% vested at all times. All assets of our Simple IRA Plan are invested based on participant-directed elections. We make certain matching contributions to the Simple IRA Plan, which are also 100% vested.
Perquisites and Other Personal Benefits
The Company’s executive officers participate in the Company’s other benefit plans on the same terms as other employees on a non-discriminatory basis. These plans include medical, dental, life and disability insurance. Relocation benefits also are reimbursed and are individually negotiated when they occur. The Company reimburses each executive officer for all reasonable business and other expenses incurred by them in connection with the performance of their duties and obligations. The Company does not provide named executive officers with any significant perquisites or other personal benefits except for personal travel using Company-owned automobiles and aircrafts. On August 28, 2023, the board of directors, after a recommendation from the Audit Committee, amended the corporate aircraft policy changing the allowed use to a maximum personal use each fiscal year, as follows: (i) 100 hours flown for the CEO and (ii) 48 hours flown each for other executive officers. Refer to footnote on All Other Compensation in the Summary Compensation Table below.
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SUMMARY COMPENSATION TABLE
The following table reflects all forms of compensation for services to us for the fiscal years ended September 30, 2025, 2024, and 2023 of our named executive officers.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | All Other Compensation(1) ($) | Total ($) | |||||||||||||||||||||||||||
| Eric S. Langan | 2025 | 1,708,775 | — | 281,728 | 1,990,503 | |||||||||||||||||||||||||||
| Former President and Chief Executive | 2024 | 1,700,000 | — | 129,649 | 1,829,649 | |||||||||||||||||||||||||||
Officer(2) | 2023 | 1,700,000 | — | 167,388 | 1,867,388 | |||||||||||||||||||||||||||
| Bradley Chhay | 2025 | 606,345 | — | 65,896 | 672,241 | |||||||||||||||||||||||||||
Former Chief Financial Officer(2) | 2024 | 600,000 | — | 63,375 | 663,375 | |||||||||||||||||||||||||||
| 2023 | 472,789 | — | 61,676 | 534,465 | ||||||||||||||||||||||||||||
| Travis Reese | 2025 | 580,040 | — | 69,423 | 649,463 | |||||||||||||||||||||||||||
| Interim President and Chief Executive | 2024 | 466,635 | — | 48,227 | 514,862 | |||||||||||||||||||||||||||
| Officer; former Executive Vice President | 2023 | 460,000 | 25,000 | 51,534 | 536,534 | |||||||||||||||||||||||||||
(1)All Other Compensation consists of SIMPLE IRA matching contributions, automobile expenses, and personal use of aircraft. We account for personal use of aircraft to be the aggregate incremental cost of personal use of the company aircraft as calculated based on a cost-per-flight-hour charge developed by a nationally recognized and independent service. The charge reflects the direct cost of operating the aircraft, including fuel, additives, lubricants, maintenance labor, airframe parts, engine restoration, and major periodic maintenance. We added actual airport/hangar fees charged to the company on a per-flight basis. The charge does not include fixed costs that do not change based on usage, such as aircraft depreciation, home hangar expenses, and general taxes and insurance. We value automobile expenses based on the annual depreciation rate of automobiles assigned for use by the particular officer, plus cost of insurance, registration, repairs, maintenance, tolls, and fuel. Tax reimbursement benefit is based on automobile fringe benefits.
A table of All Other Compensation for fiscal 2025 for our named executive officers is presented below:
| Name | SIMPLE IRA Matching Contribution ($) | Automobile Expenses ($) | Personal Use of Aircraft ($) | Tax Reimbursement ($) | Total All Other Compensation ($) | |||||||||||||||||||||||||||
| Eric S. Langan | 19,885 | 25,552 | 232,187 | 4,104 | 281,728 | |||||||||||||||||||||||||||
| Bradley Chhay | 16,384 | 44,816 | — | 4,696 | 65,896 | |||||||||||||||||||||||||||
| Travis Reese | 17,250 | 33,359 | 15,354 | 3,460 | 69,423 | |||||||||||||||||||||||||||
(2) Messrs. Langan and Chhay stepped down from their positions as President and Chief Executive Officer and Chief Financial Officer, respectively, on November 28, 2025.
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CEO Pay Ratio
We reviewed a comparison of annual total compensation of our CEO to the annual compensation of our median employee who was selected from all employees who were employed (other than the CEO) during our fiscal year ended September 30, 2025.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The compensation for our CEO in fiscal 2025 of $1,990,503 was approximately 63 times the $31,390 compensation of our fiscal 2025 median employee.
