What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2020-12-14 compared with 2020-02-13 · 48 added, 867 removed, 47 unchanged (95% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

common stock is quoted on the NASDAQ Global Market under the symbol “RICK.”

On February 6,

2020, the closing stock price for our common stock as reported by NASDAQ was $18.00, and there were approximately 150

stockholders of record of our common stock (excluding broker held shares in “street name”).

Currently, we

estimate that there are approximately 5,900 stockholders having beneficial ownership in street name.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

common stock is quoted on the NASDAQ Global Market under the symbol “RICK.”

December 8, 2020, the closing stock price for our common stock as reported by NASDAQ was $28.01, and there were approximately

150 stockholders of record of our common stock (excluding broker held shares in “street name”).

Currently, we estimate

that there are approximately 5,500 stockholders having beneficial ownership in street name.

Agent and Registrar

4 unchanged sentences

(see discussion below), our Board of Directors has declared regular quarterly cash dividends of $0.03 per share, except for the

fourth quarter of fiscal 2019 when we paid $0.04 per share.

During fiscal 2019, 2018, and 2017, we paid an aggregate amount of

$1.3 million, $1.2 million, and $1.2 million, respectively, for cash dividends.

fourth quarter of fiscal 2019 and the second and fourth quarters of fiscal 2020 when we paid $0.04 per share.

During fiscal 2020,

2019, and 2018, we paid cash dividends totaling $1.3 million, $1.3 million, and $1.2 million, respectively.

of Equity Securities by the Issuer

9 unchanged sentences

shares were purchased pursuant to the repurchase plans approved by the Board of Directors.

to September 30, 2019 through the filing date of this report, we purchased 332,671 shares of the Company’s

common stock for a total of $6.4 million.

On February 6, 2020, the Board of Directors increased the repurchase

authorization by an additional $10.0 million.

Compensation Plan Information

have no stock options nor any other equity award outstanding under equity compensation plans as of September 30, 2019.

Subsequent to September 30, 2020 through

the filing date of this report, we purchased 74,659 shares of the Company’s common stock for a total of $1.8

Compensation Plan Information

of Securities

Future Issuance

of Securities

be Issued Upon

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

shares that may be granted in the form of either incentive stock options or non-qualified stock options under the 2010 Stock

Option Plan (the “2010 Plan”).

The 2010 Plan is administered by the Board of Directors or by a compensation committee

of the Board of Directors.

The Board of Directors 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 2010 Plan.

Company’s 2010 Stock Option Plan expired on September 30, 2020.

Performance Graph

following chart compares the 5-year cumulative total stock performance of our common stock;

The following chart compares the 5-year cumulative

total stock performance of our common stock;

the NASDAQ Composite Index (IXIC);

and the Dow Jones U.S.

the Russell 200 Index (RUT);

Restaurant & Bar Index (DJUSRU), our peer index.

The graph assumes a hypothetical investment of $100

on September 30, 2014 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

The calculations exclude trading commissions and taxes.

The graph assumes a hypothetical investment of $100 on September

30, 2015 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

RICK is a component of the NASDAQ Composite Index.

The historical stock performance presented below is not intended

to and may not be indicative of future stock performance.

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.

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.

Selected Financial Data.

following tables set forth certain of the Company’s historical financial data.

The selected historical consolidated financial

position data as of September 30, 2019 and 2018 (as revised) and results of operations data for the years ended September

30, 2019, 2018 (as revised), and 2017 have been derived from the Company’s audited consolidated financial statements

and related notes included elsewhere in this Annual Report on Form 10-K.

The selected historical consolidated financial data as

of September 30, 2017, 2016, and 2015 and for the years ended September 30, 2016 and 2015 have been derived from the Company’s

audited financial statements for such years, which are not included in this Annual Report on Form 10-K.

The selected historical

consolidated financial data set forth are not necessarily indicative of the results of future operations and should be read in

conjunction with the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and

Results of Operations,”

and the historical consolidated financial statements and accompanying notes included herein to enhance

understanding of these data (in thousands, except per share data and percentages).

position data as of September 30, 2020 and 2019 and results of operations data for the years ended September 30, 2020, 2019 (as

revised), 2018 have been derived from the Company’s audited consolidated financial statements and related notes included

elsewhere in this Annual Report on Form 10-K.

The selected historical consolidated financial data as of September 30, 2018, 2017,

and 2016 and for the years ended September 30, 2017 and 2016 have been derived from the Company’s audited financial statements

for such years, which are not included in this Annual Report on Form 10-K.

The selected historical consolidated financial data

set forth are not necessarily indicative of the results of future operations and should be read in conjunction with the discussion

under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and

the historical consolidated financial statements and accompanying notes included herein to enhance understanding of these data

(in thousands, except per share data and percentages).

