What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2020-12-14 compared with 2020-02-13 · 417 added, 432 removed, 390 unchanged (69% of the section changed)

Controls and Procedures.

Evaluation of Disclosure Controls and

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 Chief Executive

Officer (“CEO”) and the 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, 2019.

Officer (“CEO”) and the 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, 2020.

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 a material weakness 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, 2020.

Notwithstanding the existence of this material weakness, 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

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.

Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible

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of our management, we assessed the effectiveness of our internal control over financial reporting as of September 30, 2020, using

the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal

Control—Integrated Framework (2013).

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 identified a material weakness in internal

control related to the proper design and implementation of controls over our income tax provision, specifically over management’s

review of the income tax provision.

Based on our evaluation and as a result of the material weakness identified, our management,

with the participation of our chief executive officer and chief financial officer, concluded that our internal control over financial

reporting was not effective as of September 30, 2020.

The Company’s independent registered

public accounting firm, Friedman, LLP, has expressed an adverse opinion on our internal control over financial reporting as of

September 30, 2020 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

Management is committed to the remediation of the material weakness

described above, as well as the continued improvement of the Company’s internal control over financial reporting.

has been implementing, and continues to implement, measures designed to ensure that control deficiencies contributing to the material

weakness are remediated, such that these controls are designed, implemented, and operating effectively.

Management will enhance our risk

assessment process over the design and implementation of internal controls over the income tax provision, including enhanced

review controls to be performed by senior accounting management.

It is our belief that these added controls

will effectively remediate the existing material weakness.

Reported Material Weakness in Internal Control Over Financial Reporting

As disclosed in Item 9A Controls and Procedures

in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, we identified a material weakness in internal

control related to ineffective financial statement close and reporting controls in the areas of management review of financial

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contingencies.

Based on this material weakness, the Company’s management concluded that at September 30, 2019, the Company’s

internal control over financial reporting was not effective.

Company’s independent registered public accounting firm, Friedman, LLP, has expressed an adverse opinion on our internal

control over financial reporting as of September 30, 2019 in the audit report that appears at the end of Part II of this Annual

Report on Form 10-K.

Plan for Existing Material Weakness

is committed to the remediation of the material weakness described above, as well as the continued improvement of the Company’s

internal control over financial reporting.

Management has been implementing, and continues to implement, measures designed to ensure

that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented,

and operating effectively.

address the material weakness, management has completed, or is in the process of:

policies and procedures to enhance the precision of management review of financial statement

policies and procedures to enhance independent review of journal entries;

and implementing procedures to ensure the completeness of related party disclosures;

and implementing procedures related to the identification and accounting for loss contingencies.

We believe that these actions will remediate

the material weakness.

The material weakness 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.

Previously Reported Material Weaknesses

in Internal Control Over Financial Reporting

As disclosed in Part II Item 9A Controls

and Procedures in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, we identified material weaknesses

in internal control related to the control environment, risk assessment and monitoring, revenues, complex accounting and management

estimates, financial statement close and reporting, information technology and segregation of duties.

Remediation Efforts to Address Material

Control Environment, Risk Assessment

and Monitoring

Our Board of Directors has directed senior

management to ensure that a proper, consistent tone is communicated throughout the organization.

We have implemented a new Code

of Conduct and Disclosure Committee charter, appointed a new Chief Compliance Officer and retained an external consulting firm

to act as an internal audit department and to assist in implementing an enterprise risk assessment.

Control Activities

Revenues –

We designed and implemented

mitigating or compensating controls around the revenue process.

Complex Accounting and Management Estimates

We added review procedures and controls over complex accounting and estimates to prevent instances of incorrect accounting,

financial statement preparation, and valuation decisions, by increasing our own level of competency as well as using third-party

consultants to assist where necessary.

Information Technology –

and strengthened the operation of Information Technology controls in fiscal year 2019, including the review of security logs and

analysis of segregation of duty conflicts.

Segregation of Duties –

Our Enterprise

Resource Planning (“ERP”) system includes proper segregation of duties within our journal entry process and an analysis

of segregation of duties conflicts, which were more fully utilized in fiscal year 2019.

We also hired a Director of ERP &

Business Intelligence.

Efforts to Address Material Weakness

In response to the previously reported

material weakness, management has made the following changes:

developed policies and procedures to

enhance the precision of management review of financial statement information;

implemented policies and procedures

to enhance independent review of journal entries;

developed and implemented procedures

to ensure the completeness of related party disclosures;

developed and implemented procedures

related to the identification and accounting for loss contingencies.