Pay vs. Performance
We are providing the following information about the relationship between executive compensation actually paid and certain financial performance measures of the Company as required by Section 953(a) of the Dodd-Frank and Consumer Protection Act, and Item 402(v) of Regulation S-K for fiscal 2025, 2024, 2023, 2022, and 2021, as it relates to our principal executive officer ("PEO") and certain non-PEO NEOs.
| Value of Initial Fixed $100 Investment Based On: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | RICK Total Shareholder Return | DJUSRU Total Shareholder Return | Net Income | Free Cash Flow | ||||||||||||||||||||||||||||||||||||||||||
| 2025 | $1,990,503 | $ | 1,961,020 | $ | 660,852 | $ | 631,369 | $ | 149.49 | $ | 146.83 | $ | 10,839,000 | $ | 45,398,000 | |||||||||||||||||||||||||||||||||||
| 2024 | $1,829,649 | $ | 1,669,815 | $ | 589,119 | $ | 429,285 | $ | 217.81 | $ | 146.72 | $ | 3,018,000 | $ | 48,421,000 | |||||||||||||||||||||||||||||||||||
| 2023 | $1,867,388 | $ | 1,905,910 | $ | 535,500 | $ | 574,022 | $ | 296.39 | $ | 120.03 | $ | 29,100,000 | $ | 53,176,000 | |||||||||||||||||||||||||||||||||||
| 2022 | $3,419,853 | $ | 3,329,003 | $ | 2,066,195 | $ | 1,975,345 | $ | 319.02 | $ | 105.38 | $ | 46,060,000 | $ | 58,911,000 | |||||||||||||||||||||||||||||||||||
| 2021 | $ | 1,545,218 | $ | 1,545,218 | $ | 504,181 | $ | 504,181 | $ | 336.19 | $ | 122.58 | $ | 30,150,000 | $ | 36,084,000 | ||||||||||||||||||||||||||||||||||
(1) Non-PEO NEOs represent Bradley Chhay and Travis Reese for each of the fiscal years presented.
(2) We selected the Dow Jones U.S. Restaurants & Bars Index as our peer group for the purpose of calculating comparable total shareholder return ("TSR"). Also refer to Item 5 of this report for our and our peer group's five-year TSR.
(3) We selected free cash flow as our Company-selected measure for this purpose.
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(4) "Compensation Actually Paid" is computed in the table below, in accordance with Item 402(v) of Regulation S-K.
| 2025 | 2024 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PEO | Average for Non-PEO NEOs | PEO | Average for Non-PEO NEOs | PEO | Average for Non-PEO NEOs | PEO | Average for Non-PEO NEOs | PEO | Average for Non-PEO NEOs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary Compensation Table total | $ | 1,990,503 | $ | 660,852 | $ | 1,829,649 | $ | 589,119 | $ | 1,867,388 | $ | 535,500 | $ | 3,419,853 | $ | 2,066,195 | $ | 1,545,218 | $ | 504,181 | |||||||||||||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deduct option awards granted during the year | — | — | — | — | — | — | (1,568,500) | (1,568,500) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Add fair value of options granted and vested at the same year | — | — | — | — | — | — | 313,700 | 313,700 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Add fair value of options granted during the year and remain unvested at year-end | — | — | — | — | — | — | 1,163,950 | 1,163,950 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (decrease) for change in fair value from prior year-end to current year-end of options granted in prior year | (62,527) | (62,527) | (143,490) | (143,490) | (62,527) | (62,527) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (decrease) for change in fair value from prior year-end to current year vesting date of options granted in prior year | 33,044 | 33,044 | (16,344) | (16,344) | 101,049 | 101,049 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation Actually Paid | $ | 1,961,020 | $ | 631,369 | $ | 1,669,815 | $ | 429,285 | $ | 1,905,910 | $ | 574,022 | $ | 3,329,003 | $ | 1,975,345 | $ | 1,545,218 | $ | 504,181 | |||||||||||||||||||||||||||||||||||||||
The mix of compensation paid to our PEO and non-PEO NEOs is mostly cash salary that is fixed, as shown in the Summary Compensation Table above. Except for the stock options granted in fiscal 2022, there had been no stock-based compensation awarded since fiscal 2014. We also currently do not have long-term incentive plans that are based on the Company's stock price or any of our financial measures. As shown in the charts below, the compensation actually paid to our PEO and non-PEO NEOs is not directly aligned with our Company and peer group total shareholder return or with our Company's net income and free cash flow in the fiscal years presented.