Statement Data:

2 unchanged sentences

Operating margin

Net income attributable to RCIHH(2)

Diluted earnings per share(2)

Net income (loss) attributable to RCIHH

Diluted earnings (loss) per share

Capital expenditures

2 unchanged sentences

Total current assets

Total assets(2)

Total current liabilities (excluding current portion of long-term debt)

Total current liabilities (excluding current portion of long-term debt and operating lease liabilities)

Long-term debt (including current portion)

Total liabilities

Total RCIHH stockholders’

Total RCIHH stockholders’ equity

Common shares outstanding

5 unchanged sentences

Non-GAAP net income

Non-GAAP diluted net income per share(1)

Non-GAAP diluted earnings per share

Free cash flow

1 unchanged sentence

Reconciliation

and discussion of non-GAAP financial measures are included under the “Non-GAAP Financial Measures”

Item 7 –

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

These measures should be considered in addition to, rather than as a substitute for, U.S.

GAAP measures.

line items in the fiscal 2018 “Non-GAAP Financial Measures”

section have been revised, as affected by (2) below.

revised the consolidated balance sheet as of September 30, 2018 and the consolidated statements of income and cash flows for

the year ended September 30, 2018 due to certain misstatements in our goodwill impairment testing.

See Note 3 to our consolidated

financial statements.

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

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:

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.

Accounting Policies and Estimates —

a discussion of accounting policies that require critical judgments and estimates.

Review —

an analysis of our Company’s consolidated results of operations for the three years presented in our

consolidated financial statements.

and Capital Resources —

an analysis of cash flows, aggregate contractual obligations, and an overview of financial position.

following are our operating segments:

wholly-owned subsidiaries own and/or operate upscale adult nightclubs serving primarily businessmen and professionals.

nightclubs are in Houston, Austin, San Antonio, Dallas, Fort Worth, Beaumont, Longview, Harlingen, Edinburg, Abilene, Lubbock,

El Paso and Odessa, Texas;

Charlotte, North Carolina;

Minneapolis, Minnesota;

New York, New York;

Miami Gardens and Pembroke

Park, Florida;

Pittsburgh, Pennsylvania;

Phoenix, Arizona;

and Washington Park, Kappa and Chicago, Illinois.

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.

wholly-owned subsidiaries own and operate restaurants and sports bars in Houston, Dallas, Austin, Spring and Pearland, Texas

under the brand name Bombshells Restaurant & Bar.

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.

here is Drink Robust, which is licensed to sell Robust Energy Drink in the United States.

revenues are derived from the sale of liquor, beer, wine, food, 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.

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.

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 month 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 definition stated above.

Revenues outside of our Nightclubs and Bombshells

reportable segments are excluded from same-store sales calculation.

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.

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.

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.

reviewed these critical accounting policies and estimates and related disclosures with our Audit Committee.

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.

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.

If fair value is used to determine

an impairment loss, 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 the fourth quarter of 2019, we impaired two clubs for a total of

$4.2 million;

during the fourth quarter of 2018, we impaired one club and one Bombshells by a total of $1.6 million;

the fourth quarter of fiscal 2017, we impaired one club by $385,000.

and Other Intangible Assets

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.

impairment calculations require management to make assumptions and to apply judgment in order to estimate fair values.

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.

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 earnings multiples, 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, 2019, we identified four reporting

units that were impaired and recognized a goodwill impairment loss totaling $1.6 million.

For the year ended September 30, 2018,

we identified two reporting units that were impaired and recognized a goodwill impairment loss totaling $834,000.

ended September 30, 2017, we identified four reporting units that were impaired and recognized a goodwill impairment loss totaling

$4.7 million.

indefinite-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.

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.

impairment charges for SOB licenses amounting to $178,000 in 2019 related to one club, $3.1 million in 2018 related to three clubs,

and $1.4 million in 2017 related to two clubs.

the fourth quarter of fiscal 2017, we also fully impaired our remaining investment in Drink Robust amounting to $1.2 million.

Available-for-sale investments are carried at fair value with the unrealized gain or loss recorded in other comprehensive income

until our adoption of Accounting Standards Update No.

2016-01 on October 1, 2018, at which the change in fair value is recorded

in current earnings.

See Note 2 to our consolidated financial statements.

estimate certain components of our provision for income taxes.

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.

December 22, 2017, the Tax Act was signed into law.

The Tax Act contains significant changes to corporate taxation, including

reduction of the corporate tax rate from 35% to 21%, additional limitations on the tax deductibility of interest, immediate deductions

for certain new investments instead of deductions for depreciation expense over time, and modification or repeal of many business

deductions and credits.

Our federal corporate income tax rate for fiscal 2018 was 24.5% percent and represents a blended income

tax rate for the current fiscal year.

