RCI HOSPITALITY HOLDINGS, INC. 10-K

Item 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures In connection with the preparation of this report, an evaluation was carried out by certain members of Company management, with the participation of the 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, 2024. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO and the CFO, to allow timely decisions regarding required disclosures. Due to material weaknesses in internal control over financial reporting described below, management concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2024. Notwithstanding the existence of these material weaknesses, management believes that the consolidated financial statements in this annual report filed on Form 10-K present, in all material respects, the Company’s financial condition as reported, in conformity with United States Generally Accepted Accounting Principles (“U.S. GAAP”). Management’s Annual Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of September 30, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified material weaknesses in internal control related to (1) ineffective design and operation of controls over certain information technology general controls ("ITGCs"), including program change management, user access, and vendor management controls; (2) ineffective design and operation of controls, which include management review controls, over the accounting for business combinations; and (3) ineffective design and operation of controls, which include management review controls, over the Company's assessments of potential impairment. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were a result of inadequate IT controls over the review of user access and imprecise documentation of procedures related to program change management. Additionally, we rely upon a variety of outsourced IT service providers for key elements of the technology infrastructure impacting our financial reporting process. Certain outsourced IT service providers could not provide System and Organization Controls ("SOC") reports for periods that closely align with our fiscal year end. Given that management did not effectively assess the design and operation of these outsourced IT service providers’ internal controls, some of our controls over IT systems and business processes were also deemed ineffective, but only to the extent 104 Table of Contents that we rely upon information that was subject to the outsourced IT service providers’ control environment. These deficiencies may have an impact on our financial statements, account balances, and disclosures. Based on our evaluation, our management, with the participation of our chief executive officer and chief financial officer, concluded that our internal control over financial reporting was not effective as of September 30, 2024. Following identification of these material weaknesses, and prior to filing this Annual Report on Form 10-K, we completed substantive procedures for the year ended September 30, 2024. Based on these procedures, management believes that the consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S. GAAP. Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K. The Company’s independent registered public accounting firm, Marcum LLP, has expressed an unqualified opinion on our consolidated financial statements and an adverse opinion on our internal control over financial reporting as of September 30, 2024, in the audit report that appears at the end of Part II of this Annual Report on Form 10-K. Remediation Plan for Existing Material Weaknesses Management is committed to the remediation of the material weaknesses described above. Review of Accounting for Business Combinations Controls will be added to both increase precision of management’s review of each component of business combinations, and if necessary, retain the services of a third-party consultant to assist in the valuation and accounting for intangible assets acquired in a business combination. Review of Accounting for Impairment of Goodwill and Intangible Assets As most of the assumptions used in the valuation models employed in impairment analyses are subjective in nature, Management will employ additional controls to validate these assumptions, including the engagement of a third-party consultant to assist developing valuation models and establishing sound and reasonable assumptions. Information Technology General Controls As a result of the material weakness, we have initiated and will continue to implement remediation measures to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) strengthening and enhancing the review and documentation procedures in our controls over user access review; (ii) defining and communicating clear and concise program change management policy and procedures; (iii) enhancing the reporting requirements of accounting system audit logs; (vi) continuous improvement over our ITGC controls related to third party applications; and (vi) enhanced quarterly reporting on the remediation measures to the Audit Committee of the board of directors. It is our belief that these added controls will effectively remediate the existing material weaknesses. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of fiscal 2025. 105 Table of Contents Changes in Internal Control Over Financial Reporting Except for the remediation efforts as discussed above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. OTHER INFORMATION. Insider Trading Agreements None of our officers or directors, as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, adopted, modified, or terminated a "Rule 10b5-1 trading agreement" or a "non-Rule 10b5-1 trading agreement," as defined in Item 408 of Regulation S-K, during the three months ended September 30, 2024. 106 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING To the Stockholders and Board of Directors of RCI Hospitality Holdings, Inc. Adverse Opinion on Internal Control over Financial Reporting We have audited RCI Hospitality Holdings, Inc.’s (the "Company’s") internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses described in the 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, 2024, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in Management's Annual Report on Internal Control Over Financial Reporting: • The Company had ineffective design and operation of controls over certain information technology general controls ("ITGCs"), including program change management, user access, and vendor management controls to ensure: 1) For all in-scope systems, IT program and data changes affecting the Company’s financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate; 2) For a certain three systems, appropriate restrictions that would adequately prevent users from gaining inappropriate access; and 3) For three key service providers, SOC reports were obtained and reviewed. As a result of the above deficiencies, automated process-level and manual controls, including the remaining ITGCs, that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective. • Ineffective design and operation of controls, which include management review controls, over the accounting for business combinations. • Ineffective design and operation of controls, which include management review controls, over the Company's assessments of potential impairment. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal 2024 consolidated financial statements and financial statement schedule, and this report does not affect our report dated December 16, 2024 on those consolidated financial statements. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of September 30, 2024 and 2023 and the related consolidated statements of income, changes in equity, and cash flows and the related financial statement schedule for each of the years in the two-year period ended September 30, 2024 of the Company and our report dated December 16, 2024 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule. 107 Table of Contents Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of 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. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate. /s/ Marcum LLP Marcum LLP Marlton, New Jersey December 16, 2024 108 Table of Contents PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. DIRECTORS AND EXECUTIVE OFFICERS Our directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected and qualified. Officers are appointed by the board of directors annually and serve at the discretion of the board of directors (subject to any existing employment agreements). There is no family relationship between or among any of our directors and executive officers. Our board of directors consists of six persons. The following table sets forth our directors and executive officers as of December 16, 2024: Name Age Position Eric S. Langan 56 Director, Chairman, Chief Executive Officer, President Bradley Chhay 41 Chief Financial Officer Travis Reese 55 Director and Executive Vice President Luke Lirot 68 Director Yura Barabash 50 Director Elain J. Martin 68 Director Arthur Allan Priaulx 84 Director Eric S. Langan has been a director since 1998, and our President, CEO and Chairman since 1999. He began his career in the hospitality industry in 1989 and has developed significant expertise in sports bar/restaurants and adult entertainment nightclubs, including related areas of real estate development and finance. Mr. Langan built the XTC Cabaret nightclub brand and merged it into RCI in 1998, expanding the scope of the company. He has been instrumental in bringing professional marketing, management, finance, and technology practices and systems to the gentlemen’s club industry. As one of the original founders of the National Association of Club Executives (ACE), Mr. Langan has been an active member of its board of directors since 1999. Through these activities, Mr. Langan has acquired the knowledge and skills necessary to successfully operate adult entertainment businesses. Involvement in certain legal proceedings : On September 21, 2020, as part of the settlement of a civil administrative proceeding with the SEC, the Company, Mr. Langan, and Phil Marshall (our former chief financial officer) agreed, without admitting or denying the findings, to a cease-and-desist order regarding certain sections of the Securities Exchange Act of 1934 and certain rules promulgated thereunder. The SEC’s order as to the Company, Mr. Langan, and Mr. Marshall found that, from fiscal 2014 through 2019, the Company failed to disclose a total of $615,000 in executive compensation in the form of perquisites. According to the order, these undisclosed perquisites included the cost of the personal use of the Company’s aircraft and Company-provided vehicles, reimbursements for personal airline flights, charitable corporate contributions to the school two of Mr. Langan’s children attended, and housing costs and meal allowance for Mr. Marshall. In addition, the order found that the Company failed to disclose related party transactions involving Mr. Langan’s father and brother and a director’s brother. The order further found that the Company failed to keep books and records that allowed it to report, and lacked sufficient internal controls concerning, these executive perquisites and related party transactions. The SEC’s order as to the Company, Mr. Langan, and Mr. Marshall found that the Company and Mr. Langan violated, and Mr. Langan and Mr. Marshall caused the Company to violate, the proxy solicitation provisions of Section 14(a) of the Securities Exchange Act of 1934 and Rules 14a-3 and 14a-9 thereunder. The order further found that the Company violated, and Mr. Langan and Mr. Marshall caused the Company to violate, the reporting provisions of Section 13(a) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder, the books and records provisions of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and the disclosure controls provision of Rule 13a-15(a) under the Exchange Act. The Company, Mr. Langan, and Mr. Marshall agreed, without admitting or denying the SEC’s findings, to a cease-and-desist order and to pay civil penalties in the amounts of $400,000, $200,000, and $35,000, respectively. 109 Table of Contents Bradley 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. Travis Reese became a director and our Executive Vice President in 1999. Throughout his time with the Company, Mr. Reese has served many different roles, including without limitation overseeing information technology, working to create the company’s intranet, permit tracking, and incident reporting systems as well as other technology platforms the Company uses. Additionally, with his family history in military and aviation, he created the Company’s Bombshells Restaurant and Sports Bar concept in 2013. Mr. Reese has been involved in the adult entertainment industry since 1992. His experience and knowledge in this industry is essential to the board’s oversight of our businesses. Luke Lirot became a director on July 31, 2007. Mr. Lirot received his law degree from the University of San Francisco in 1986. After serving as an intern in the San Francisco Public Defender’s Office in 1986, Mr. Lirot returned to Florida and established a private law practice where he continues to practice and specializes in adult entertainment issues. He is a past President of the First Amendment Lawyers’ Association and has actively participated in numerous state and federal legal matters. Mr. Lirot represents as counsel scores of individuals and entities within our industry. Having practiced in this area for over 30 years, he is aware of virtually every type of legal issue that can arise, making him an important member of the board. Yura Barabash became a director on September 19, 2017. Since October 2021, he has served as the Vice President of Business Development at AVI-SPL, the world's largest designer, integrator and provider of advanced audio-visual (AV) and collaboration solutions and services based in Florida. Mr. Barabash brings with him extensive corporate finance experience across various industries both domestically and internationally. He has played a key role in numerous equity and debt financings, as well as mergers and acquisitions in the United States, Latin America, China, and the European Union. From August 2019 to January 2021, Mr. Barabash was a Chief Operating Officer of Gingko Online Learning LLC, private online language learning company in Florida and a consultant to Chengdu Gingko Education Management, educational management company in Chengdu, China. From 2016 to June 2019, he was a Senior Vice President of Finance at Motorsport Network LLC (www.motorsportnetwork.com) in Miami, the largest motorsport digital media company in the world. Earlier in his career, Mr. Barabash held investment banking roles at Primary Capital, Rodman & Renshaw, and Merrill Lynch. He holds a B.A. from Sevastopol City University in Ukraine and a Master in International Affairs from Columbia University in New York City, and is fluent in Russian. Mr. Barabash recently completed the Cybersecurity Governance course at MIT Sloan and the Audit and Compensation Committees programs at Harvard Business School Executive Education. Elaine J. Martin became a director on August 8, 2019. She is co-founder and general partner of two privately-held Houston area businesses for which she provides a broad array of management and accounting functions on a day-to-day basis. In 1993, she co-founded Medco Manufacturing LLC, which develops, manufactures and sells, under Food and Drug Administration (FDA) guidelines, equipment and disposable products used by plastic surgeons in domestic and international markets. In 1989, Ms. Martin co-founded Aero Tech Aviation LLC, which trains foreign nationals for the Federal Aviation Administration (FAA) Air Frame and Power Plant examination, for their license to repair US-origin aircraft. Earlier in her career, she was a Registered Nurse specializing in cosmetic surgery. Ms. Martin received her BS in Biology and Chemistry from Houston Baptist University. Her volunteer activities have included serving as a member of the board of directors of Texas A&M University Mothers’ Club (Aggie Moms). Ms. Martin’s business acumen and experience running companies make her an important member of the board. 