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GRANTS OF PLAN-BASED AWARDS
There were no grants of plan-based awards for fiscal 2025.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information with respect to outstanding stock options awards for each of our named executive officers as of September 30, 2025.
| Option Awards | ||||||||||||||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($/Sh) | Option Expiration Date | |||||||||||||||||||||||||||
| Eric S. Langan | 2/9/2022 | 40,000 | 10,000 | 100.00 | 2/9/2027 | |||||||||||||||||||||||||||
| Bradley Chhay | 2/9/2022 | 40,000 | 10,000 | 100.00 | 2/9/2027 | |||||||||||||||||||||||||||
| Travis Reese | 2/9/2022 | 40,000 | 10,000 | 100.00 | 2/9/2027 | |||||||||||||||||||||||||||
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2025
There were no stock options exercised nor stock that vested during the fiscal year ended September 30, 2025.
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DIRECTOR COMPENSATION
We pay the expenses of our directors in attending board meetings. We paid no equity-based compensation during the fiscal year ended September 30, 2025, and we paid our independent directors $50,000 in cash for the fiscal year. The Audit Committee chair received additional compensation of $10,000 in cash. Following is a schedule of all compensation paid to our directors in the year ended September 30, 2025:
| Name | Fees earned or paid in cash ($) | |||||||
| Luke C. Lirot | 50,000 | |||||||
| Yura Barabash | 60,000 | |||||||
| Elaine Martin | 50,000 | |||||||
| Arthur Allan Priaulx | 50,000 | |||||||
| Eric S. Langan | — | |||||||
| Travis Reese | — | |||||||
EMPLOYMENT AGREEMENTS
On September 5, 2024, we entered into new two-year employment agreements with Eric Langan, our former President and Chief Executive Officer, and Travis Reese, our Interim President and Chief Executive Officer and former Executive Vice President, which agreements were effective as of September 1, 2024. Under their respective new agreements, Mr. Reese’s annual salary increased to $575,000; and Mr. Langan’s annual salary is $1,700,000. The term of each of the agreements commenced on September 1, 2024, and will end on August 31, 2026. Although Mr. Langan and Mr. Reese changed titles with the Company in November 2025, each individual will continue to receive the same compensation and benefits under their respective employment agreements.
Each of the employment agreements above provides for bonus eligibility, expense reimbursement, health benefits, participation in our benefit plans, use of a company-owned automobile, access to company-owned aircraft (subject to the terms and conditions of our corporate aircraft policy), and two weeks paid vacation annually. Under the terms of the new agreements, each executive is bound to a confidentiality provision and cannot compete with us for a period upon termination of the agreement. Further, in the event we terminate any such employee without cause or such employee terminates his employment because we reduce or fail to pay his compensation or materially change his responsibilities, such employee is entitled to receive in one lump sum payment the full remaining amount under the term of his employment agreement to which he would have been entitled had his agreement not been terminated.
Currently, our executive officers do not have long-term incentive plans or defined benefit or actuarial plans outstanding.
EMPLOYEE STOCK OPTION PLANS
On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000. The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each to six members of management subject to the approval of the 2022 Plan.