For fiscal 2019, our federal corporate income tax rate was 21%.

and Other Contingencies

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.

of operations from fiscal 2019 compared to fiscal 2018 (with fiscal 2017 comparative data) are as follows:

of $181.1 million compared to $165.7 million, a 9.2% increase

revenue of $148.6 million compared to $140.1 million in 2018, a 6.1% increase

revenue of $30.8 million compared to $24.1 million in 2018, a 27.9% increase

2017 total revenues of $144.9 million (Nightclubs revenue of $124.7 million and Bombshells revenue of $18.8 million)

same-store sales decrease of 0.3% (0.6% increase for Nightclubs and 6.1% decrease for Bombshells)

Consolidated,

Nightclubs and Bombshells same-store sales in 2018 (compared to 2017) of +4.6%,

+5.8% and -3.3%, respectively

Consolidated,

Nightclubs and Bombshells same-store sales in 2017 (compared to 2016) of +4.9%,

+5.1% and +3.5%, respectively

earnings per share (“EPS”) of $1.99 compared to $2.15, a 7.4% decrease (non-GAAP diluted EPS* of $2.31 compared

to $2.18, a 6.0% increase) (diluted EPS of $0.85 and non-GAAP diluted EPS of $1.43 in fiscal 2017)

cash flow* of $33.3 million compared to $23.2 million, a 43.3% increase

($19.3 million in fiscal 2017)

Reconciliation

and discussion of non-GAAP financial measures are included under the “Non-GAAP Financial Measures”

and discussion of non-GAAP financial measures are included under the “Non-GAAP Financial Measures” section of

Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that

These measures should be considered in addition to, rather than as a substitute for, U.S.

GAAP measures.

following common size tables present a comparison of our results of operations as a percentage of total revenues for the past

three fiscal years:

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

Total revenues

Cost of goods sold

Alcoholic beverages

Food and merchandise

Service and other

Total cost of goods sold (exclusive of items shown separately below)

Salaries and wages

Selling, general and administrative

Depreciation and amortization

Other charges, net

Total operating expenses

Income from operations

Other income (expenses)

Interest expense

Interest income

Unrealized loss on equity securities

Income before income taxes

Income tax expense (benefit)

may not foot due to rounding.

Percentage of revenue for individual cost of goods sold items pertains to their respective revenue

is a table presenting the changes in each line item of the income statement for the last three fiscal years (dollar amounts in

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

Total revenues

Cost of goods sold

Alcoholic beverages

Food and merchandise

Service and other

Total cost of goods sold (exclusive of items shown separately below)

Salaries and wages

Selling, general and administrative

Depreciation and amortization

Other charges, net

Total operating expenses

Income from operations

Other income/expenses

Interest expense

Interest income

Unrealized loss on equity securities

Income before income taxes

Income tax expense/benefit

revenues increased by $15.3 million, or 9.2%, from 2018 to 2019, and increased by $20.9 million, or 14.4%, from 2017 to 2018.

The increase from 2018 to 2019 was mainly due to a 10.9% increase from newly acquired or constructed units and a 0.3% increase

in other revenues, partially offset by a 1.7% decrease from closed units and the impact of the 0.3% decline in same-store sales.

The increase from 2017 to 2018 was primarily due to 11.5% in newly acquired or constructed or reconcepted locations, the impact

of the 4.6% increase in consolidated same-store sales, and a minimal increase in other revenues, partially offset by a 1.8% decrease

from closed locations.

reportable segment, revenues were as follows (in thousands):

segment revenues.

Nightclubs revenues increased by 6.1% and 12.3% from 2018 to 2019 and from 2017 to 2018, respectively.

breakdown of the changes compared to total change in Nightclubs revenues is as follows:

Impact of 0.6% and 5.8% increase in same-store sales, respectively, to total revenues

Newly acquired and reconcepted units

type of revenue line item, changes in Nightclubs segment revenue dollars are broken down as:

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

segment sales mix did not change much through the three fiscal years:

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

in the 2019 new units are Rick’s Cabaret Chicago and Rick’s Cabaret Pittsburgh, which were acquired in November 2018

(see Note 15 to our consolidated financial statements) and contributed $5.0 million and $4.6 million in revenues for 2019 since

acquisition date.

Included in the 2018 new units is Kappa Men’s Club, which was acquired in May 2018.

in other revenues of the Nightclubs segment is real estate rental revenue amounting to $1.7 million in 2019, $1.2 million in 2018,

and $1.1 million in 2017.

segment revenues.

Bombshells revenues increased by 27.9% from 2018 to 2019 and by 28.0% from 2017 to 2018.

A breakdown of the changes compared to total changes in Bombshells revenues is as follows:

Impact of 6.1% and 3.3% decrease in same-store sales, respectively, to total revenues

type of revenue line item, changes in Bombshells segment revenues are broken down as:

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

segment sales mix for the three fiscal years is as follows:

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

290 was opened early in the fourth quarter of 2017.

Bombshells Pearland was opened in the third quarter of 2018.

Bombshells I-10

was opened in the first quarter of 2019, while Bombshells 249 was opened in the second quarter of 2019.

segment revenues.