110 Table of Contents Arthur Allan Priaulx became a director on August 8, 2019. He has more than 45 years of experience in the communications industry. Earlier in his career, he was Vice President and General Manager of King Features Division of Hearst Corporation, in charge of worldwide newspaper activities and product licensing. He was also publisher of American Banker, a leading trade publication in the financial services industry, when it was owned by Thomson Financial. In 1993, he founded Resource Media Group, a New York-based financial media and investor relations firm. His clients included a wide range of companies, including RCI Hospitality Holdings, Inc., for which he provided public and investor relations services from 1994 to 2013. Mr. Priaulx has been retired since 2014. He attended Dartmouth College and University of Southampton in the U.K. He has also completed graduate-level courses at INSEAD Business School in France and the Wharton School of the University of Pennsylvania. His volunteer activities have included serving as national vice president of United Cerebral Palsy. COMMITTEES OF THE BOARD OF DIRECTORS AUDIT COMMITTEE We have an Audit Committee whose members are Yura Barabash, Elaine Martin, and Arthur Allan Priaulx. All members of the Audit Committee are independent directors. The purpose of the Audit Committee is to (i) oversee our accounting and financial reporting processes, our disclosure controls and procedures and system of internal controls and audits of our consolidated financial statements, (ii) oversee the relationship with our independent auditors, including appointing or changing our auditors and ensuring their independence, and (iii) provide oversight regarding significant financial matters. The Audit Committee meets privately with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our outside independent registered public accounting firm. Yura Barabash serves as the Audit Committee’s financial expert. In August 2015, our board adopted a new charter for the Audit Committee. A copy of the Audit Committee Charter can be found on our website at www.rcihospitality.com/investor . The Charter establishes the independence of our Audit Committee and sets forth the scope of the Audit Committee’s duties. The Audit Committee conducts an ongoing review of our financial reports and other financial information prior to their being filed with the SEC, or otherwise provided to the public. The Audit Committee also reviews our systems, methods and procedures of internal controls in the areas of: financial reporting, audits, treasury operations, corporate finance, managerial, financial and SEC accounting, compliance with law, and ethical conduct. NASDAQ Stock Market Rules require all members of the Audit Committee to be independent. The Audit Committee is objective, and reviews and assesses the work of our independent registered public accounting firm and our internal accounting department. NOMINATING COMMITTEE We have a Nominating Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash, and Arthur Allan Priaulx. In July 2004, the board unanimously adopted a Charter with regard to the process to be used for identifying and evaluating nominees for director. The Charter establishes the independence of our Nominating Committee and sets forth the scope of the Nominating Committee’s duties. NASDAQ Stock Market Rules require all members of the Nominating Committee to be independent. Pursuant to its Charter, the Committee has the power and authority to consider board nominees and proposals submitted by our stockholders and to establish any procedures, including procedures to facilitate stockholder communication with the board of directors, and to make any such disclosures required by applicable law in the course of exercising such authority. A copy of the Nominating Committee’s Charter can be found on our website at www.rcihospitality.com/investor . COMPENSATION COMMITTEE We have a Compensation Committee whose current members are Elaine Martin, Luke Lirot, Yura Barabash, and Arthur Allan Priaulx. In June 2014, the Compensation Committee adopted a Charter with regard to the Compensation Committee’s responsibilities, including evaluating, reviewing and determining the compensation of our Chief Executive Officer and other executive officers. A copy of the Compensation Committee’s Charter can be found on our website at www.rcihospitality.com/investor . 111 Table of Contents DELINQUENT SECTION 16(A) REPORTS Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own beneficially more than ten percent of our common stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3, 4 and 5 furnished to us during the fiscal year ended September 30, 2024, we believe that the directors, executive officers, and greater than ten percent beneficial owners have complied with all applicable filing requirements during the fiscal year ended September 30, 2024, except for a Form 4 for a single transaction that was not filed on a timely basis by Bradley Chhay, our Chief Financial Officer. CODE OF ETHICS We have adopted a code of ethics for our principal executive and senior financial officers, a copy of which can be found on our website at www.rcihospitality.com. INSIDER TRADING POLICIES We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities that applies to all of RCI Hospitality Holdings, Inc.’s directors, officers and employees, and also applies to other key employees of subsidiaries of RCI Hospitality Holdings, Inc., as determined by our Chief Compliance Officer. We do not presently have written procedures for the repurchase of our securities. We believe that our insider trading policy and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19.1 to this Form 10-K. 112 Table of Contents Item 11. EXECUTIVE COMPENSATION. COMPENSATION DISCUSSION AND ANALYSIS This compensation discussion and analysis describes the material elements of the Company’s compensation programs as they relate to our executive officers who are listed in the compensation tables appearing below. This compensation discussion and analysis focuses on the information contained in the following tables and related footnotes. The individuals who served as the Company’s Chief Executive Officer and Chief Financial Officer during fiscal 2024, as well as any other individuals included in the Summary Compensation Table, are referred to as “named executive officers” ("NEOs"). Overview of Compensation Committee Role and Responsibilities The Compensation Committee of the board of directors oversees our compensation plans and policies, reviews and approves all decisions concerning the named executive officers’ compensation, which may further be approved by the board, and administers our stock option and equity plans, including reviewing and approving stock option grants and equity awards under the plans. The Compensation Committee’s membership is determined by the board and is composed entirely of independent directors. Management plays a role in the compensation-setting process. The most significant aspects of management’s role are to evaluate employee performance and recommend salary levels and equity compensation awards. Our Chief Executive Officer often makes recommendations to the Compensation Committee and the board concerning compensation for other executive officers. Our Chief Executive Officer is a member of the board but does not participate in board decisions regarding any aspect of his own compensation. The Compensation Committee can retain independent advisors or consultants. Compensation Committee Process The Compensation Committee reviews executive compensation in connection with the evaluation and approval of an employment agreement, an increase in responsibilities or other factors. With respect to equity compensation awarded to other employees, the Compensation Committee or the board may grant stock options, often after receiving a recommendation from our Chief Executive Officer. The Compensation Committee also evaluates proposals for incentive and performance equity awards, and other compensation. Compensation Philosophy The Compensation Committee emphasizes the important link between the Company’s performance, which ultimately affects stockholder value, and the compensation of its executives. Therefore, the primary goal of the Company’s executive compensation policy is to try to align the interests of the executive officers with the interests of the stockholders. In order to achieve this goal, the Company attempts to (i) offer compensation opportunities that attract and retain executives whose abilities and skills are critical to the long-term success of the Company and reward them for their efforts in ensuring the success of the Company, (ii) align the Company’s compensation programs with the Company’s long-term business strategies and objectives, and (iii) provide variable compensation opportunities that are directly linked to the Company’s performance and stockholder value, including an equity stake in the Company. Our named executive officers’ compensation utilizes two primary components — base salary and long-term equity compensation — to achieve these goals. Additionally, the Compensation Committee may award discretionary bonuses to certain executives based on the individual’s contribution to the achievement of the Company’s strategic objectives. Setting Executive Compensation We fix executive base compensation at a level we believe enables us to hire and retain individuals in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business goals. We also take into account the compensation that is paid by companies that we believe to be our competitors and by other companies with which we believe we generally compete for executives. 