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Timing of Grants of Certain Equity Awards
COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT
We attempt to make our compensation programs discretionary, balanced and focused on the long term. We believe goals and objectives of our compensation programs reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Our approach to compensation practices and policies applicable to employees and consultants is consistent with that followed for our executives. Based on these factors, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis to be included in this Form 10-K. Based on the reviews and discussions referred to above, the Compensation Committee recommends to the board of directors that the Compensation Discussion and Analysis referred to above be included in this report. This report is furnished by the Compensation Committee of our board of directors, whose members are:
Elaine Martin
Luke Lirot
Yura Barabash
Arthur Allan Priaulx
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Ms. Martin and Messrs. Lirot, Barabash, and Priaulx. No interlocking relationship exists between any member of the Compensation Committee and any member of any other company’s board of directors or compensation committee.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information at March 13, 2026, with respect to the beneficial ownership of shares of common stock by (i) each person known to us who owns beneficially more than 5% of the outstanding shares of common stock, (ii) each of our directors, (iii) each of our named executive officers and (iv) all of our named executive officers and directors as a group. Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o RCI Hospitality Holdings, Inc., 10737 Cutten Road, Houston, Texas 77066. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. Applicable percentage ownership is based on 7,710,000 shares of common stock outstanding at March 13, 2026. Generally, in computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deem outstanding shares of common stock subject to stock options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 13, 2026, and shares of common stock issuable upon conversion of other securities held by that person that are currently convertible or convertible within 60 days of March 13, 2026; we do not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
| Name/Address | Common Stock | Percent of Class (1) | ||||||||||||
| Executive Officers and Directors | ||||||||||||||
| Eric S. Langan | 756,370 | (2)(3) | 9.75 | % | ||||||||||
| Bradley Chhay | 53,607 | (2)(4) | * | |||||||||||
Travis Reese | 62,671 | (2) | * | |||||||||||
Albert Molina | 100 | * | ||||||||||||
Yura Barabash | 1,149 | * | ||||||||||||
| Luke Lirot | 518 | * | ||||||||||||
| Elaine Martin | 11,751 | * | ||||||||||||
| Arthur Allan Priaulx | 2,000 | * | ||||||||||||
| All of our Directors and Officers as a Group of seven persons | 888,165 | 11.30 | % | |||||||||||
| Other > 5% Security Holders | ||||||||||||||
BlackRock, Inc. (5) | 633,098 | 8.21 | % | |||||||||||
The Vanguard Group - 23-1945930 (6) | 513,742 | 6.66 | % | |||||||||||
Progeny 3, Inc. (7) | 408,605 | 5.30 | % | |||||||||||
(1)These percentages exclude treasury shares in the calculation of percentage of class.
(2)Includes stock options that are currently exercisable into 50,000 shares of common stock.
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(3)630,609 shares of stock are held in a brokerage account that is pledged as collateral for a loan obligation of Mr. Langan.
(4)The number of shares is rounded to the nearest whole number. The actual amount is 53,606.681 shares.
(5)Based on the most recently available Schedule 13G filed with the SEC on January 26, 2024, by BlackRock Inc. BlackRock beneficially owned 633,098 shares, with sole voting power and sole dispositive power over all such shares. The address of BlackRock is 50 Hudson Yards, New York, New York 10001.
(6)Based on the most recently available Schedule 13G filed with the SEC on January 30,2026, by The Vanguard Group - 23-1945930. The Vanguard Group - 23-1945930 beneficially owned an aggregate of 513,742 shares, with sole voting power over 0 shares, shared voting power over 67,947 shares, sole dispositive power over 0 shares and shared dispositive power over 513,742 shares. The address of Vanguard Group - 23-1945930 is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(7)Based on the most recently available Schedule 13G filed with the SEC on August 14, 2025, by Progeny 3, Inc. Progeny 3, Inc. beneficially owned 408,605 shares, with sole voting power and sole dispositive power over all such shares. Jon Hemingway controls Progeny 3, Inc. The address of Progeny 3, Inc. is 5209 Lake Washington Blvd NE, Suite 200, Kirkland, Washington 98033.
The Company is not aware of any arrangements that could result in a change in control of the Company.
The disclosure required by Item 201(d) of Regulation S-K is set forth in Item 5 herein and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Presently, our director and former Chairman, President, and CEO, Eric Langan, personally guarantees all of the commercial bank indebtedness of the company. Mr. Langan receives no compensation or other direct financial benefit for any of the guarantees. Three adult children of Mr. Langan are also employed by the Company in corporate shared services. Colby Langan, one of Eric Langan's adult children mentioned above, is currently the President of RCI Development Services, Inc., which manages strategy on the Company's new business ventures, and received $244,342, $180,960, and $184,068 in employment compensation during the fiscal year ended September 30, 2025, 2024, and 2023, respectively. Included also in the adult children mentioned above is Ashley Wilkins, Eric Langan's daughter, who worked in the Treasury Department of the Company until July 2025, and received $99,639 and $123,600 in employment compensation during the fiscal year ended September 30, 2025, and 2024, respectively.
In October 2021, we borrowed $500,000 from Ed Anakar, President of RCI Management Services, Inc. and our Director of Operations and brother of former director Nourdean Anakar, and $150,000 from Allen Chhay, brother of the Company's former CFO, Bradley Chhay, as part of a larger group of private lenders (see Note 9 to our consolidated financial statements). Their promissory notes bear interest at the rate of 12% per annum and mature in October 2024 and later extended to October 2026. The notes are payable in monthly installments of interest only with a balloon payment of all unpaid principal and interest due at maturity. The terms of the notes are the same as the rest of the lender group. Refer to Note 9 to our consolidated financial statements for the October 2023 extension of term of promissory notes. As of September 30, 2025, the amount borrowed from Ed Anakar has been fully paid.
