What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2024-02-08 · 163 added, 72 removed, 441 unchanged (35% of the section changed)

3 unchanged sentences

(in thousands, except par value and number of shares)

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Current assets

4 unchanged sentences

Prepaid expenses and other current assets 8,387 1,943

Assets held for sale 74 —

Total current assets 42,032 37,473

24 unchanged sentences

20,000,000 shares authorized;

9,359,685 and 9,397,639 shares issued and outstanding as of December 31, 2023 and September 30, 2023, respectively

9,332,420 and 9,397,639 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively

Additional paid-in capital 77,742 80,437

9 unchanged sentences

For the Three Months Ended

March 31, For the Six Months Ended

2024 2023 2024 2023

Sales of alcoholic beverages $ 32,907 $ 30,136 $ 66,223 $ 59,786

19 unchanged sentences

Income before income taxes

754 9,840 9,797 23,142

Income tax expense

5 2,147 1,804 5,178

Net income 749 7,693 7,993 17,964

Net income attributable to noncontrolling interests ( 18 ) ( 33 )

Net loss attributable to noncontrolling interests 25 39 7 6

Net income attributable to RCIHH common stockholders $ 774 $ 7,732 $ 8,000 $ 17,970

23 unchanged sentences

Balance at December 31, 2023 9,359,685 94 78,815 207,714 — — ( 239 ) 286,384

Purchase of treasury shares — — — — ( 27,265 ) ( 1,530 ) — ( 1,530 )

Canceled treasury shares ( 27,265 ) ( 1 ) ( 1,529 ) — 27,265 1,530 — —

Excise tax on stock repurchases — — ( 15 ) — — — — ( 15 )

Payment of dividends ($ 0.06 per share)

— — — ( 560 ) — — — ( 560 )

Stock-based compensation — — 471 — — — — 471

Net income (loss) — — — 774 — — ( 25 ) 749

Balance at March 31, 2024

9,332,420 $ 93 $ 77,742 $ 207,928 — $ — $ ( 264 ) $ 285,499

Balance at September 30, 2022

8 unchanged sentences

Balance at December 31, 2022 9,230,225 92 68,070 183,726 — — ( 78 ) 251,810

Issuance of common shares for business combination 200,000 2 16,306 — — — — 16,308

Payment of dividends ($ 0.06 per share)

— — — ( 553 ) — — — ( 553 )

Stock-based compensation — — 706 — — — — 706

Net income (loss) — — — 7,732 — — ( 39 ) 7,693

Balance at March 31, 2023

9,430,225 $ 94 $ 85,082 $ 190,905 — $ — $ ( 117 ) $ 275,964

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except number of shares)

For the Three Months Ended December 31,

For the Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization 7,737 7,067

Impairment of assets 8,033 662

Deferred income tax benefit

Stock-based compensation 941 1,647

Gain on sale of businesses and assets ( 3 ) ( 686 )

Loss (gain) on sale of businesses and assets 37 ( 689 )

Amortization of debt discount and issuance costs 312 291

2 unchanged sentences

Doubtful accounts expense on notes receivable 22 —

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of business acquisitions:

Accounts receivable 1,067 708

17 unchanged sentences

Share in return of investment by noncontrolling partner — ( 600 )

Net cash used in financing activities ( 8,421 ) ( 3,117 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 132 ( 1,872 )

Net cash provided by (used in) financing activities ( 12,833 ) 3,196

NET DECREASE IN CASH AND CASH EQUIVALENTS ( 1,050 ) ( 13,196 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,023 35,980

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,973 $ 22,784

For the Three Months Ended December 31,

For the Six Months Ended March 31,

CASH PAID DURING PERIOD FOR:

4 unchanged sentences

Debt incurred in connection with purchase of property and equipment $ — $ 7,584

Issuance of shares of common stock for acquisition of businesses:

Number of shares — 200,000

Fair value $ — $ 16,308

Adjustment to operating lease right-of-use assets related to new and renewed leases $ — $ 1,659

Adjustment to operating lease liabilities related to new and renewed leases $ — $ 1,958

Unpaid excise tax on stock repurchases $ 35 $ —

12 unchanged sentences

In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made.

Operating results for the three months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2024.

Operating results for the six months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending September 30, 2024.