During the fourth quarter of 2020, we completed

our testing of the operating effectiveness of the implemented controls and, with the exception of the remaining material weakness

in financial close and reporting described above, management has concluded that the previously reported material weaknesses have

been remediated.

Changes in Internal Control Over Financial

Except for the changes in connection with

our implementation of the remediation plan 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) that occurred during the fourth quarter of 2019 that

have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

our testing of the operating effectiveness of the implemented controls and, with the exception of the new material weakness related

to the income tax provision described above, management has concluded that the previously reported material weakness has been

in Internal Control Over Financial Reporting

Except for the changes 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) that occurred during the fourth quarter of 2020 that have materially affected, or are reasonably likely to

materially affect, the Company’s internal control over financial reporting.

We have not experienced any material impact

to our internal controls over financial reporting despite the fact that many of our employees are working remotely due to the

COVID-19 pandemic.

We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the

impact on their design and operating effectiveness.

Other Information.

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and Stockholders

RCI Hospitality Holdings, Inc.

Adverse Opinion on Internal Control

over Financial Reporting

We have audited RCI Hospitality Holdings,

Inc.’s (the “Company’s”) internal control over financial reporting as of September 30, 2019, based on

criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission (“COSO”).

In our opinion, because of the effect of the material weakness described in the

following paragraph 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, 2019, based on criteria established in Internal Control—Integrated

Framework (2013) issued by COSO.

A material weakness is a control deficiency,

or a 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

The following material weakness has been identified and included in management’s assessment:

Ineffective financial statement

close and reporting controls in the areas of management review of financial statement information, independent review of journal

entries, disclosure of related party transactions and accounting for loss contingencies.

This material weakness was considered in

determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements,

and this report does not affect our report dated February 13, 2020, on those consolidated financial statements.

We do not express an opinion or any other

form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of

management’s assessment.

We also have audited, in accordance with

the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance

sheets and the related consolidated statements of income, comprehensive income, stockholders’

equity, and cash flows of

the Company, and our report dated February 13, 2020, expressed an unqualified opinion.

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 “Item 9A - 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.

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 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;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of 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 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.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

Hospitality Holdings, Inc.

Opinion on Internal Control over Financial Reporting

have audited RCI Hospitality Holdings, Inc.’s (the “Company’s”) internal control over financial reporting

as of September 30, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued

by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, because of the effect

of the material weakness described in the following paragraph 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, 2020, based on criteria

established in Internal Control—Integrated Framework (2013) issued by COSO.

material weakness is a control deficiency, or a 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.

The following material weakness has been identified and included in management’s

Ineffective controls related to management’s review of the

income tax provision.

This material weakness was considered in determining

the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this

report does not affect our report dated December 14, 2020, on those consolidated financial statements.

We do not express an opinion or any other form

of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s

We also have audited, in accordance with the

standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets

and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash

flows of the Company, and our report dated December 14, 2020, expressed an unqualified opinion.

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 “Item 9A - 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.

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

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.

and Limitations of Internal Control over Financial Reporting

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 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 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 financial statements.

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.

/s/ Friedman LLP

Marlton, New Jersey

February 13, 2020

December 14, 2020

Directors, Executive Officers and Corporate Governance.

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The following table sets forth our Directors and executive officers

as of December 8, 2020:

Chairman, Chief Executive Officer, President

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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

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Langan has acquired the knowledge and skills necessary to successfully operate adult entertainment businesses.

Marshall has served as our Chief Financial Officer since May 2007.

He was previously controller of Dorado Exploration, Inc., an

oil and gas exploration and production company, from February 2007 to May 2007.

He previously served as Chief Financial Officer

of CDT Systems, Inc., a publicly held water technology company, from July 2003 to September 2006.

Marshall began

his public accounting career with the international accounting firm, KMG Main Hurdman.

After its merger with Peat Marwick, Mr.

Marshall served as an audit partner at KPMG for several years.

After leaving KPMG, Mr.

Marshall was partner in charge of the audit

practice at Jackson & Rhodes in Dallas from 1992 to 2003, where he specialized in small publicly held companies.

is also a trustee of United Mortgage Trust, United Development Funding IV and United Development Funding V, publicly held real

estate investment trusts.