Other revenues included revenues from Drink Robust in 2019 and 2018.

After a brief period when a majority

of our interest in Drink Robust was sold, we later reacquired Drink Robust in March 2018 (see Note 15 to our consolidated financial

Drink Robust sales were $231,000, $141,000, and $0 in fiscal 2019, 2018, and 2017, respectively, which excludes intercompany

sales to Nightclubs and Bombshells units.

Media business revenues were $1.4 million, $1.4 million, and $1.2 million in fiscal

2019, 2018, and 2017, respectively.

operating expenses, as a percent of revenues, were 80.8%, 83.4%, and 84.0% for the fiscal year 2019, 2018, and 2017, respectively.

Significant contributors to the change in operating expenses as a percent of revenues are explained below.

of goods sold includes cost of alcoholic and non-alcoholic beverages, food, cigars and cigarettes, merchandise, media printing/binding

As a percentage of consolidated revenues, consolidated cost of goods sold was 13.8%, 13.8%, and 14.3% for fiscal 2019,

2018, and 2017, respectively.

See above for 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 11.2%, 11.8%, and 12.7%

for fiscal 2019, 2018, and 2017, respectively, which was primarily caused by sales mix shifting over to high-margin revenues.

Bombshells cost of goods sold of 25.3%, 24.7%, and 24.8% for fiscal 2019, 2018, and 2017, respectively, which was mainly driven

by food cost inflation.

salaries and wages increased by $5.3 million, or 11.9%, from 2018 to 2019 and by $4.5 million, or 11.3%, from 2017 to 2018.

dollar increase from 2018 to 2019 primarily came from newly opened units plus the impact of pre-opening salaries and wages on

still under-construction Bombshells units.

The dollar increase from 2017 to 2018 was mainly from new club and restaurant openings.

As a percentage of revenues, consolidated salaries and wages has been fairly stable at 27.5%, 26.9%, and 27.6% for fiscal year

2019, 2018, and 2017, respectively.

reportable segment, salaries and wages are broken down as follows (in thousands):

General corporate

manager payroll is included in salaries and wages of each location, while payroll for regional manager and above are included

in general corporate.

components of consolidated selling, general and administrative expenses are in the tables below (dollars in thousands):

Ended September 30,

Taxes and permits

Advertising and marketing

Supplies and services

Charge card fees

Accounting and professional fees

Repairs and maintenance

reportable segment, selling, general and administrative expenses are broken down as follows (in thousands):

General corporate

significant variances in selling, general and administrative expenses are as follows:

Taxes and permits increased

by $1.2 million, or 12.9%, from 2018 to 2019 primarily due to new units, higher taxes on those new units, and increases

in patron taxes and property taxes as a result of increased sales revenues.

Taxes and permits increased by $1.5 million, or 18.9%,

from 2017 to 2018 primarily due to an increased operating activity and the previously mentioned sales tax audit settlements in

As a percentage of revenues, taxes and permits were 6.0%, 5.8%, and 5.5% for 2019, 2018, and 2017, respectively.

and marketing increased by $856,000, or 11.4%, from 2018 to 2019 and increased by $832,000, or 12.4%, from 2017 to 2018 mainly

due to new units.

As a percentage of revenues, advertising and marketing was relatively flat at 4.6%, 4.5%, and 4.6% for 2019,

2018, and 2017, respectively.

decreased nominally by $44,000, or 0.8%, from 2018 to 2019.

It increased by $1.5 million, or 36.6%, from 2017 to 2018 primarily

due to an increase in general liability insurance premiums and additional property insurance.

expense increased by $176,000, or 4.7%, from 2018 to 2019 mainly due to adjustments in deferred rent liability in fiscal year

Rent expense increased by $462,000, or 14.2% from 2017 to 2018 primarily due to Scarlett’s Miami, which was acquired

in May 2017, and Bombshells 290, which was opened in July 2017.

As a percentage of revenues, rent expense has been flat at 2.2%

in all three years.

expenses increased in 2019 from 2018 by $1.6 million, or 44.5%, mainly due to SEC-related matters.

Legal expenses increased by

$512,000, or 16.7%, from 2017 to 2018 primarily due to increased legal activity on on-going litigation cases.

card fees increased by $559,000, or 17.5%, from 2018 to 2019, and by $461,000, or 16.6%, from 2017 to 2018.

Both increases were

directly related to higher revenues from prior year.