Recent Accounting Standards and Pronouncements

12 unchanged sentences

Early adoption is permitted.

We have not yet evaluated the impact of this ASU on our consolidated financial statements.

We are evaluating the impact of this ASU and we believe that the adoption of this guidance will not have a significant impact on our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842):

4 unchanged sentences

Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance.

We are still evaluating the impact of this ASU on our consolidated financial statements.

We are still evaluating the impact of this ASU but we believe that the adoption of this guidance will not have a significant impact on our consolidated financial statements.

RCI HOSPITALITY HOLDINGS, INC.

25 unchanged sentences

Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 4 ), are shown below (in thousands):

Three Months Ended December 31, 2023 Three Months Ended December 31, 2022

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total

7 unchanged sentences

$ 59,372 $ 12,771 $ 140 $ 72,283 $ 57,031 $ 14,315 $ 171 $ 71,517

Six Months Ended March 31, 2024 Six Months Ended March 31, 2023

Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total

Sales of alcoholic beverages $ 52,182 $ 14,041 $ — $ 66,223 $ 44,289 $ 15,497 $ — $ 59,786

Sales of food and merchandise 10,586 11,284 — 21,870 9,417 11,935 — 21,352

Service revenues 48,681 2 — 48,683 51,219 34 — 51,253

Other revenues 8,956 175 283 9,414 8,431 280 383 9,094

$ 120,405 $ 25,502 $ 283 $ 146,190 $ 113,356 $ 27,746 $ 383 $ 141,485

Recognized at a point in time $ 119,549 $ 25,500 $ 283 $ 145,332 $ 112,495 $ 27,702 $ 338 $ 140,535

Recognized over time 856 * 2 — 858 861 * 44 45 950

$ 120,405 $ 25,502 $ 283 $ 146,190 $ 113,356 $ 27,746 $ 383 $ 141,485

* Lease revenue (included in Other Revenues) as covered by ASC 842.

All other revenues are covered by ASC 606.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenues - continued

The Company does not have contract assets with customers.

5 unchanged sentences

Revenue Balance at

December 31, 2023

March 31, 2024

Ad revenue $ 49 $ 244 $ ( 207 ) $ 86

3 unchanged sentences

Contract liabilities with customers are included in accrued liabilities as unearned revenues in our unaudited condensed consolidated balance sheets (see also Note 5 ), while the revenues associated with these contract liabilities are included in other revenues in our unaudited condensed consolidated statements of income.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment Information

7 unchanged sentences

For the Three Months Ended

March 31, For the Six Months Ended

2024 2023 2024 2023

Revenues (from external customers)

9 unchanged sentences

$ 4,657 $ 13,427 $ 17,822 $ 30,325

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment Information - continued

For the Three Months Ended

March 31, For the Six Months Ended

2024 2023 2024 2023

Depreciation and amortization

1 unchanged sentence

Bombshells 650 931 1,293 1,389

Other 2 63 4 126

Corporate 305 302 608 603

6 unchanged sentences

$ 7,667 $ 9,537 $ 12,802 $ 22,090

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment Information - continued

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Nightclubs $ 472,743 $ 483,563

3 unchanged sentences

$ 609,893 $ 610,884

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended December 31, 2023, amounting to $ 4.5 million and $ 227,000 , respectively, and for the three months ended December 31, 2022, amounting to $ 3.7 million and $ 231,000 , respectively;

and intercompany sales of Robust Energy Drink included in Other segment for the three months ended December 31, 2023 and 2022 amounting to $ 39,000 and $ 37,000 , respectively.

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended March 31, 2024, amounting to $ 4.6 million and $ 21,000 , respectively, and for the six months ended March 31, 2024, amounting to $ 9.1 million and $ 248,000 , respectively;

and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2024 amounting to $ 89,000 and $ 128,000 , respectively.

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended March 31, 2023, amounting to $ 3.9 million and $ 31,000 , respectively, and for the six months ended March 31, 2023, amounting to $ 7.6 million and $ 262,000 , respectively;

and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2023 amounting to $ 78,000 and $ 115,000 , respectively.

These intercompany revenue amounts are eliminated upon consolidation.