Involvement in certain legal proceedings :

On September 21, 2020, as part of the settlement of a civil administrative proceeding with the SEC, Mr.

Langan 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.

See the subsection “SEC Matter and Internal Review” under the “Legal

Matters” section within Note 12 to our consolidated financial statements within this Annual Report on Form 10-K for

a description of the settlement and order, which description is incorporated herein by reference.

Chhay was appointed as our CFO on September 14, 2020.

He is a Certified Public Accountant (CPA), Certified Fraud

Examiner (CFE), and Certified Information Systems Auditor (CISA).

He joined us in November 2015 as Controller in charge of migrating

the company to an upgraded ERP system and enhancing internal and external audit and SEC reporting functions.

From 2007 through

2009, he was an auditor for Deloitte & Touche LLP.

From 2009 through 2013, he served as Internal Audit Senior, IT Auditor,

and Senior Fraud Auditor for Live Nation Entertainment, Inc.

of Beverly Hills, a publicly-traded company that markets tickets

for live entertainment worldwide, owns and operates entertainment venues, and manages music artists.

From 2013 through 2015, Mr.

Chhay was an Audit Supervisor and Global ERP Project Lead for RigNet, Inc.

of Houston, a publicly-traded digital technology company

serving the oil and gas, maritime and government markets.

After RigNet, he briefly served as CFO for a smaller, privately-held,

multi-unit restaurant chain.

Reese became a director and our Executive Vice President in 1999.

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administrator at St.

Vincent’s Hospital in Santa Fe, New Mexico.

During 1997, Mr.

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pilot with Hang On, Inc., an airline company.

Reese has an Associate’s Degree in Aeronautical Science from Texas State

Technical College.

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His experience and knowledge in

this industry is essential to the Board’s oversight of our businesses.

Lirot became a director on July 31, 2007.

Lirot received his law degree from the University of San Francisco in 1986.

serving as an intern in the San Francisco Public Defender’s Office in 1986, Mr.

Lirot returned to Florida and established

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He is a past President of

the First Amendment Lawyers’

Association and has actively participated in numerous state and federal legal matters.

the First Amendment Lawyers’ Association and has actively participated in numerous state and federal legal matters.

Lirot represents as counsel scores of individuals and entities within our industry.

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from Duke University and CHA in Hospitality Management from the Conrad Hilton College at the University of Houston.

Anakar’s

experience managing and developing businesses in industries with similar characteristics to ours make him an excellent fit to

Barabash became a director on September 19, 2017.

Barabash has been a Director of SportUpdate BV, private digital media company

in the Netherlands, since December 2017.

Barabash has extensive corporate finance experience across multiple industries domestically

and internationally, and has been involved in multiple equity and debt financings and M&A transactions for public and private

companies in the US, China, Brazil, EU and Russia.

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 data enabled digital media company in the world.

to joining Motorsport Network, he was an investment banker at Primary Capital from 2011 until 2016.

Previously, Mr.

an investment banker at Rodman & Renshaw and Merrill Lynch.

Barabash has been a Chief Operating Officer of Gingko Online Learning LLC,

private online learning company in Florida since July 2020 and a consultant to Chengdu Gingko Education Management, educational

management company in Chengdu, China since August 2019.

Barabash has extensive corporate finance experience across multiple

industries domestically and internationally, and has been involved in multiple equity and debt financings and M&A transactions

for public and private companies in the US, China, Brazil, EU and Russia.

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 data enabled digital media company

in the world.

Prior to joining Motorsport Network, he was an investment banker at Primary Capital from 2011 until 2016.

Barabash was an investment banker at 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.

Barabash is a valuable

member of the Board of Directors based on his extensive corporate finance and investment banking experience across multiple industries

domestically and internationally with a wide range of transactions (debt and equity).

He also possesses extensive financial modeling

and investor relationship experience and experience in diligence, governance and accounting.

from Sevastopol City University

in Ukraine and a Master in International Affairs from Columbia University in New York City, and is fluent in Russian.

is a valuable member of the Board of Directors based on his extensive corporate finance and investment banking experience across

multiple industries domestically and internationally with a wide range of transactions (debt and equity).

He also possesses extensive

financial modeling and investor relationship experience and experience in diligence, governance and accounting.

Martin became a director on August 8, 2019.

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Her volunteer activities have included serving

as a member of the Board of Directors of Texas A&M University Mothers’

Club (Aggie Moms).