As a percentage of revenues, charge card fees were 2.1%, 2.0%, and 1.9% in

2019, 2018, and 2017, respectively.

and professional fees decreased by $129,000, or 4.4%, from 2018 to 2019 mainly due to consulting services during our ERP implementation

Accounting and professional fees increased by $785,000, or 36.4%, from 2017 to 2018 primarily due to our hiring of an

outside internal controls consultant in 2018 and the previously mentioned ERP implementation consultants.

and amortization increased by $1.4 million, or 17.5%, from 2018 to 2019, and increased by $802,000, or 11.6%, from 2017 to 2018

coming from newly acquired and constructed units.

components of other charges, net are in the table below (dollars in thousands):

Ended September 30,

Impairment of assets

Settlement of lawsuits

Loss (gain) on sale of businesses and assets

Gain on insurance

Gain on settlement of patron tax

Total other charges, net

significant variances in other charges, net are discussed below:

the year ended September 30, 2017, we recorded aggregate impairment charges of $7.6 million ($1.4 million in the third quarter

and $6.2 million in the fourth quarter) for the goodwill of four club locations ($4.7 million), including one that we have put

up for sale during the fiscal year;

for property and equipment of one club ($385,000);

for SOB license of two club locations ($1.4

million), and for our remaining investment in Drink Robust ($1.2 million).

During the year ended September 30, 2018, we recorded

a loss on the note owed to us the by former owner of Drink Robust in relation to our reacquisition of Drink Robust ($1.55 million

in the second quarter), impairment related to licenses of three clubs ($3.1 million in the fourth quarter), impairment related

to goodwill of two clubs ($834,000 in the fourth quarter), and impairment related to long-lived assets of a club that closed and

a still-operating Bombshells ($1.6 million in the fourth quarter).

During the year ended September 30, 2019, we recorded aggregate

impairment charges amounting to $6.0 million related to goodwill of four clubs ($1.6 million), SOB license of one club ($178,000),

and property and equipment of two clubs ($4.2 million).

See Notes 15 and 17 to our consolidated financial statements

for further discussion.

from Operations

is a table which reflects segment contribution to income from operations (in thousands):

General corporate

operating margin (income from operations divided by revenues) was 19.2% in 2019, 16.6% in 2018, and 16.0% in 2017.

operating margin was 34.1%, 31.1%, and 28.2% in 2019, 2018, and 2017, respectively, primarily due to the closure of underperforming

units, fixed expense leverage on increasing sales, and impairment of assets of $5.9 million, $4.4 million, and $6.5 million for

2019, 2018, and 2017, respectively.

Bombshells operating margin was 7.4%, 8.5%, and 16.4% in 2019, 2018, and 2017, respectively,

mainly due to pre-opening expenses in 2019 (particularly in salaries and wages and selling, general and administrative expenses)

and impairment of assets of $1.1 million in 2018.

the impact of settlement of lawsuits, impairment of assets, gain on insurance, gain on patron tax settlement, and gain on sale

of businesses and assets, operating margin for the Nightclub segment would have been 35.9%, 35.1%, and 33.1% for 2019, 2018, and

2017, respectively.

Excluding the impact of impairment of assets, loss on sale of assets, and settlement of lawsuits, Bombshells

segment operating margin would have been 7.6%, 15.1%, and 16.4% for 2019, 2018, and 2017, respectively.

Refer to discussion of

Non-GAAP Financial Measures on page 32.

expense increased by $255,000 from 2018 to 2019, and increased by $1.2 million from 2017 to 2018.

The increase in interest expense

is due to higher average debt balance partially offset by lower weighted average interest rate.

During the first quarter of 2018,

we significantly increased our debt balance with our $81 million refinancing, but that transaction also significantly reduced

our weighted average interest rate.

During 2019, our debt repayments were significantly higher than our borrowing, excluding borrowings

from acquisitions, thereby reducing interest expense as a percentage of revenue.

consider rent plus interest expense as our occupancy costs since most of our debts are for real property where our clubs and restaurants

For occupancy cost purposes, we exclude non-real-estate-related interest expense.

As a percentage of revenues, total

occupancy costs, with its components, are shown below.

Total occupancy cost

taxes were an expense of $4.9 million in 2019, a benefit of $3.1 million in 2018, and an expense of $6.4 million in 2017.

effective income tax rate was a 20.1% expense in 2019, a 17.5% benefit in 2018, and a 43.4% expense in 2017.

The components of

our annual effective income tax rate are the following:

Computed expected income tax expense

State income taxes, net of federal benefit

Deferred taxes on subsidiaries acquired/sold

Permanent differences

Change in deferred tax liability rate

Reserve for uncertain tax position

Total effective income tax rate

fiscal year 2017, due to higher income before tax, our income tax rate has increased to 37%, of which has impacted the fourth

quarter with the change in rate from 35% in the first nine months of the year and in prior years.

A full year impact in the change

in rate of our deferred tax liability has also been recognized in the fourth quarter.

The change in deferred tax liability rate

for 2017 is due to the 1% increase in our effective tax rate from the increase in the federal rate and also an increase in the

This amount results from increasing by 2% the rate applied to our entire deferred tax liabilities at the beginning

The reserve for uncertain tax positions results from an audit of the returns of one of the states in which we operate.

As a result of the items discussed above which affected the fiscal year, the fourth quarter effective tax rate rose to 99.6% expense

on a pre-tax loss.