3 unchanged sentences

Accordingly, those asset costs have been transferred out of the Bombshells segment.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Selected Account Information

The components of accounts receivable, net are as follows (in thousands):

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Credit card receivables $ 4,154 $ 4,141

5 unchanged sentences

The components of prepaid expenses and other current assets are as follows (in thousands):

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Prepaid insurance $ 6,203 $ 375

4 unchanged sentences

Total prepaid expenses and other current assets $ 8,387 $ 1,943

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Selected Account Information - continued

The components of accrued liabilities are as follows (in thousands):

December 31, 2023 September 30, 2023

March 31, 2024 September 30, 2023

Insurance $ 6,017 $ 9

8 unchanged sentences

Total accrued liabilities $ 22,597 $ 16,051

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Selected Account Information - continued

The components of selling, general and administrative expenses are as follows (in thousands):

For the Three Months Ended

March 31, For the Six Months Ended

2024 2023 2024 2023

Taxes and permits $ 3,967 $ 2,739 $ 8,009 $ 5,423

12 unchanged sentences

Total selling, general and administrative expenses $ 24,653 $ 22,026 $ 49,854 $ 44,758

The components of other charges, net are as follows (in thousands):

For the Three Months Ended

March 31, For the Six Months Ended

2024 2023 2024 2023

Impairment of assets $ 8,033 $ 662 $ 8,033 $ 662

Settlement of lawsuits 167 3,120 167 3,120

Loss (gain) on disposal of businesses and assets ( 5 ) 3 ( 8 ) ( 587 )

Gain on insurance — ( 27 ) — ( 91 )

Total other charges, net

$ 8,195 $ 3,758 $ 8,192 $ 3,104

During the quarter ended March 31, 2024, we recorded $ 4.4 million in SOB license impairment related to four clubs, $ 2.9 million in goodwill impairment related to two clubs, and $ 693,000 in tradename impairment related to one club, whereas during the quarter ended March 31, 2023, we recorded $ 662,000 in goodwill impairment related to one club.

During the quarter ended March 31, 2023, we recognized lawsuit settlements of $ 3.1 million, of which $ 2.8 million related to a settlement with the New York Department of Labor related to the assessment by the New York Department of Labor for state unemployment insurance.

RCI HOSPITALITY HOLDINGS, INC.

6 unchanged sentences

Of the new amended promissory notes, $ 9.1 million are payable interest-only monthly (or quarterly) in arrears, with a final lump sum payment of principal and accrued and unpaid interest due on October 1, 2026.

The remaining $ 6.6 million in promissory notes are payable in monthly payments of principal and interest based on a 10 -year amortization period, with the balance of the entire principal amount together with all accrued and unpaid interest due and payable in full on November 1, 2027.

The remaining $ 6.6 million in the amended promissory notes are payable in monthly payments of principal and interest based on a 10 -year amortization period, with the balance of the entire principal amount together with all accrued and unpaid interest due and payable in full on November 1, 2027.

The original promissory notes that were returned and cancelled as consideration for the issuance of the $ 6.6 million in new amended promissory notes had an original principal amount of $ 7.5 million in October 2021.

4 unchanged sentences

There are certain financial covenants with which the Company is to be in compliance related to this loan.

Future maturities of long-term debt as of December 31, 2023 are as follows:

$ 20.4 million, $ 24.1 million, $ 22.6 million, $ 21.9 million, $ 19.9 million and $ 128.2 million for the twelve months ending December 31, 2024, 2025, 2026, 2027, 2028, and thereafter, respectively.

Future maturities of long-term debt as of March 31, 2024 are as follows:

$ 25.6 million, $ 17.9 million, $ 23.1 million, $ 25.6 million, $ 17.7 million and $ 124.9 million for the twelve months ending March 31, 2025, 2026, 2027, 2028, 2029, and thereafter, respectively.

Of the maturity schedule mentioned above, $ 12.0 million, $ 4.8 million, $ 9.1 million, $ 7.9 million, $ 2.7 million and $ 73.6 million, respectively, relate to scheduled balloon payments.

Unamortized debt discount and issuance costs amounted to $ 2.9 million and $ 2.9 million as of December 31, 2023 and September 30, 2023, respectively.