We paid Ed Anakar employment compensation of $763,691, 759,605, and $718,539 during the fiscal years ended September 30, 2025, 2024, and 2023, respectively.
We used the services of Tall Oak Custom Furniture and Nottingham Barrels and Furniture, previously Nottingham Creations, all furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Tall Oak Custom Furniture and Nottingham Barrels and Furniture are owned by a brother of Eric Langan (as was Nottingham Creations). Amounts billed to us for goods and services provided by Tall Oak Custom Furniture, Nottingham Barrel and Furniture, and Nottingham Creations were approximately $19,477 in fiscal 2025, $350,000 in fiscal 2024, and $195,000 in fiscal 2023. As of September 30, 2025, 2024, and 2023 we owed
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Tall Oak Custom Furniture, Nottingham Barrel and Furniture, and Nottingham Creations $3,312, $18,700, and $10,700 respectively, in unpaid billings.
TW Mechanical LLC (“TW Mechanical”) provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 2025, 2024, and 2023. A son-in-law of Eric Langan owns a 50% interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were approximately $555, $16,491, and $443,295 for the fiscal years 2025, 2024, and 2023, respectively. Amounts billed directly to the Company were approximately $4,615, $3,160, and $9,430 for the fiscal years 2025, 2024, and 2023, respectively. As of September 30, 2025, 2024, and 2023 the Company owed TW Mechanical approximately $0, $0, and $0, respectively, in unpaid direct billings.
Review, Approval, or Ratification of Related Transactions
On September 23, 2019, the board of directors, acting upon the recommendation of its Audit Committee, adopted a written related party transaction policy, under which related party transactions are subject to review, approval, rejection, modification and/or ratification by the Audit Committee. The policy provides that prior to the entry into any transaction between the Company and one of its officers, directors, 5% shareholders or an immediate family member of any of the foregoing (a “related party”), such transaction will be reported to the Company’s chief compliance officer. The Company’s chief compliance officer will undertake an evaluation of the transaction. If that evaluation indicates that the transaction would require the Audit Committee’s approval, the Company’s chief compliance officer will report this transaction to the Audit Committee. The Audit Committee will review the material facts of all related party transactions that require the Audit Committee’s approval and either approve or disapprove of the entry into the related party transaction. If advance Audit Committee approval of a related party transaction is not feasible, then the related party transaction will be considered and, if the Audit Committee determines it to be appropriate, ratified at the Audit Committee’s next regularly scheduled meeting. In determining whether to approve or ratify a related party transaction, the Audit Committee will take into account factors it deems appropriate. In the event that the Audit Committee determines not to ratify and approve the related party transaction, then the Audit Committee will instruct that the related party transaction be rescinded or unwound. The Audit Committee will not approve or ratify any related party transaction unless it deems that the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director will participate in any discussion or approval of a related party transaction for which he or she is a related party, except that the director shall provide all material information concerning the transaction to the Audit Committee.
In reviewing related party transactions under the policy, the Audit Committee will review and consider one or more of the following as it seems appropriate for the circumstances: (1) the related party’s interest in the related party transaction; (2) the approximate dollar value of the amount involved in the related party transaction; (3) the approximate dollar value of the amount of the related party’s interest in the transaction without regard to the amount of any profit or loss; (4) whether the transaction was undertaken in the ordinary course of business of the Company; (5) whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party; (6) the purpose of, and the potential benefits to the Company of, the related party transaction; (7) whether the related party transaction would impair the independence of an outside director; (8) required public disclosure, if any; and (9) any other information regarding the related party transaction or the related party in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. The Audit Committee will review all relevant information available to it about the related party transaction. The Audit Committee may approve or ratify the related party transaction only if the Audit Committee determines in good faith that, under all of the circumstances, the transaction is fair as to the Company. The Audit Committee, in its sole discretion, may impose such condition as it deems appropriate on the Company or the related party in connection with approval of the related party transaction.