113 Table of Contents In establishing compensation packages for executive officers, numerous factors are considered, including the particular executive’s experience, expertise and performance, our company’s overall performance and compensation packages available in the marketplace for similar positions. In arriving at amounts for each component of compensation, our Compensation Committee strives to strike an appropriate balance between base compensation and incentive compensation. The Compensation Committee also endeavors to properly allocate between cash and non-cash compensation and between annual and long-term compensation. The Role of Shareholder Say-on-Pay Votes At our annual meeting of shareholders held on August 28, 2024, approximately 92% of the shareholders who voted (including abstentions) on the “say-on-pay” proposal approved the compensation of our named executive officers, as disclosed in the proxy statement. Although this advisory shareholder vote on executive compensation is non-binding, the Compensation Committee will consider the outcome of the vote when making future compensation decisions for named executive officers. Base Salary The Company provides executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. Subject to the provisions contained in employment agreements with executive officers concerning base salary amounts, base salaries of the executive officers are established based upon compensation data of comparable companies in our market, the executive’s job responsibilities, level of experience, individual performance and contribution to the business. We believe it is important for the Company to provide adequate fixed compensation to highly qualified executives in our competitive industry. In making base salary decisions, the Compensation Committee uses its discretion and judgment based upon personal knowledge of industry practice but does not apply any specific formula to determine the base salaries for the executive officers. Retirement Savings Plan The Company maintains a retirement savings plan for the benefit of our executives and employees. Our Simple IRA Plan is intended to qualify as a defined contribution arrangement under the Internal Revenue Code (the “Code”). Participants may elect to defer a percentage of their eligible pretax earnings each year or contribute a fixed amount per pay period up to the maximum contribution permitted by the Code. All participants’ plan accounts are 100% vested at all times. All assets of our Simple IRA Plan are invested based on participant-directed elections. We make certain matching contributions to the Simple IRA Plan, which are also 100% vested. Perquisites and Other Personal Benefits The Company’s executive officers participate in the Company’s other benefit plans on the same terms as other employees on a non-discriminatory basis. These plans include medical, dental, life and disability insurance. Relocation benefits also are reimbursed and are individually negotiated when they occur. The Company reimburses each executive officer for all reasonable business and other expenses incurred by them in connection with the performance of their duties and obligations. The Company does not provide named executive officers with any significant perquisites or other personal benefits except for personal travel using Company-owned automobiles and aircrafts. On August 28, 2023, the board of directors, after a recommendation from the Audit Committee, amended the corporate aircraft policy changing the allowed use to a maximum personal use each fiscal year, as follows: (i) 100 hours flown for the CEO and (ii) 48 hours flown each for other executive officers. Refer to footnote on All Other Compensation in the Summary Compensation Table below. 114 Table of Contents SUMMARY COMPENSATION TABLE The following table reflects all forms of compensation for services to us for the fiscal years ended September 30, 2024, 2023, and 2022 of our named executive officers. Name and Principal Position Year Salary ($) Bonus ($) Option Awards (1) ($) All Other Compensation (2) ($) Total ($) Eric S. Langan 2024 1,700,000 — — 129,649 1,829,649 President and Chief Executive 2023 1,700,000 — — 167,388 1,867,388 Officer 2022 1,700,000 — 1,568,500 151,353 3,419,853 Bradley Chhay 2024 600,000 — — 63,375 663,375 Chief Financial Officer 2023 472,789 — — 61,676 534,465 2022 428,077 — 1,568,500 77,374 2,073,951 Travis Reese 2024 466,635 — — 48,227 514,862 Executive Vice President 2023 460,000 25,000 — 51,534 536,534 2022 423,077 — 1,568,500 66,862 2,058,439 (1) Amounts represent the aggregate grant date fair value of the stock options granted during the fiscal year, computed in accordance with FASB ASC Topic 718. Information about the assumptions used to value these stock option awards can be found in Note 2 to the consolidated financial statements in this Annual Report on Form 10-K. (2) All Other Compensation consists of SIMPLE IRA matching contributions, automobile expenses, and personal use of aircraft. We account for personal use of aircraft to be the aggregate incremental cost of personal use of the company aircraft as calculated based on a cost-per-flight-hour charge developed by a nationally recognized and independent service. The charge reflects the direct cost of operating the aircraft, including fuel, additives, lubricants, maintenance labor, airframe parts, engine restoration, and major periodic maintenance. We added actual airport/hangar fees charged to the company on a per-flight basis. The charge does not include fixed costs that do not change based on usage, such as aircraft depreciation, home hangar expenses, and general taxes and insurance. We value automobile expenses based on the annual depreciation rate of automobiles assigned for use by the particular officer, plus cost of insurance, registration, repairs, maintenance, tolls, and fuel. Tax reimbursement benefit is based on automobile fringe benefits. A table of All Other Compensation for fiscal 2024 for our named executive officers is presented below: Name SIMPLE IRA Matching Contribution ($) Automobile Expenses ($) Personal Use of Aircraft ($) Tax Reimbursement ($) Total All Other Compensation ($) Eric S. Langan 19,385 27,408 71,523 11,333 129,649 Bradley Chhay 15,884 36,267 — 11,224 63,375 Travis Reese 14,133 24,400 3,302 6,392 48,227 115 Table of Contents CEO Pay Ratio We reviewed a comparison of annual total compensation of our CEO to the annual compensation of our median employee who was selected from all employees who were employed (other than the CEO) during our fiscal year ended September 30, 2024. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. The compensation for our CEO in fiscal 2024 of $1,829,649 was approximately 59 times the $30,890 compensation of our fiscal 2024 median employee. Pay vs. Performance We are providing the following information about the relationship between executive compensation actually paid and certain financial performance measures of the Company as required by Section 953(a) of the Dodd-Frank and Consumer Protection Act, and Item 402(v) of Regulation S-K for fiscal 2024, 2023, 2022, and 2021, as it relates to our principal executive officer ("PEO") and certain non-PEO NEOs. Value of Initial Fixed $100 Investment Based On: Year Summary Compensation Table Total for PEO Compensation Actually Paid to PEO Average Summary Compensation Table Total for Non-PEO NEOs Average Compensation Actually Paid to Non-PEO NEOs RICK Total Shareholder Return DJUSRU Total Shareholder Return Net Income Free Cash Flow 2024 $1,829,649 $ 1,669,815 $ 589,119 $ 429,285 $ 217.81 $ 146.72 $ 3,018,000 $ 48,421,000 2023 $1,867,388 $ 1,905,910 $ 535,500 $ 574,022 $ 296.39 $ 98.12 $ 29,100,000 $ 53,176,000 2022 $3,419,853 $ 3,329,003 $ 2,066,195 $ 1,975,345 $ 319.02 $ 129.93 $ 46,060,000 $ 58,911,000 2021 $1,545,218 $ 1,545,218 $ 504,181 $ 504,181 $ 336.19 $ 88.89 $ 30,150,000 $ 36,084,000 (1) Non-PEO NEOs represent Bradley Chhay and Travis Reese for each of the fiscal years presented. (2) We selected the Dow Jones U.S. Restaurants & Bars Index as our peer group for the purpose of calculating comparable total shareholder return ("TSR"). Also refer to Item 5 of this report for our and our peer group's five-year TSR. (3) We selected free cash flow as our Company-selected measure for this purpose. 116 Table of Contents (4) "Compensation Actually Paid" is computed in the table below, in accordance with Item 402(v) of Regulation S-K. 2024 2023 2022 2021 PEO Average for Non-PEO NEOs PEO Average for Non-PEO NEOs PEO Average for Non-PEO NEOs PEO Average for Non-PEO NEOs Summary Compensation Table total $ 1,829,649 $ 589,119 $ 1,867,388 $ 535,500 $ 3,419,853 $ 2,066,195 $ 1,545,218 $ 504,181 Adjustments: Deduct option awards granted during the year — — — — (1,568,500) (1,568,500) — — Add fair value of options granted and vested at the same year — — — — 313,700 313,700 — — Add fair value of options granted during the year and remain unvested at year-end — — — — 1,163,950 1,163,950 — — Increase (decrease) for change in fair value from prior year-end to current year-end of options granted in prior year (143,490) (143,490) (62,527) (62,527) — — — — Increase (decrease) for change in fair value from prior year-end to current year vesting date of options granted in prior year (16,344) (16,344) 101,049 101,049 — — — — Compensation Actually Paid $ 1,669,815 $ 429,285 $ 1,905,910 $ 574,022 $ 3,329,003 $ 1,975,345 $ 1,545,218 $ 504,181 The mix of compensation paid to our PEO and non-PEO NEOs is mostly cash salary that is fixed, as shown in the Summary Compensation Table above. Except for the stock options granted in fiscal 2022, there had been no stock-based compensation awarded since fiscal 2014. We also currently do not have long-term incentive plans that are based on the Company's stock price or any of our financial measures. As shown in the charts below, the compensation actually paid to our PEO and non-PEO NEOs is not directly aligned with our Company and peer group total shareholder return or with our Company's net income and free cash flow in the fiscal years presented. 117 Table of Contents GRANTS OF PLAN-BASED AWARDS There were no grants of plan-based awards for fiscal 2024. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth information with respect to outstanding stock options awards for each of our named executive officers as of September 30, 2024. Option Awards Name Grant Date Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Exercise Price ($/Sh) Option Expiration Date Eric S. Langan 2/9/2022 30,000 20,000 100.00 2/9/2027 Bradley Chhay 2/9/2022 30,000 20,000 100.00 2/9/2027 Travis Reese 2/9/2022 30,000 20,000 100.00 2/9/2027 OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2024 There were no stock options exercised nor stock that vested during the fiscal year ended September 30, 2024. 118 Table of Contents DIRECTOR COMPENSATION We pay the expenses of our directors in attending board meetings. We paid no equity-based compensation during the fiscal year ended September 30, 2024, and we paid our independent directors $50,000 in cash for the fiscal year. The Audit Committee chair received additional compensation of $10,000 in cash. Following is a schedule of all compensation paid to our directors in the year ended September 30, 2024: Name Fees earned or paid in cash ($) Luke C. Lirot 50,000 Yura Barabash 60,000 Elaine Martin 50,000 Arthur Allan Priaulx 50,000 Eric S. Langan — Travis Reese — EMPLOYMENT AGREEMENTS On August 28, 2023, we entered into a new two-year employment agreement with Bradley Chhay, under which he receives an annual salary of $600,000. The term of the agreement commenced on August 28, 2023, and will end on August 31, 2025. On September 5, 2024, we entered into new two-year employment agreements with Eric Langan, our Chief Executive Officer and President, and Travis Reese, our Executive Vice President and Secretary, which agreements were effective as of September 1, 2024. Under their respective new agreements, Mr. Reese’s annual salary increased to $575,000; and Mr. Langan’s annual salary is $1,700,000. The term of each of the agreements commenced on September 1, 2024, and will end on August 31, 2026. Each of the employment agreements above provides for bonus eligibility, expense reimbursement, health benefits, participation in our benefit plans, use of a company-owned automobile, access to company-owned aircraft (subject to the terms and conditions of our corporate aircraft policy), and two weeks paid vacation annually. Under the terms of the new agreements, each executive is bound to a confidentiality provision and cannot compete with us for a period upon termination of the agreement. Further, in the event we terminate any such employee without cause or such employee terminates his employment because we reduce or fail to pay his compensation or materially change his responsibilities, such employee is entitled to receive in one lump sum payment the full remaining amount under the term of his employment agreement to which he would have been entitled had his agreement not been terminated. Currently, our executive officers do not have long-term incentive plans or defined benefit or actuarial plans outstanding. EMPLOYEE STOCK OPTION PLANS On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000. The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each to six members of management subject to the approval of the 2022 Plan. 119 Table of Contents Timing of Grants of Certain Equity Awards We do not have any formal policies regarding the timing of awards of options in relation to the disclosure of material nonpublic information. Except for the options granted in February 2022, we had not awarded any stock-based compensation since fiscal 2014. If we grant additional options in the future, it is anticipated that the board and Compensation Committee will take material nonpublic information into account when determining the timing and terms of such an award, with the goal being to not grant such awards close in time to the release of any material nonpublic information. We have never timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT We attempt to make our compensation programs discretionary, balanced and focused on the long term. We believe goals and objectives of our compensation programs reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Our approach to compensation practices and policies applicable to employees and consultants is consistent with that followed for our executives. Based on these factors, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. Compensation Committee Report The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis to be included in this Form 10-K. Based on the reviews and discussions referred to above, the Compensation Committee recommends to the board of directors that the Compensation Discussion and Analysis referred to above be included in this report. This report is furnished by the Compensation Committee of our board of directors, whose members are: Elaine Martin Luke Lirot Yura Barabash Arthur Allan Priaulx Compensation Committee Interlocks and Insider Participation The Compensation Committee is comprised of Ms. Martin and Messrs. Lirot, Barabash, and Priaulx. No interlocking relationship exists between any member of the Compensation Committee and any member of any other company’s board of directors or compensation committee. 