December 22, 2017, during our first quarter 2018, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law,

which provides for significant changes to the U.S.

Internal Revenue Code of 1986, as amended, such as a reduction in the statutory

federal corporate tax rate from a maximum of 35% to a flat 21% rate effective from January 1, 2018 forward and changes and limitations

to certain tax deductions.

The Company has a fiscal year end of September 30, so the change to the statutory corporate tax rate

results in a blended federal statutory rate of 24.5% for its fiscal year 2018.

The increase in state tax effective rate from 2017

to 2018 was mainly caused by the impact of return-to-provision true-up, which has an expense impact in 2018 while having a benefit

fiscal 2019, the effective income tax rate has normalized to 20.1%, with the rate difference from the statutory federal corporate

tax rate of 21% coming from offsetting impact of state income tax, net of federal benefit, and tax credits that are mostly FICA

Financial Measures

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:

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) gains

or losses on settlement of patron tax case.

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.

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 shareholders and diluted earnings per

Adjustment items are:

(a) amortization of intangibles, (b) impairment of assets, (c) costs and charges related to debt

refinancing, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) unrealized gains or losses

on equity securities, (g) settlement of lawsuits, (h) gains or losses on settlement of patron tax case, and (i) the income tax

effect of the above described adjustments.

Included in the income tax effect of the above adjustments is the net effect of the

non-GAAP provision for income taxes, calculated at 20.1%, 24.5% and 37.0% effective tax rate of the pre-tax non-GAAP income before

taxes for the 2019, 2018 and 2017, 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.

The calculated amount for adjustment (i)

above in fiscal 2018 was significantly affected by the change in the statutory federal corporate tax rate caused by the Tax Act.

We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common shareholders:

(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) unrealized gains or losses on equity securities, (g) impairment of

assets, (h) settlement of lawsuits, (i) gains or losses on settlement of patron tax case.

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.

also use certain non-GAAP cash flow measures such as free cash flow.

See “Liquidity and Capital Resources”

for further discussion.

following tables present our non-GAAP performance measures for the periods indicated (in thousands, except per share amounts and

percentages):

the Year Ended

Reconciliation of GAAP net income to Adjusted EBITDA

Net income attributable to RCIHH common shareholders(1)

Income tax expense (benefit)

Interest expense, net

Settlement of lawsuits

Gain on settlement of patron tax case

Impairment of assets(1)

Loss (gain) on sale of businesses and assets

Depreciation and amortization

Unrealized loss on equity securities

Gain on insurance

Adjusted EBITDA

Reconciliation of GAAP net income to non-GAAP net income

Net income attributable to RCIHH common shareholders(1)

Amortization of intangibles

Settlement of lawsuits

Gain on settlement of patron tax case

Impairment of assets(1)

Loss (gain) on sale of businesses and assets

Costs and charges related to debt refinancing

Unrealized loss on equity securities

Gain on insurance

Net income tax effect of adjustments above

Non-GAAP net income

the Year Ended

Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share

Diluted shares

GAAP diluted earnings per share(1)

Amortization of intangibles

Settlement of lawsuits

Gain on settlement of patron tax case

Impairment of assets(1)

Loss (gain) on sale of businesses and assets

Costs and charges related to debt refinancing

Unrealized loss on equity securities

Gain on insurance

Net income tax effect of adjustments above

Non-GAAP diluted earnings per share

Reconciliation of GAAP operating income to non-GAAP operating income

Income from operations(1)

Amortization of intangibles

Settlement of lawsuits

Gain on settlement of patron tax case

Impairment of assets(1)

Loss (gain) on sale of businesses and assets

Gain on insurance

Non-GAAP operating income

Reconciliation of GAAP operating margin to non-GAAP operating margin

GAAP operating margin(1)

Amortization of intangibles

Settlement of lawsuits

Gain on settlement of patron tax case

Impairment of assets(1)

Loss (gain) on sale of businesses and assets

Gain on insurance

Non-GAAP operating margin

Per share amounts and percentages may not foot due to rounding.

(1) These amounts

have been revised for fiscal 2018, as explained in Note 3 to our consolidated financial statements.

adjustments to reconcile net income attributable to RCIHH common shareholders to non-GAAP net income exclude the impact of adjustments

related to noncontrolling interests, which is immaterial.

In the calculation of non-GAAP diluted earnings per share for fiscal

2017, we take into consideration the adjustment to net income from assumed conversion of debentures (see Note 2 to the consolidated

financial statements).

AND CAPITAL RESOURCES

believe our ability to generate cash from operating activities is one of our fundamental financial strengths.

The near-term outlook

for our business remains strong, and we expect to generate substantial cash flows from operations in fiscal 2020 and beyond.

a result of our expected cash flows from operations, we have significant flexibility to meet our financial commitments.

has not recently raised capital through the issuance of equity securities.