Unamortized debt discount and issuance costs amounted to $ 2.8 million and $ 2.9 million as of March 31, 2024 and September 30, 2023, respectively.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock-based Compensation

6 unchanged sentences

On February 9, 2022, the board of directors approved a grant of 50,000 stock options to each of six members of management subject to the approval of the 2022 Plan.

Stock-based compensation for the three months ended December 31, 2023 and 2022, which is included in corporate segment selling, general and administrative expenses, amounted to $ 470,000 and $ 941,000 , respectively.

As of December 31, 2023, we had unrecognized compensation cost amounting to $ 4.0 million related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 2.1 years.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock-based Compensation - continued

Stock-based compensation, which is included in corporate segment selling, general and administrative expenses amounted to $ 471,000 and $ 941,000 during the three and six months ended March 31, 2024, respectively, and $ 706,000 and $ 1.6 million during the three and six months ended March 31, 2023, respectively.

As of March 31, 2024, we had unrecognized compensation cost amounting to $ 3.5 million related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 1.9 years.

The February 9, 2022 stock options vest over four years with the first 20 % having vested on the approval of the 2022 Plan at the 2022 annual stockholders' meeting on August 23, 2022, and 20 % vesting on February 9 of each year thereafter, provided however that the options will be subject to earlier vesting under certain events set forth in the Plan, including without limitation a change in control.

1 unchanged sentence

The weighted average grant-date fair value of the stock options was $ 31.37 per share.

No stock options were exercised during the three months ended December 31, 2023.

As of December 31, 2023, 120,000 stock options were vested and exercisable.

For the three months ended December 31, 2023 and 2022, we excluded 300,000 stock options from the calculation of diluted earnings per share because their effect was anti-dilutive.

No stock options were exercised during the three and six months ended March 31, 2024.

As of March 31, 2024, 180,000 stock options were vested and exercisable.

For the three and six months ended March 31, 2024 and 2023, we excluded 300,000 stock options from the calculation of diluted earnings per share because their effect was anti-dilutive.

Aside from the outstanding stock options, there were no other potentially dilutive securities for inclusion in the calculation of diluted earnings per share.

Income tax expense was $ 1.8 million and $ 3.0 million during the three months ended December 31, 2023 and 2022, respectively.

The effective income tax expense rate was 19.9 % and 22.8 % for the three months ended December 31, 2023 and 2022, respectively.

Income tax expense was $ 5,000 and $ 1.8 million during the three and six months ended March 31, 2024, respectively, compared to $ 2.1 million and $ 5.2 million during the three and six months ended and March 31, 2023, respectively.

The effective income tax rate was 0.7 % and 18.4 % for the three and six months ended March 31, 2024 compared to 21.8 % and 22.4 % for the three and six months ended March 31, 2023, respectively.

The disproportionate tax rates during the three months ended March 31, 2024 were caused by the small amount of pre-tax income during the quarter and the reduction of the expected annual effective tax rate.

Our effective income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, as presented below.

For the Three Months Ended

March 31, For the Six Months Ended

2024 2023 2024 2023

Federal statutory income tax expense 21.0 % 21.0 % 21.0 % 21.0 %

8 unchanged sentences

The Company ordinarily goes through various federal and state reviews and examinations for various tax matters.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

11 unchanged sentences

Pursuant to the rulings, the Texas Patron Fee is unconstitutional as applied to clubs featuring dancers using latex cover.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies - continued

Indemnity Insurance Corporation

13 unchanged sentences

As previously stated, since October 25, 2013, the Company has obtained general liability coverage from other insurers, which have covered and/or will cover any claims arising from actions after that date.

As of December 31, 2023, we have 1 remaining unresolved claim out of the original 71 claims.

As of March 31, 2024, we have 1 remaining unresolved claim out of the original 71 claims.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies - continued

Shareholder Derivative Action

25 unchanged sentences

On November 15, 2018 the Court of Appeals vacated the jury’s verdict and remanded the case to the trial court.

It is anticipated that a new trial will occur at some point in the future.

A new trial has been set for June 2025.

JAI Phoenix will continue to vigorously defend itself.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies - continued

As set forth in the risk factors as disclosed in this report, the adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees.

4 unchanged sentences

In March 2023, the New York State Department of Labor assessed a final judgment against one of our subsidiaries in a state unemployment tax matter for the years 2009-2022.