Our Audit Committee is composed of all independent directors, including Yura Barabash, Elaine Martin and Arthur Allan Priaulx. We additionally have one other independent director, Luke Lirot, who is not on the Audit Committee. The definition of “independent” used herein is based on the independence standards of The NASDAQ Stock Market LLC.
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Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following table sets forth the aggregate fees paid or accrued for professional services and the aggregate fees paid or accrued for audit-related services and all other services rendered by CBIZ CPAs P.C. and Marcum LLP for the fiscal 2025 and 2024.
| CBIZ 2025 | Marcum 2024 | ||||||||||
| Audit fees | $ | 1,839,690 | $ | 1,313,698 | |||||||
| Audit-related fees | — | 20,600 | |||||||||
| Tax fees | — | — | |||||||||
| All other fees | — | — | |||||||||
| Total | $ | 1,839,690 | $ | 1,334,298 | |||||||
“Audit fees” include fees billed for professional services rendered in connection with the annual audit and quarterly reviews of the Company’s consolidated financial statements, the audit of internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002, and assistance with securities filings other than periodic reports.
“Audit-related fees” include professional services in relation to review of our franchise disclosure document.
“Tax fees” include consultation related to tax compliance and tax structuring.
“All other fees” include fees billed for professional services rendered in connection with the SEC investigation.
All above audit services, audit-related services and tax services were pre-approved by the Audit Committee, which concluded that the provision of such services by CBIZ CPAs P.C. and Marcum LLP was compatible with the maintenance of those firms’ independence in the conduct of their auditing functions. The Audit Committee’s outside auditor independence policy provides for pre-approval of all services performed by the outside auditors.
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PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
| Exhibit No. | Description | |||||||
| 3.1 | Articles of Incorporation dated December 9, 1994. (Incorporated by reference from Form SB-2 filed with the SEC on January 11, 1995.) * | |||||||
| 3.2 | Certificate of Amendment to Articles of Incorporation dated September 9, 2008. (Incorporated by reference from Definitive Schedule 14A filed with the SEC on July 21, 2008.) * | |||||||
| 3.3 | Certificate of Amendment to Articles of Incorporation dated August 6, 2014. (Incorporated by reference from Definitive Schedule 14A filed with the SEC on June 24, 2014.) * | |||||||
| 3.4 | Amended and Restated Bylaws (Incorporated by reference from Form 8-K filed with the SEC on March 16, 2016.) * | |||||||
| 4.1 | Consolidated, Amended and Restated Promissory Note for $99,145,838.22 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * | |||||||
| 4.2 | 10-Year Secured Promissory Note for $11,000,000 by Big Sky Hospitality Holdings, Inc. to Family Dog, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 4.3 | 20-Year Secured Promissory Note for $8,000,000 by Big Sky Hospitality Holdings, Inc. to Family Dog, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 4.4 | 10-Year Promissory Note for $1,200,000 by RCI Holdings, Inc. to 3480 South Galena, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 4.5 | IP Promissory Note for $1,000,000 by Big Sky Hospitality Holdings, Inc. to Club Licensing, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 4.6 | Promissory Note for $18,740,000 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * | |||||||
| 4.7 | Revolving Promissory Note for $10,000,000 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * | |||||||
| 4.8 | Form of Promissory Note dated March 16, 2023 (in connection with Baby Dolls/Chicas Locas acquisition transaction) (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * | |||||||
| 4.9 | Promissory Note (Real Estate) with Duncan Burch dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * | |||||||
| 4.10 | Amended and Restated 12% Unsecured Promissory Note (form of amortizing payment schedule version of the note) (Incorporated by reference from Form 8-K filed with the SEC on October 26, 2023) * | |||||||
| 4.11 | Promissory Note for $20,000,000 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * | |||||||
| 4.12 | The description of our common stock (Incorporated by reference from Form 10-K filed with the SEC on December 14, 2020) * | |||||||
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| 10.1 | Employment Agreement with Eric S. Langan. (Incorporated by reference from Form 8-K filed with the SEC on September 5, 2024) * | |||||||
| 10.2 | Employment Agreement with Bradley Chhay (Incorporated by reference from Form 8-K filed with the SEC on August 30, 2023) * | |||||||
| 10.3 | Employment Agreement with Travis Reese (Incorporated by reference from Form 8-K filed with the SEC on September 5, 2024) * | |||||||
| 10.4 | Loan Agreement between RCI Holdings, Inc. and Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * | |||||||
| 10.5 | Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * | |||||||