Martin’s business

as a member of the Board of Directors of Texas A&M University Mothers’ Club (Aggie Moms).

Martin’s business

acumen and experience running companies make her an important member of the Board.

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vice president of United Cerebral Palsy.

August 8, 2019, Steven Jenkins resigned from the board.

He has confirmed that his decision was not due to a disagreement with

the Company on any matter relating to the Company’s operations, policies or practices.

OF THE BOARD OF DIRECTORS

have an Audit Committee whose members are Yura Barabash, Elaine Martin and Arthur Allan Priaulx.

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

Yura Barabash serves as the Audit Committee’s financial expert.

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.

August 2015, our Board adopted a new Charter for the Audit Committee.

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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

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independent registered public accounting firm and our internal accounting department.

have a Nominating Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash and Arthur Allan

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.

have a Nominating Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash and Arthur Allan Priaulx.

2004, the Board unanimously adopted a Charter with regard to the process to be used for identifying and evaluating nominees for

The Charter establishes the independence of our Nominating Committee and sets forth the scope of the Nominating Committee’s

NASDAQ Stock Market Rules require all members of the Nominating Committee to be independent.

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

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 .

have a Compensation Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash and Arthur Allan

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 .

WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

have a Compensation Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash and Arthur Allan Priaulx.

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.

the Compensation Committee’s Charter can be found on our website at www.rcihospitality.com/investor .

Section 16(a) Reports

16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own beneficially more

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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, 2019, except for an untimely Form 4 filed on February 12, 2020 for each of Eric

Langan, our Chief Executive Officer;

Phillip Marshall, our Chief Financial Officer;

and Travis Reese, our Director and Executive

Vice President.

during the fiscal year ended September 30, 2020, except for (i) two untimely Form 4s filed on March 19, 2020 and July 24, 2020

by Elaine Martin, our director, with respect to a total of seven transactions occurring on March 13, 16, and 19, 2020, and (ii)

an untimely Form 4 filed on February 12, 2020 by each of Eric Langan, our Chief Executive Officer;

Phillip Marshall,

our former Chief Financial Officer;

and Travis Reese, our Director and Executive Vice President, with respect to the same transaction

involving an investment club.

have adopted a code of ethics for our principal executive and senior financial officers, a copy of which can be found on our website

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DISCUSSION AND ANALYSIS

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.

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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 2019, as well as any other individuals included in the Summary

Compensation Table, are referred to as “named executive officers.”

The individuals who served as the Company’s

Chief Executive Officer and Chief Financial Officer during fiscal 2020, as well as any other individuals included in the

Summary Compensation Table, are referred to as “named executive officers.”

of Compensation Committee Role and Responsibilities

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

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.

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.

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Committee also evaluates proposals for incentive and performance equity awards, and other compensation.

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.

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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,

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.

Our named executive officers’ compensation utilizes two primary components —

base salary and long-term equity compensation — to achieve these goals.

We have not, however, granted any equity awards

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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.

Executive Compensation

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which we believe we generally compete for executives.

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

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.

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Role of Shareholder Say-on-Pay Votes

our annual meeting of shareholders held on August 29, 2018, approximately 96% of the shareholders who voted 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.

our annual meeting of shareholders held on September 14, 2020, approximately 96.6% of the shareholders who voted

on the “say-on-pay” proposal approved the compensation of our named executive officers, as disclosed in the proxy

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.

Company provides executive officers and other employees with base salary to compensate them for services rendered during the fiscal

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.

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but does not apply any specific formula to determine the base salaries for the executive officers.

Awards—Equity Compensation Plans

we have not granted any equity awards to our executive officers since 2014, the Compensation Committee has historically used equity

awards, usually in the form of stock options, primarily to motivate our named executive officers to realize benefits from longer-term

strategies that increase stockholder value, and to promote commitment and retention.

Equity awards may vest either at a particular

date in the future or upon the achievement of performance criteria that the Company believes are critical to its long-term success.

Compensation Committee believes that stock options are an important form of long-term incentive compensation because they align

the executive officer’s interests with the interests of stockholders, since the options have value only if our stock price

increases over time.

From time to time, the Compensation Committee may consider circumstances that warrant the grant of full value

awards such as restricted stock units.

Examples of these circumstances include, among others, attracting a new executive to the

recognizing a promotion to the executive team;

and rewarding outstanding long-term contributions.

equity grant practices require that stock options and other equity compensation have prices not less than the fair market value

on the date of grant.