The assessment of $ 2.8 million, which was recorded by the Company during the quarter ended March 31, 2023, was issued in final notice by the NY DOL after several appeals were denied by the Supreme Court of the State of New York, Appellate Division, Third Department.

In September 2023, the NY DOL assessed another of our subsidiaries for approximately $ 280,000 on the same matter for the period January 2015 through June 2022.

We recorded this latter assessment during the quarter ended September 30, 2023.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies - continued

In the regular course of business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state, and local environmental, labor, health and safety laws and regulations.

3 unchanged sentences

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.

There were no lawsuit settlements incurred during the three months ended December 31, 2023 and 2022.

As of December 31, 2023 and September 30, 2023, the Company has accrued $ 2.1 million and $ 2.4 million in accrued liabilities, respectively, related to settlement of lawsuits.

The Company recorded lawsuit settlements incurred amounting to $ 167,000 and $ 167,000 for the three and six months ended March 31, 2024, respectively, and $ 3.1 million and $ 3.1 million for the three and six months ended March 31, 2023, respectively.

As of March 31, 2024, and September 30, 2023, the Company has accrued $ 2.2 million and $ 2.4 million, respectively, related to settlement of lawsuit, which is included in accrued liabilities in our unaudited condensed consolidated balance sheets.

Related Party Transactions

1 unchanged sentence

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

The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of December 31, 2023 and September 30, 2023, was $ 116.7 million and $ 119.2 million, respectively.

The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of March 31, 2024 and September 30, 2023, was $ 117.6 million and $ 119.2 million, respectively.

Included in the October 2023 debt transaction (see Note 6 ) are notes borrowed from related parties—one note for $ 500,000 (Ed Anakar, an employee of the Company and brother of our former director Nourdean Anakar) and another note for $ 150,000 (from a brother of Company CFO, Bradley Chhay) in which the terms of the notes are the same as the rest of the lender group.

1 unchanged sentence

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 $ 142,098 and $ 0 during the three months ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and September 30, 2023, we owed Nottingham Creations and Sherwood Forest $ 36,308 and $ 10,700 , respectively, in unpaid billings.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions - continued

Amounts billed to us for goods and services provided by Nottingham Creations and Sherwood Forest were $ 202,700 and $ 344,798 during the three and six months ended March 31, 2024, respectively, and $ 188,285 and $ 188,285 during the three and six months ended March 31, 2023, respectively.

As of March 31, 2024 and September 30, 2023, we owed Nottingham Creations and Sherwood Forest $ 84,163 and $ 10,700 , respectively, in unpaid billings.

TW Mechanical LLC 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 2024 and 2023.

A son-in-law of Eric Langan owns a 50 % interest in TW Mechanical.

Amounts billed by TW Mechanical to the third-party general contractor were $ 0 and $ 0 for the three months ended December 31, 2023 and 2022, respectively.

Amounts billed directly to the Company were $ 2,932 and $ 0 for the three months ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and September 30, 2023, the Company owed TW Mechanical $ 0 and $ 0 , respectively, in unpaid direct billings.

Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three months ended December 31, 2023 and 2022 is as follows (in thousands):

Three Months Ended December 31,

Amounts billed by TW Mechanical to the third-party general contractor were $ 0 and $ 0 for the three and six months ended March 31, 2024, respectively, and $ 18,000 and $ 64,000 for the three and six months ended March 31, 2023, respectively.

Amounts billed directly to the Company were $ 228 and $ 3,160 for the three and six months ended March 31, 2024, respectively, and $ 379 and $ 379 for the three and six months ended March 31, 2023, respectively.

As of March 31, 2024 and September 30, 2023, the Company owed TW Mechanical $ 0 and $ 0 , respectively, in unpaid direct billings.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three and six months ended March 31, 2024 and 2023 is as follows (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2024 2023 2024 2023

Operating lease expense – fixed payments $ 1,292 $ 1,288 $ 2,584 $ 2,547

Variable lease expense 411 359 861 786

Short-term and other lease expense (includes $ 107 and $ 64 recorded in advertising and marketing for the three months ended December 31, 2023 and 2022, respectively;

and $ 141 and $ 127 recorded in repairs and maintenance for the three months ended December 31, 2023 and 2022, respectively;