120 Table of Contents Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth certain information at December 13, 2024, 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 8,900,000 shares of common stock outstanding at December 13, 2024. Generally, in computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deem outstanding shares of common stock subject to stock options or warrants held by that person that are currently exercisable or exercisable within 60 days of December 13, 2024 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 13, 2024; we do not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*). Name/Address Common Stock Percent of Class (1) Executive Officers and Directors Eric S. Langan 733,000 (2) 8.21 % Bradley Chhay 33,607 (2)(3) * Yura Barabash 1,149 * Travis Reese 42,671 (2) * Luke Lirot 518 * Elaine Martin 11,158 * Arthur Allan Priaulx 2,000 * All of our Directors and Officers as a Group of seven persons 824,103 9.17 % Other > 5% Security Holders BlackRock, Inc. (4) 633,098 7.11 % ADW Capital Partners, L.P. (5) 934,592 10.50 % The Vanguard Group - 23-1945930 (6) 492,823 5.54 % Progeny 3, Inc. (7) 460,968 5.18 % (1) These percentages exclude treasury shares in the calculation of percentage of class. (2) Includes stock options that are currently exercisable into 30,000 shares of common stock. 121 Table of Contents (3) Number of shares is rounded to the nearest whole number. The actual amount is 33,606.681 shares. (4) Based on the most recently available Schedule 13G filed with the SEC on January 26, 2024 by BlackRock Inc. BlackRock beneficially owned 633,098 shares, with sole voting power and sole dispositive power over all such shares. The address of BlackRock is 50 Hudson Yards, New York, New York 10001. (5) Based on the most recently available Schedule 13G filed with the SEC on February 14, 2024 by ADW Capital Partners, L.P., ADW Capital Management, LLC and Adam D. Wyden. ADW Capital Management, LLC is the general partner and investment manager of ADW Capital Partners, L.P. Mr. Wyden is the sole manager of ADW Capital Management, LLC. ADW Capital Partners, L.P is the record and direct beneficial owner of 934,592 shares, with shared voting power and shared dispositive power over all such shares. The address of each of these reporting persons is 6431 Allison Road, Miami Beach, Florida 33141. (6) Based on the most recently available Schedule 13G filed with the SEC on February 13, 2024 by The Vanguard Group - 23-1945930. The Vanguard Group - 23-1945930 beneficially owned an aggregate of 492,823 shares, with sole voting power over 0 shares, shared voting power over 15,450 shares, sole dispositive power over 468,833 shares and shared dispositive power over 23,990 shares. The address of Vanguard Group - 23-1945930 is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. (7) Based on the most recently available Schedule 13G filed with the SEC on November 7, 2024 by Progeny 3, Inc. Progeny 3, Inc. beneficially owned 460,968 shares, with sole voting power and sole dispositive power over all such shares. Jon Hemingway controls Progeny 3, Inc. The address of Progeny 3, Inc. is 5209 Lake Washington Blvd NE, Suite 200, Kirkland, Washington 98033. The Company is not aware of any arrangements that could result in a change in control of the Company. The disclosure required by Item 201(d) of Regulation S-K is set forth in Item 5 herein and is incorporated herein by reference. 122 Table of Contents Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Presently, our Chairman and President, Eric Langan, personally guarantees all of the commercial bank indebtedness of the company. Mr. Langan receives no compensation or other direct financial benefit for any of the guarantees. Three adult children of Mr. Langan are also employed by the Company in corporate shared services. Colby Langan, one of Eric Langan's adult children mentioned above, is currently the President of RCI Development Services, Inc., which manages strategy on the Company's new business ventures, and received $180,960, $184,068, and $138,762 in employment compensation during the fiscal year ended September 30, 2024, 2023, and 2022, respectively. Included also in the adult children mentioned above is Ashley Wilkins, Eric Langan's daughter, who works in the Treasury Department of the Company, and received $123,600 in employment compensation during the fiscal year ended September 30, 2024. In October 2021, we borrowed $500,000 from Ed Anakar, President of RCI Management Services, Inc. and our Director of Operations and brother of former director Nourdean Anakar, and $150,000 from Allen Chhay, brother of Company CFO, Bradley Chhay, as part of a larger group of private lenders (see Note 8 to our consolidated financial statements). Their promissory notes bear interest at the rate of 12% per annum and mature in October 2024 and later extended to October 2026. The notes are payable in monthly installments of interest only with a balloon payment of all unpaid principal and interest due at maturity. The terms of the notes are the same as the rest of the lender group. Refer to Note 8 to our consolidated financial statements for the October 2023 extension of term of promissory notes. We paid Ed Anakar employment compensation of $759,605, $718,539, and $720,492 during the fiscal years ended September 30, 2024, 2023, and 2022, respectively. We used the services of Nottingham Creations, and previously Sherwood Forest Creations, LLC, both furniture fabrication companies that manufacture 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 $350,000 in fiscal 2024, $195,000 in fiscal 2023, and $207,000 in fiscal 2022. As of September 30, 2024 and 2023, we owed Nottingham Creations and Sherwood Forest $18,700 and $10,700, respectively, in unpaid billings. TW Mechanical LLC (“TW Mechanical”) provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 2024, 2023, and 2022. A son-in-law of Eric Langan owns a 50% interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were approximately $16,491, $443,295, and $3,809 for the fiscal years 2024, 2023, and 2022, respectively. Amounts billed directly to the Company were approximately $3,160, $9,430, and $133,000 for the fiscal years 2024, 2023, and 2022, respectively. As of September 30, 2024, and 2023, the Company owed TW Mechanical approximately $0 and $0, respectively, in unpaid direct billings. Review, Approval, or Ratification of Related Transactions On September 23, 2019, the board of directors, acting upon the recommendation of its Audit Committee, adopted a written related party transaction policy, under which related party transactions are subject to review, approval, rejection, modification and/or ratification by the Audit Committee. The policy provides that prior to the entry into any transaction between the Company and one of its officers, directors, 5% shareholders or an immediate family member of any of the foregoing (a “related party”), such transaction will be reported to the Company’s chief compliance officer. The Company’s chief compliance officer will undertake an evaluation of the transaction. If that evaluation indicates that the transaction would require the Audit Committee’s approval, the Company’s chief compliance officer will report this transaction to the Audit Committee. The Audit Committee will review the material facts of all related party transactions that require the Audit Committee’s approval and either approve or disapprove of the entry into the related party transaction. If advance Audit Committee approval of a related party transaction is not feasible, then the related party transaction will be considered and, if the Audit Committee determines it to be appropriate, ratified at the Audit Committee’s next regularly scheduled meeting. In determining whether to approve or ratify a related party transaction, the Audit Committee will take into account factors it deems appropriate. In the event that the Audit Committee determines not to ratify and approve the related party transaction, then the Audit Committee will instruct that the related party transaction be rescinded or unwound. The Audit Committee will not approve or ratify any related party transaction unless it deems that the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director will participate in any discussion or approval of a related party transaction for which he or she is a related party, except that the director shall provide all material information concerning the transaction to the Audit Committee. 