The fair market value of our stock option awards has historically been the NASDAQ closing price on the date

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

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contribution permitted by the Code.

All participants’

plan accounts are 100% vested at all times.

All participants’ plan accounts are 100% vested at all times.

All assets of our Simple

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and Other Personal Benefits

Company’s executive officers participate in the Company’s other benefit plans on the same terms as other employees

on a non-discriminatory basis.

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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 under their employment

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/or aircrafts.

In September 2019, the board of directors approved

an aircraft policy allowing personal use of Company aircrafts as follows:

(1) 25 hours per fiscal quarter for our CEO, and (2)

12 hours each per fiscal quarter for our CFO and our EVP.

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/or aircrafts, and housing and living expenses for our former CFO.

In September 2019, the board of directors

approved an aircraft policy allowing personal use of Company aircrafts as follows:

(1) 25 hours per fiscal quarter for our CEO,

and (2) 12 hours each per fiscal quarter for other executive officers.

COMPENSATION TABLE

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Compensation (1)

President and Chief Executive Officer

Chief Financial Officer

Executive Vice President

Other Compensation consists of SIMPLE IRA matching contributions, automobile expenses, and personal use of aircraft.

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,

major periodic maintenance, and an allowance for propeller maintenance.

We added actual airport/hangar fees charged to the

company on a per-flight basis.

President and

Chief Executive Officer

Bradley Chhay (2)

Chief Financial

Executive Vice

Former Chief Financial

Other Compensation consists of SIMPLE IRA matching contributions, automobile expenses, personal use of aircraft, and housing

and living expenses.

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

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

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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, and fuel.

rate of automobiles assigned for use by the particular officer (until fiscal 2019), plus cost of insurance, registration,

repairs, maintenance, tolls, fuel, and starting fiscal 2020, tax reimbursement on automobile fringe benefits.

table of All Other Compensation for fiscal 2020 for our named executive officers is presented below:

IRA Matching Contribution

Use of Aircraft

All Other Compensation

SIMPLE IRA Matching Contribution

Automobile Expenses

Personal Use of Aircraft

Housing and Living Expenses

Total All Other Compensation

Bradley Chhay

Chhay assumed the role of Chief Financial Officer when Mr.

Marshall retired as the Company’s Chief Financial Officer on September 14, 2020.

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, 2020.

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

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own pay ratios.

We used the same median employee

that was identified in our Form 10-K for the fiscal year ended September 30, 2018.

compensation for our CEO in fiscal 2019 of $1,281,355 was approximately 62 times the compensation of our median

employee of $20,534.

the fiscal year ended September 30, 2020, the employment of the

median employee that was identified in our Form 10-K for the fiscal year ended September 30, 2019 and 2018 was terminated.

recalculated and identified a new median employee using the same methodology as mentioned above.

compensation for our CEO in fiscal 2020 of $1,169,052 was approximately 17 times the compensation of our fiscal

2020 median employee of $67,654.

OF PLAN-BASED AWARDS

were no grants of plan-based awards for the year ended September 30, 2019.

were no grants of plan-based awards for fiscal 2020.

Equity Awards at Fiscal Year-End

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compensation paid to our directors in the year ended September 30, 2020:

Nourdean Anakar

Yura Barabash

Elaine Martin

Arthur Allan Priaulx

September 2019, the board of directors unanimously approved increasing the compensation of the non-executive directors to $30,000

in cash for the 2020 fiscal year, payable $7,500 each quarter.

January 31, 2020, the employment agreements with each of our executive officers, including Eric S.

Langan, our Chief Executive

Officer and President, Phillip Marshall, our Chief Financial Officer, and Travis Reese, our Executive Vice President, expired.

We are presently in the process of negotiating new employment agreements with each of these individuals.

During this process,

the Compensation Committee has determined that these executive officers will continue to receive the pay and benefits provided

under their previous employment agreements.

Allan Priaulx

On January 31, 2020, the employment agreements

Langan, our Chief Executive Officer and President, and Travis Reese, our Executive Vice President, expired.

presently in the process of negotiating new employment agreements with these individuals.

During this process, the Compensation

Committee has determined that these executive officers will continue to receive the pay and benefits provided under their previous

employment agreements.

Under their respective agreements, Mr.

Langan’s annual salary was $1,200,000,

Marshall’s annual salary was $325,000, and Mr.