Short-term and other lease expense (includes $ 118 and $ 63 recorded in advertising and marketing for the three months ended March 31, 2024 and 2023, respectively, and $ 225 and $ 127 for the six months ended March 31, 2024 and 2023, respectively;

and $ 147 and $ 138 recorded in repairs and maintenance for the three months ended March 31, 2024 and 2023, respectively, and $ 288 and $ 265 for the six months ended March 31, 2024 and 2023, respectively;

347 319 677 586

Sublease income — — — —

4 unchanged sentences

Weighted average discount rate – operating leases 5.8 % 5.7 %

Future maturities of operating lease liabilities as of December 31, 2023 are as follows (in thousands):

Future maturities of operating lease liabilities as of March 31, 2024 are as follows (in thousands):

Principal Payments Interest Payments Total Payments

January - December 2024 $ 3,037 $ 2,014 $ 5,051

January - December 2025 3,296 1,835 5,131

January - December 2026 3,594 1,640 5,234

January - December 2027 3,355 1,438 4,793

January - December 2028 2,996 1,256 4,252

April 2024 - March 2025 $ 3,098 $ 1,970 $ 5,068

April 2025 - March 2026 3,370 1,788 5,158

April 2026 - March 2027 3,588 1,589 5,177

April 2027 - March 2028 3,218 1,390 4,608

April 2028 - March 2029 3,038 1,213 4,251

Thereafter 20,379 4,046 24,425

$ 36,691 $ 11,996 $ 48,687

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Pro Forma Information on Prior Year Business Acquisition

In relation to the acquisition of the Baby Dolls-Chicas Locas clubs in March 2023, below are certain unaudited pro forma combined results of operations of the Company and the five acquired clubs and related assets as though the acquisition occurred at the beginning of fiscal 2022 (in thousands, except per share amounts and number of shares):

Three Months Ended

March 31, Six Months Ended

2024 2023 2024 2023

Pro forma revenues $ 72,283 $ 77,292 $ 146,190 $ 154,424

Pro forma net income attributable to RCIHH common stockholders $ 774 $ 8,303 $ 8,000 $ 17,213

Pro forma earnings per share - basic and diluted $ 0.08 $ 0.88 $ 0.85 $ 1.83

Pro forma weighted average shares used in computing earnings per share - basic and diluted 9,350,292 9,430,225 9,358,768 9,430,241

The above unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2022.

The unaudited pro forma financial information reflects material, nonrecurring adjustments directly attributable to the acquisition, including acquisition-related expenses, interest expense, and any related tax effects.

We incurred approximately $ 280,000 and $ 292,000 in acquisition-related expenses during the three and six months ended March 31, 2023, respectively, which is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income.

Pro forma net income and pro forma earnings per share include the impact of acquisition-related expenses and interest expense related to a $ 10.0 million line-of-credit facility and the nine seller-financed notes in the acquisition as if they were incurred as of the first day of fiscal 2022.

Pro forma weighted average shares used in computing earnings per share include the impact of 200,000 shares of our common stock issued as partial consideration for the acquisition.

Since the results of operations during the three and six months ended March 31, 2024 were in a fiscal year subsequent to the fiscal year of acquisition and that the periods fully include the results of operations of the five acquired clubs, the amounts presented do not reflect any pro forma adjustments.

Subsequent Events

On April 30, 2024, the Company entered into a term loan with a bank lender for $ 20.0 million for additional working capital.

The loan has a 10 -year term and an interest rate of 8.25 % per annum for the first five years , after which the interest rate is to be adjusted to a rate equal to the then weekly average yield on U.S.

Treasury Securities plus 362 basis points, with a 6.5 % floor.

The promissory note is payable in equal monthly installments of $ 170,408 for principal and interest, based on a 20 -year amortization period, during the first five years , after which the monthly payments shall adjust based on the new interest rate to continue until April 30, 2034, at which time the remaining principal amount and accrued interest shall be paid.

The Company paid $ 356,000 in debt issuance costs at the time of closing.

There are certain financial covenants with which the Company is to be in compliance with related to this loan, including a minimum tangible net worth requirement of $ 25.0 million.

Subsequent to the balance sheet date through May 6, 2024, we repurchased 7,303 shares of our common stock at an average price of $ 51.29 .

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-Q

Item 1. Financial Statements