| 10.6 | Absolute Unconditional and Continuing Guaranty of Eric S. Langan (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * | |||||||
| 10.7 | Guaranty by RCI Hospitality Holdings, Inc. in favor of Family Dog (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 10.8 | Guaranty by RCI Hospitality Holdings, Inc. in favor of 3480 South Galena LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 10.9 | Guaranty by RCI Hospitality Holdings, Inc. in favor of Club Licensing, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 10.10 | Lock-Up Agreement between RCI Hospitality Holdings, Inc. and Family Dog, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 10.11 | Lock-Up Agreement by RCI Hospitality Holdings, Inc. in favor of Club Licensing, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * | |||||||
| 10.12 | Loan Agreement between RCI Holdings, Inc. and Centennial Bank dated January 25, 2022 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * | |||||||
| 10.13 | Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. dated January 25, 2022 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * | |||||||
| 10.14 | Absolute Unconditional and Continuing Guaranty of Eric S. Langan dated January 25, 2022 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * | |||||||
| 10.15 | Loan Agreement with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * | |||||||
| 10.16 | Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * | |||||||
| 10.17 | Absolute Unconditional and Continuing Guaranty of Eric Langan (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * | |||||||
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| 10.18 | Form of Absolute Unconditional and Continuing Guaranty of Burch Management Company, Inc. dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * | |||||||
| 10.19 | Form of Absolute Unconditional and Continuing Guaranty of BD Hospitality Acquisition, Inc. dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * | |||||||
| 10.20 | Lock-Up Agreement with Duncan Burch dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * | |||||||
| 10.21 | Loan Agreement between RCI Holdings, Inc. and Centennial Bank dated April 30, 2024 (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * | |||||||
| 10.22 | Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. dated April 30, 2024 (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * | |||||||
| 10.23 | Absolute Unconditional and Continuing Guaranty of Eric S. Langan dated April 30, 2024 (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * | |||||||
| 19.1 | Policy on Insider Trading (Incorporated by reference from Form 10-K filed with the SEC on December 16, 2024) * | |||||||
| 21.1 | Subsidiaries | |||||||
| 23.1 | Consent of CBIZ CPAs P.C. | |||||||
| 23.2 | Consent of Marcum LLP | |||||||
| 31.1 | Certification of Chief Executive Officer of RCI Hospitality Holdings, Inc. required by Rule 13a-14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 31.2 | Certification of Chief Financial Officer of RCI Hospitality Holdings, Inc. required by Rule 13a-14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer of RCI Hospitality Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63. | |||||||
| 97.1 | Policy for Recovery of Erroneously Awarded Incentive Compensation (Incorporated by reference from Form 10-K filed with the SEC on December 14, 2023) * | |||||||
| 101 | The following financial information from RCI Hospitality Holdings, Inc.'s Annual Report on Form 10-K for the year ended September 30, 2025 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Statements of Cash Flows, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Balance Sheets, and (v) Notes to the Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
*Incorporated by reference from our previous filings with the SEC.
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Item 16. FORM 10-K SUMMARY.
None.
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SIGNATURES
In accordance with the requirements of Section 13 of 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 19, 2026.
| RCI Hospitality Holdings, Inc. | ||||||||
| By: | /s/ Travis Reese | |||||||
Travis Reese | ||||||||
Interim Chief Executive Officer and President | ||||||||
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons in the capacities and on the dates indicated:
| Signature | Title | Date | ||||||||||||
| /s/ Eric S. Langan | ||||||||||||||
| Eric S. Langan | Director | March 19, 2026 | ||||||||||||
/s/ Travis Reese | ||||||||||||||
Travis Reese | Director, Interim Chief Executive Officer and President | March 19, 2026 | ||||||||||||
/s/ Albert Molina | ||||||||||||||
Albert Molina | Interim Chief Financial Officer and Principal Accounting Officer | March 19, 2026 | ||||||||||||
| /s/ Yura Barabash | ||||||||||||||
| Yura Barabash | Director | March 19, 2026 | ||||||||||||
| /s/ Luke Lirot | ||||||||||||||
| Luke Lirot | Director | March 19, 2026 | ||||||||||||
| /s/ Elaine Martin | ||||||||||||||
| Elaine Martin | Director | March 19, 2026 | ||||||||||||
/s/ Arthur Allan Priaulx | ||||||||||||||
| Arthur Allan Priaulx | Director | March 19, 2026 | ||||||||||||
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Rci Hospitality
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