123 Table of Contents In reviewing related party transactions under the policy, the Audit Committee will review and consider one or more of the following as it seems appropriate for the circumstances: (1) the related party’s interest in the related party transaction; (2) the approximate dollar value of the amount involved in the related party transaction; (3) the approximate dollar value of the amount of the related party’s interest in the transaction without regard to the amount of any profit or loss; (4) whether the transaction was undertaken in the ordinary course of business of the Company; (5) whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party; (6) the purpose of, and the potential benefits to the Company of, the related party transaction; (7) whether the related party transaction would impair the independence of an outside director; (8) required public disclosure, if any; and (9) any other information regarding the related party transaction or the related party in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. The Audit Committee will review all relevant information available to it about the related party transaction. The Audit Committee may approve or ratify the related party transaction only if the Audit Committee determines in good faith that, under all of the circumstances, the transaction is fair as to the Company. The Audit Committee, in its sole discretion, may impose such condition as it deems appropriate on the Company or the related party in connection with approval of the related party transaction. Our Audit Committee is composed of all independent directors, including Yura Barabash, Elaine Martin and Arthur Allan Priaulx. We additionally have one other independent director, Luke Lirot, who is not on the Audit Committee. The definition of “independent” used herein is based on the independence standards of The NASDAQ Stock Market LLC. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The following table sets forth the aggregate fees paid or accrued for professional services and the aggregate fees paid or accrued for audit-related services and all other services rendered by Marcum LLP and Friedman LLP for the fiscal 2024 and 2023. Marcum 2024 Marcum 2023 Friedman 2023 Audit fees $ 1,313,698 $ 659,789 $ 523,017 Audit-related fees 20,600 — — Tax fees — — — All other fees — — — Total $ 1,334,298 $ 659,789 $ 523,017 Effective September 1, 2022, Friedman LLP, our independent registered public accounting firm of record in fiscal 2022, combined with Marcum LLP and continued to operate as an independent registered public accounting firm. “Audit fees” include fees billed for professional services rendered in connection with the annual audit and quarterly reviews of the Company’s consolidated financial statements, the audit of internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002, and assistance with securities filings other than periodic reports. “Audit-related fees” include professional services in relation to review of our franchise disclosure document. “Tax fees” include consultation related to tax compliance and tax structuring. “All other fees” include fees billed for professional services rendered in connection with the SEC investigation. All above audit services, audit-related services and tax services were pre-approved by the Audit Committee, which concluded that the provision of such services by Marcum LLP and Friedman, LLP was compatible with the maintenance of those firms’ independence in the conduct of their auditing functions. The Audit Committee’s outside auditor independence policy provides for pre-approval of all services performed by the outside auditors. 124 Table of Contents Merger of Marcum LLP with CBIZ, Inc. On July 30, 2024, CBIZ, Inc. entered into an agreement and plan of merger with Marcum LLP with an anticipated close date of November 1, 2024. On August 15, 2024, Marcum LLP informed the Company that it would not be independent with respect to the completion of the fiscal year ended September 30, 2024, integrated audit as a result of internal audit services that were performed by CBIZ, Inc. during the period under audit. For the following reasons, the Audit Committee of the Board of Directors of the Company and Marcum have each concluded, and are of the view that a reasonable investor with knowledge of all relevant facts and circumstances would conclude, that the provision of these services did not impair Marcum LLP’s objectivity and impartiality with respect to Marcum LLP’s integrated audit of the Company’s financial statements and internal controls over financial reporting: 1. Majority of the CBIZ, Inc. services were performed prior to July 31, 2024, when the proposed transaction between CBIZ, Inc. and Marcum LLP was publicly announced. The audit engagement team was not aware of this proposed transaction prior to July 31, 2024. CBIZ, Inc. services did not involve decision making and supervisory responsibilities over and on behalf of the Company management. 2. The Company terminated CBIZ, Inc.’s engagement promptly after the merger announcement and hired an unrelated third party to reperform all the work performed by CBIZ, Inc. in relation to the fiscal year ending September 30, 2024. 3. Marcum audit planning and procedures did not rely upon any testing performed by CBIZ, Inc. 4. After Marcum LLP’s expected merger with CBIZ, Inc., no personnel from CBIZ, Inc. who worked on the Company’s engagement will be part of the audit team or have any involvement in the audit. 125 Table of Contents PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. Exhibit No. Description 3.1 Articles of Incorporation dated December 9, 1994. (Incorporated by reference from Form SB-2 filed with the SEC on January 11, 1995.) * 3.2 Certificate of Amendment to Articles of Incorporation dated September 9, 2008. (Incorporated by reference from Definitive Schedule 14A filed with the SEC on July 21, 2008.) * 3.3 Certificate of Amendment to Articles of Incorporation dated August 6, 2014. (Incorporated by reference from Definitive Schedule 14A filed with the SEC on June 24, 2014.) * 3.4 Amended and Restated Bylaws (Incorporated by reference from Form 8-K filed with the SEC on March 16, 2016.) * 4.1 Consolidated, Amended and Restated Promissory Note for $99,145,838.22 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * 4.2 10-Year Secured Promissory Note for $11,000,000 by Big Sky Hospitality Holdings, Inc. to Family Dog, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 4.3 20-Year Secured Promissory Note for $8,000,000 by Big Sky Hospitality Holdings, Inc. to Family Dog, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 4.4 10-Year Promissory Note for $1,200,000 by RCI Holdings, Inc. to 3480 South Galena, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 4.5 IP Promissory Note for $1,000,000 by Big Sky Hospitality Holdings, Inc. to Club Licensing, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 4.6 Promissory Note for $18,740,000 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * 4.7 Revolving Promissory Note for $10,000,000 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * 4.8 Form of Promissory Note dated March 16, 2023 (in connection with Baby Dolls/Chicas Locas acquisition transaction) (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * 4.9 Promissory Note (Real Estate) with Duncan Burch dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * 4.10 Amended and Restated 12% Unsecured Promissory Note (form of interest-only version of the note) (Incorporated by reference from Form 8-K filed with the SEC on October 26, 2023) * 4.11 Amended and Restated 12% Unsecured Promissory Note (form of amortizing payment schedule version of the note) (Incorporated by reference from Form 8-K filed with the SEC on October 26, 2023) * 4.12 P romissory Note for $20,000,000 with Centennial Bank ( Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * 126 Table of Contents 4.13 The description of our common stock (Incorporated by reference from Form 10-K filed with the SEC on December 14, 2020) * 10.1 Employment Agreement with Eric S. Langan. (Incorporated by reference from Form 8-K filed with the SEC on September 5, 2024) * 10.2 