Reese’s annual salary was $390,000.

Each of the agreements also

provided for bonus eligibility, expense reimbursement, participation in all benefit plans maintained by us for salaried employees

and two weeks paid vacation.

Langan’s annual salary was $1,200,000 and Mr.

annual salary was $390,000.

Each of the agreements also provided for bonus eligibility, expense reimbursement, participation in

all benefit plans maintained by us for salaried employees and two weeks paid vacation.

We are also in the process of negotiating

an employment agreement with Bradley Chhay who was appointed Chief Financial Officer on September 14, 2020.

During this process,

the Compensation Committee has determined to pay him an annual salary of $400,000.

our executive officers do not have long-term incentive plans or defined benefit or actuarial plans outstanding.

STOCK OPTION PLANS

of September 30, 2019, there are no stock options outstanding under our 2010 Stock Option Plan, as amended.

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

POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT

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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

No interlocking relationship exists

between any member of the Compensation Committee and any member of any other company’s Board of Directors or compensation

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

following table sets forth certain information at February 6, 2020, 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 executive officers and (iv) all of our executive officers and directors as a group.

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 9,258,000 shares of common stock outstanding at

February 6, 2020.

In computing the number of shares of common stock beneficially owned by a person and the percentage ownership

of that person, we deemed 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 February 6, 2020 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 February 6, 2020.

We did 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 (*).

The following table sets forth certain information

at December 8, 2020, 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 executive

officers and (iv) all of our 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 8,999,910 shares of common stock outstanding at December 8, 2020.

In computing the number of shares

of common stock beneficially owned by a person and the percentage ownership of that person, we deemed 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

December 8, 2020 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 December 8, 2020.

We did 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 (*).

Number of shares

Title of class

Percent of Class (1)

Executive Officers and Directors

Bradley Chhay

Yura Barabash

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BlackRock, Inc.

ADW Capital Partners, L.P.

Greenhaven Road Investment Management, L.P.

percentages exclude treasury shares in the calculation of percentage of class.

Includes 1,870 shares held in an investment club over which Mr.

Langan has shared voting and investment power.

1,870 shares held in an investment club over which Mr.

Langan has shared voting and investment

As of the date of this report, Mr.

Langan owns approximately 21.7% of the investment

Includes 1,870 shares held in an investment club

over which Mr.

Marshall has shared voting and investment power.

Langan owns less than 0.1% of the investment

1,870 shares held in an investment club over which Mr.

Chhay has shared voting and investment

As of the date of this report, Mr.

Marshall owns approximately

4.6% of the investment club.

Includes 1,870 shares held in an investment club

over which Mr.

Chhay owns approximately 3.8% of the

investment club.

1,870 shares held in an investment club over which Mr.

Reese has shared voting and investment power.

As of the date of this report, Mr.

Reese owns approximately 0.9%

of the investment club.

representative of Renaissance Technologies LLC (“RTC”) has communicated to us that RTC no longer beneficially

owns more than 5% of our outstanding shares of common stock.

RTC has not yet filed with the SEC a Schedule 13G/A to reflect

this change, but the change is consistent with RTC’s latest Form 13F report.

RTC’s most recently available Schedule

13G/A filed on February 13, 2019 by RTC and Renaissance Technologies Holdings Corporation (the majority owner of RTC) reflects

that RTC beneficially owned 703,700 shares of common stock (which would represent 7.32% of outstanding common stock), with

sole voting power over 613,400 shares, sole dispositive power over 652,575 shares, and shared dispositive power over 51,125

The address for both entities is 800 Third Avenue, New York, New York 10022.

on the most recently available Schedule 13G/A filed with the SEC on February

10, 2020 by Cooper Capital Securities, L.P., Cooper Capital Management, LLC, Adam

Mikkelsen and Yilaap Lai.

As of the date of this

Reese owns approximately 1.6% of the investment club.

on the most recently available Schedule 13G/A filed with the SEC on February 10, 2020 by Cooper Capital Securities, L.P.,

Cooper Capital Management, LLC, Adam Mikkelsen and Yilaap Lai.

Cooper Capital Management is the general partner of Cooper

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Adam Mikkelsen is the managing member of Cooper Capital Management;

and Yilaap Lai is the limited partner of Cooper Capital Securities.

Cooper Capital Securities

beneficially owned 547,170 shares, with shared voting power over 425,852 shares,

and shared dispositive power over 425,852 shares.