Instead, we use debt financing to lower our overall

cost of capital and increase our return on equity.

We have a history of borrowing funds in private transactions

and from sellers in acquisition transactions and continue to have the ability to borrow funds at reasonable interest rates in

We also have historically utilized these cash flows to invest in maintenance capital expenditures for existing units,

adult nightclubs acquisitions, and restaurants/sports bars construction.

following table presents a summary of our cash flows from operating, investing, and financing activities (in thousands):

Ended September 30,

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

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.

of September 30, 2019, we had negative working capital of $2.3 million (excluding the impact of assets held for sale amounting

to $2.9 million) compared to working capital of $55,000 as of September 30, 2018 (excluding the impact of assets held for sale

amounting to $2.9 million).

The decrease in working capital is principally due to the following items:

payments of long-term debt to our lenders;

acquisitions and purchase of capital expenditures;

offset by operating cash flow for the year.

We believe that our current sources of liquidity and capital will

be more than sufficient to finance our continued operations and growth plans not only within the next 12 months, but for the next

18 to 24 months.

Refer to sections on Debt Financing and Contractual Obligations and Commitments below for a discussion of long-term

liquidity and capital resources.

Flows from Operating Activities

are our summarized cash flows from operating activities (in thousands):

Ended September 30,

Depreciation and amortization

Deferred tax expense (benefit)

Impairment of assets

Net change in operating assets and liabilities

cash flows from operating activities increased from 2018 to 2019 primarily from higher income from operations plus lower income

Net cash flows from operating activities increased from 2017 to 2018 mainly due to higher income from operations partially

offset by higher income taxes and interest expense in 2018.

Flows from Investing Activities

are our summarized cash flows from investing activities (in thousands):

Ended September 30,

Proceeds from sale of businesses and assets

Proceeds from insurance and notes receivable

Issuance of notes receivable

Additions to property and equipment

Acquisition of businesses, net of cash acquired

opened four new units in 2019 (acquired two clubs in Chicago, Illinois and Pittsburgh, Pennsylvania, and built two new Bombshells

in Houston, Texas);

opened two new units in 2018 (one acquired club in Kappa, Illinois and one built Bombshells in Pearland, Texas);

and opened five new units in 2017 (including two acquired and one reconcepted from a Bombshells to a club).

See Note 15 to our

consolidated financial statements.

As of September 30, 2019, 2018, and 2017, we had $8.9 million, $6.4 million, and $1.6 million

in construction-in-progress related mostly to Bombshells opening in the subsequent fiscal year.

is a reconciliation of our additions to property and equipment for the years ended September 30, 2019, 2018, and 2017 (in thousands):

Ended September 30,

Purchase of real estate*

New capital expenditures in new clubs and Bombshells units and equipment

Maintenance capital expenditures

Total capital expenditures, excluding business acquisitions

Excludes real estate acquired through business acquisitions.

Flows from Financing Activities

are our summarized cash flows from financing activities (in thousands):

Ended September 30,

Proceeds from long-term debt

Payments on long-term debt

Payment of dividends

Purchase of treasury stock

Payment of loan origination costs

Debt prepayment penalty

Distribution of noncontrolling interests

purchased shares of our common stock representing 128,040 shares, 0 shares, and 89,685 shares in 2019, 2018, and 2017, respectively.

We have paid quarterly dividends of $0.03 per share for fiscal 2019, 2018 and 2017, except for the fourth quarter of 2019 where

we paid $0.04 per share.

See Note 9 to our consolidated financial statements for a detailed discussion of our debt obligations.

Cash Flow Measure

also uses certain non-GAAP cash flow measures such as free cash flows.

We define free cash flow as net cash provided by operating

activities less maintenance capital expenditures.

See table below (in thousands):

Net cash provided by operating activities

Maintenance capital expenditures

Free cash flow

do not include total 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.

Our free cash flow after long-term debt repayments was $10.4 million, $(49.6) million,

and $6.2 million during fiscal 2019, 2018, and 2017, respectively.

Free cash flow after long-term debt repayments in fiscal 2018

was significantly impacted by our $81.2 million refinancing in December 2017.

Note 9 to our consolidated financial statements for detail regarding our long-term debt activity.

Obligations and Commitments

have long-term contractual obligations primarily in the form of debt obligations and operating leases.

The following table (in

thousands) summarizes our contractual obligations and their aggregate maturities as well as future minimum rent payments.

interest payments related to debt were estimated using the interest rate in effect at September 30, 2019.

Due by Period

Long-term debt –

Interest payments

Operating leases(a)

October 1, 2019, we will adopt Accounting Standards Update No.

2016-02, Leases (Topic 842) , which will significantly

affect our accounting of all leases.

revised the consolidated balance sheet as of September 30, 2019 and the consolidated

statements of operations and cash flows for the year ended September 30, 2019 due to

an error in our income tax provision.

See Note 4 to our consolidated financial statements.