Employment Agreement with Bradley Chhay (Incorporated by reference from Form 8-K filed with the SEC on A ugust 30, 2023 ) * 10.3 Employment Agreement with Travis Reese (Incorporated by reference from Form 8-K filed with the SEC on September 5, 2024) * 10.4 Loan Agreement between RCI Holdings, Inc. and Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * 10.5 Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * 10.6 Absolute Unconditional and Continuing Guaranty of Eric S. Langan (Incorporated by reference from Form 8-K filed with the SEC on October 4, 2021) * 10.7 Guaranty by RCI Hospitality Holdings, Inc. in favor of Family Dog (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 10.8 Guaranty by RCI Hospitality Holdings, Inc. in favor of 3480 South Galena LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 10.9 Guaranty by RCI Hospitality Holdings, Inc. in favor of Club Licensing, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 10.10 Lock-Up Agreement between RCI Hospitality Holdings, Inc. and Family Dog, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 10.11 Lock-Up Agreement by RCI Hospitality Holdings, Inc. in favor of Club Licensing, LLC (Incorporated by reference from Form 8-K filed with the SEC on October 21, 2021) * 10.12 Loan Agreement between RCI Holdings, Inc. and Centennial Bank dated January 25, 2022 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * 10.13 Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. dated January 25, 2022 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * 10.14 Absolute Unconditional and Continuing Guaranty of Eric S. Langan dated January 25, 2022 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2022) * 10.15 Asset Purchase Agreement with TTNA, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.16 Asset Purchase Agreement with DB Entertainment, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 127 Table of Contents 10.17 Asset Purchase Agreement with Duncan Burch, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.18 Asset Purchase Agreement with Millennium Restaurants Group, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.19 Asset Purchase Agreement with T&N, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.20 Intellectual Property Purchase Agreement with HQ Real Estate Management LLC dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.21 Intellectual Property Purchase Agreement with ERAF, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.22 Asset Purchase Agreement with ECAL-D&D, Inc. dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.23 Purchase and Sale Agreement with Duncan Burch dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.24 Cooperation Agreement dated December 12, 2022 (Incorporated by reference from Form 8-K filed with the SEC on December 15, 2022) * 10.25 Amendment to Asset Purchase Agreement with TTNA, Inc. dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.26 Amendment to Asset Purchase Agreement with DB Entertainment, Inc. dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.27 Amendment to Asset Purchase Agreement with Duncan Burch, Inc. dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.28 Amendment to Asset Purchase Agreement with Millennium Restaurants Group, Inc. dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.29 Second Amendment to Asset Purchase Agreement with T AND N, INCORPORATED dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.30 Amendment to Intellectual Property Purchase Agreement with HQ Real Estate Management LLC dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.31 Amendment to Intellectual Property Purchase Agreement with ERAF, Inc. dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.32 Amendment to Asset Purchase Agreement with ECAL-D&D, Inc. dated January 25, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.33 Amendment to Purchaser and Sale Agreement with Duncan Burch dated January 26, 2023 (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2023) * 10.34 Second Amendment to Asset Purchase Agreement with TTNA, Inc. dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 128 Table of Contents 10.35 Second Amendment to Asset Purchase Agreement with DB Entertainment, Inc. dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.36 Second Amendment to Asset Purchase Agreement with Duncan Burch, Inc. dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.37 Second Amendment to Asset Purchase Agreement with Millennium Restaurants Group, Inc. dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.38 Third Amendment to Asset Purchase Agreement with T AND N, INCORPORATED dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.39 Second Amendment to Intellectual Property Purchase Agreement with HQ Real Estate Management LLC dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.40 Second Amendment to Intellectual Property Purchase Agreement with ERAF, Inc. dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.41 Second Amendment to Asset Purchase Agreement with ECAL-D&D, Inc. dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.42 Second Amendment to Purchase and Sale Agreement with Duncan Burch dated February 27, 2023 (Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023) * 10.43 Loan Agreement with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * 10.44 Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * 10.45 Absolute Unconditional and Continuing Guaranty of Eric Langan (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2023) * 10.46 Form of Absolute Unconditional and Continuing Guaranty of Burch Management Company, Inc. dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * 10.47 Form of Absolute Unconditional and Continuing Guaranty of BD Hospitality Acquisition, Inc. dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * 10.48 Lock-Up Agreement with Duncan Burch dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * 10.49 Non-Competition Agreement with Duncan Burch dated March 16, 2023 (Incorporated by reference from Form 8-K filed with the SEC on March 17, 2023) * 10.50 Loan Agreement between RCI Holdings, Inc. and Centennial Bank dated April 30, 2024 (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * 10.51 Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. dated April 30, 2024 (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * 129 Table of Contents 10.52 Absolute Unconditional and Continuing Guaranty of Eric S. Langan dated April 30, 2024 (Incorporated by reference from Form 8-K filed with the SEC on May 3, 2024) * 19.1 P olicy on Insider Trading 21.1 Subsidiaries 23.1 Consent of Marcum LLP 23.2 Consent of Friedman LLP 31.1 Certification of Chief Executive Officer of RCI Hospitality Holdings, Inc. required by Rule 13a-14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer of RCI Hospitality Holdings, Inc. required by Rule 13a-14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer and Chief Financial Officer of RCI Hospitality Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63. 97.1 Policy for Recovery of Erroneously Awarded Incentive Compensation (Incorporated by reference from Form 10-K filed with the SEC on December 14, 202 3 ) * 101 The following financial information from RCI Hospitality Holdings, Inc.'s Annual Report on Form 10-K for the year ended September 30, 2024 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Incorporated by reference from our previous filings with the SEC. Item 16. FORM 10-K SUMMARY. None. 130 Table of Contents SIGNATURES In accordance with the requirements of Section 13 of 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 16, 2024. RCI Hospitality Holdings, Inc. By: /s/ Eric S. Langan Eric S. Langan Chief Executive Officer and President Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons in the capacities and on the dates indicated: Signature Title Date /s/ Eric S. Langan Eric S. Langan Director, Chief Executive Officer, and President December 16, 2024 /s/ Bradley Chhay Bradley Chhay Chief Financial Officer and Principal Accounting Officer December 16, 2024 /s/ Travis Reese Travis Reese Director and Executive Vice President December 16, 2024 /s/ Yura Barabash Yura Barabash Director December 16, 2024 /s/ Luke Lirot Luke Lirot Director December 16, 2024 /s/ Elaine Martin Elaine Martin Director December 16, 2024 Arthur Allan Priaulx Director 131