The address of Cooper Capital Securities

is 520 Newport Center Drive, Suite 500, Newport Beach, California 92660.

on the most recently available Schedule 13G filed with the SEC on February 7, 2020 by

BlackRock Inc.

BlackRock beneficially owned 596,667 shares, with sole voting power over

581,097 shares and sole dispositive power over 596,667 shares.

The address of BlackRock

is 55 East 52nd Street, New York, New York 10055.

and Yilaap Lai is the limited partner

of Cooper Capital Securities.

Cooper Capital Securities beneficially owned 547,170 shares, with shared voting power over 425,852

shares, and shared dispositive power over 425,852 shares.

The address of Cooper Capital Securities is 520 Newport Center Drive,

Suite 500, Newport Beach, California 92660.

on the most recently available Schedule 13G filed with the SEC on February 7, 2020 by BlackRock Inc.

BlackRock beneficially

owned 596,667 shares, with sole voting power over 581,097 shares and sole dispositive power over 596,667 shares.

of BlackRock is 55 East 52nd Street, New York, New York 10055.

on the most recently available Schedule 13G filed with the SEC on May 21, 2020 by ADW Capital Partners, L.P., ADW Capital

Management, LLC and Adam D.

ADW Capital Management, LLC is the general partner and investment manager of ADW Capital

Partners, L.P.

Wyden is the sole manager of ADW Capital Management, LLC.

ADW Capital Partners, L.P is the record and direct

beneficial owner of 457,000 shares, with sole voting power and sole dispositive power over all such shares.

The address of

each of these reporting persons is 1133 Broadway, Suite 719, New York, New York 10010.

on the most recently available Schedule 13G filed with the SEC on September 4, 2020 by

Scott Stewart Miller, Greenhaven Road Investment Management, LP (the “Investment

Manager”), MVM Funds, LLC (the “General Partner”), Greenhaven Road

Capital Fund 1, L.P.

(“Fund 1”), and Greenhaven Road Capital Fund 2, L.P.

(“Fund 2”, and together with Fund 1, the “Funds”).

is a private investment vehicle.

The Funds directly beneficially own the common stock.

The Investment Manager is the investment manager of the Funds.

The General Partner is

the general partner of the Funds and the Investment Manager.

Miller is the controlling

person of the General Partner.

Miller, the Investment Manager and the General Partner

may be deemed to beneficially own the common stock directly beneficially owned by the

Funds, with sole voting power and sole dispositive power over all such shares.

of each of these reporting persons is c/o Royce & Associates LLC, 8 Sound Shore Drive,

Suite 190, Greenwich, CT 06830.

Company is not aware of any arrangements that could result in a change in control of the Company.

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receives no compensation or other direct financial benefit for any of the guarantees.

paid Ed Anakar, our director of operations –

club division, employment compensation of $550,000, $488,462, and $450,000

In November 2018, we borrowed $500,000 from

Ed Anakar and $100,000 from Allen Chhay as part of a larger group of private lenders.

The note bears interest at the rate

of 12% per annum and matures in November 2021.

The note is payable in monthly installments of interest only with a balloon payment

of all unpaid principal and interest due at maturity.

Ed Anakar is the brother of Nourdean Anakar, a director of the Company.

We paid Ed Anakar, our director of operations – club division, employment compensation of $502,404, $550,000, and $488,462

during the fiscal years ended September 30, 2020, 2019, and 2018, respectively.

Ed Anakar is the brother of Nourdean Anakar, a

director of the Company.

November 2018, we borrowed $500,000 from Ed Anakar.

The note bears interest at the rate of 12% per annum and matures in November

The note is payable in monthly installments of interest only with a balloon payment of all unpaid principal and interest

due at maturity.

used the services of Sherwood Forest Creations, LLC (“Sherwood Forest”) and its predecessor, Creative Steel Designs

(“Creative Steel”), furniture fabrication companies that manufacture tables, chairs and other furnishings for our

Bombshells locations, as well as providing ongoing maintenance.

Sherwood Forest is owned by a brother of Eric Langan, and Creative

Steel was owned by his father.

Amounts billed to us for goods and services provided by Sherwood Forest were approximately $134,000

in fiscal 2019, $321,000 in fiscal 2018, and an aggregate of $135,000 by Sherwood Forest and Creative Steel in fiscal 2017.

of September 30, 2019 and 2018, we owed Sherwood Forest $6,588 and $73,377, respectively, in unpaid billings.

Mechanical LLC (“TW Mechanical”) provided plumbing and HVAC services to both a third-party general contractor providing

Allen Chhay is the brother of Bradley Chhay, our

CFO, and is not employed by the Company or any of its subsidiaries.

used the services of Nottingham Creations (formerly Sherwood Forest Creations, LLC), a furniture fabrication company that manufactures

tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance.

Nottingham Creations

is owned by a brother of Eric Langan (as was Sherwood Forest).

Amounts billed to us for goods and services provided by Nottingham

Creations and Sherwood Forest were approximately $59,000 in fiscal 2020, $134,000 in fiscal 2019, and $321,000 in fiscal 2018.

As of September 30, 2020 and 2019, we owed Nottingham Creations and Sherwood Forest $0 and $6,588, respectively, in unpaid billings.

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 2020 and 2019.

TW Mechanical is 20% owned

by the son-in-law of Eric Langan.

Amounts billed by TW Mechanical to the third-party general contractor were $452,000,

$120,000, and $0 for the fiscal years ended 2019, 2018 and 2017 respectively.

Amounts billed directly to the Company were $47,000,

$7,000 and $0 for the fiscal years ended 2019, 2018, and 2017 respectively.

As of September 30, 2019 and 2018, we owed TW Mechanical

$0 and $0, respectively, in unpaid direct billings.

A son-in-law of Eric Langan

owns a noncontrolling interest in TW Mechanical.

Amounts billed by TW Mechanical to the third-party general contractor were approximately

$19,000, $452,000, and $120,000 for the fiscal years 2020, 2019, and 2018, respectively.

Amounts billed directly to the Company

were approximately $62,000, $47,000, and $7,000 for the fiscal years 2020, 2019, and 2018, respectively.

As of September 30, 2020

and 2019, the Company owed TW Mechanical approximately $5,700 and $0, respectively, in unpaid direct billings.

Approval, or Ratification of Related Transactions

September 23, 2019, the Board of Directors, acting upon the recommendation of its Audit Committee, adopted a new 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.

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.

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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

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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

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as it seems appropriate for the circumstances:

(1) the related party’s interest in the related party transaction;

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

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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 two other independent

directors, Nourdean Anakar and Luke Lirot, who are not on the Audit Committee.

The definition of “independent”

used herein is based on the independence standards of The NASDAQ Stock Market LLC.

Audit Committee is composed of all independent directors, including Yura Barabash, Elaine Martin and Arthur Allan Priaulx.

additionally have two other independent directors, Nourdean Anakar and Luke Lirot, who are not on the Audit Committee.

The definition

of “independent” used herein is based on the independence standards of The NASDAQ Stock Market LLC.

Principal Accounting Fees and Services.

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 BDO USA, LLP for the audit of our annual financial statements fiscal

year 2018, partial fiscal 2019 and by Friedman LLP for partial fiscal 2019 (in thousands).

for audit-related services and all other services rendered by Friedman LLP for the fiscal year 2020 and partial 2019, and by

BDO USA, LLP for partial fiscal 2019 (in thousands).

Audit-related fees

All other 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

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.

were no “Audit-related fees”

in Fiscal 2019 or 2018.

category of “Tax fees”

includes consultation related to tax compliance and tax structuring.

other fees”

include fees billed for professional services rendered in connection with the SEC investigation.

were no “Audit-related fees” in fiscal 2020 or 2019.

category of “Tax fees” includes consultation related to tax compliance and tax structuring.

other fees” include fees billed for professional services rendered in connection with the SEC investigation.

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 Friedman, LLP or BDO USA, LLP was compatible with the maintenance of that firm’s independence

in the conduct of its 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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Amended and Restated Promissory Note for $8,147,572.57 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) *

The description of our common stock

Employment Agreement with Eric S.

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Letter from BDO USA, LLP to the Securities and Exchange Commission (Incorporated by reference from Form 8-K filed with the SEC on July 18, 2019) *

of Friedman LLP

Consent of Friedman LLP

Certification of Chief Executive Officer of RCI Hospitality Holdings, Inc.

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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 February 13, 2020.

on its behalf by the undersigned, thereunto duly authorized, on December 14, 2020.

Hospitality Holdings, Inc.

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Chief Executive Officer, and President

Bradley Chhay

Financial Officer and Principal Accounting Officer

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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 9A. Controls and Procedures