However, we do not expect changes

in our contractual obligations for future lease payments related to all of our leases existing as of September 30, 2019, except

for any expected exercise of renewal options allowed in the adoption of ASC 842.

than the debt refinancing and other notes payable financing described in Note 9 to the consolidated financial statements, we are

not aware of any event or trend that would potentially significantly affect liquidity.

In the event such a trend develops, we

believe our working capital and capital expenditure requirements will be adequately met by cash flows from operations.

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

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.

following table presents a summary of such indicators (dollars in thousands):

Sales of alcoholic beverages

Sales of food and merchandise

Service revenues

Total revenues

Net cash provided by operating activities

Adjusted EBITDA*

Free cash flow*

Long-term debt (end of period)

See definition and calculation of Adjusted EBITDA and Free Cash Flow under Non-GAAP Financial Measures and Liquidity and Capital

Resources above.

have not established financing other than the notes payable discussed in Note 9 to the consolidated financial statements.

can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the

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 2019, 2018, and 2017, we paid for treasury stock amounting to $2.9 million, $0, and $1.1 million representing

128,040 shares, 0 shares, and 89,685 shares, respectively.

We have $10.2 million remaining to purchase additional shares as of

September 30, 2019.

Subsequent to September 30, 2019 through the filing date of this report, we purchased 332,671 shares

of the Company’s common stock for a total of $6.4 million.

On February 6, 2020, the Board of Directors increased the

repurchase authorization by an additional $10.0 million.

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.

have not experienced a material overall impact from inflation in our operations during the past several years.

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.

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.

believe that our nightclub operations can continue to grow organically and through careful entry into markets and demographic

segments with high growth potential.

Our growth strategy involves the following:

(i) to acquire existing units in locations that

are consistent with our growth and income targets and which appear receptive to the upscale club formula we have developed;

to open new units after market analysis;

(iii) to franchise our Bombshells brand;

(iv) to form joint ventures or partnerships

to reduce start-up and operating costs, with us contributing equity in the form of our brand name and management expertise;

to develop new club concepts that are consistent with our management and marketing skills;

(vi) to develop and open our restaurant

concepts as our capital and manpower allow;

and (vii) to control the real estate in connection with club operations, although

some units may be in leased premises.

believe that Bombshells can grow organically and through careful entry into markets and demographic segments with high growth

All eight of the existing Bombshells as of September 30, 2019 are located in Texas.

Our growth strategy is to diversify

our operations with these units which do not require SOB licenses, which are sometimes difficult to obtain.

While we are searching

for adult nightclubs to acquire, we are able to also search for restaurant/sports bar locations that are consistent with our income

fiscal 2017, we acquired two clubs, one in Florida (Scarlett’s Miami) and another in Illinois (Hollywood Showclub) and certain

adjacent real estate for an aggregate purchase price of $30.2 million.

See Note 15 to the consolidated financial statements for

details of the transactions.

We subsequently relaunched Hollywood Showclub as Scarlett’s St.

fiscal 2018, we reacquired Drink Robust (see Note 15 to our consolidated financial statements).

Also in fiscal 2018, we acquired

a club in Kappa, Illinois for $1.5 million, financed by a $1.0 million seller note with interest at 8%.

The Kappa transaction

provides for the purchase of the real estate for $825,000 and other non-real-estate business assets for $180,000, with goodwill

amounting to $495,000.

See Note 15 to the consolidated financial statements for details of the transactions.

fiscal 2019, we acquired two clubs, one in Illinois (rebranded as Rick’s Cabaret Chicago) and another in Pennsylvania (rebranded

as Rick’s Cabaret Pittsburgh) for an aggregate purchase price of $25.5 million.

See Note 15 to the consolidated financial

statements for details of the transactions.

opened two Bombshells units in fiscal 2019.

October 2018, the Company sold its nightclub in Philadelphia for a total sales price of $1.0 million, payable $375,000 in cash

at closing and a 9% note payable over a 10-year period.

See Note 15 to the consolidated financial statements for details of the

to the end of fiscal 2019, we opened two Bombshells units.

On November 5, 2019, the Company announced

that its subsidiaries have signed definitive agreements to acquire the assets and related real estate of a well-established, top

gentlemen’s club located in the Northeast Corridor for $15.0 million.

As of the filing of this report, closing of this transaction

is still pending subject to certain conditions.

Under the terms of the agreements, Company subsidiaries will pay $7.2 million

for the club and $7.8 million for the real estate using $4.0 million in seller financing at 6.0% for the club with the balance

of cash from an anticipated $11.0 million bank loan at a blended rate of 6.25%.

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

Quantitative and Qualitative Disclosures About Market Risk

items in our financial statements subject to market risk are potential debt instruments with variable interest rates.

carry any debt with a variable interest rate in effect as of September 30, 2019.

Certain of our debt have variable interest rates,

but will only be effective in future years.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity