RCI HOSPITALITY HOLDINGS, INC. 10-Q

Item 1. Financial Statements. RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 12,259 $ 7,993 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,345 7,737 Impairment of assets 1,780 8,033 Deferred income tax benefit ( 1,242 ) ( 1,911 ) Stock-based compensation 588 941 Loss (gain) on sale of businesses and assets ( 1,248 ) 37 Amortization of debt discount and issuance costs 290 312 Noncash lease expense 1,326 1,535 Gain on insurance ( 1,150 ) — Doubtful accounts expense on notes receivable — 22 Changes in operating assets and liabilities, net of business acquisitions: Receivables 1,714 1,067 Inventories 64 ( 142 ) Prepaid expenses, other current, and other assets ( 530 ) ( 6,420 ) Accounts payable, accrued, and other liabilities 695 5,265 Net cash provided by operating activities 21,891 24,469 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of businesses and assets 1,085 — Proceeds from insurance 1,150 — Proceeds from notes receivable 147 116 Payments for property and equipment and intangible assets ( 8,608 ) ( 12,802 ) Acquisition of businesses, net of cash acquired ( 6,000 ) — Net cash used in investing activities ( 12,226 ) ( 12,686 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt obligations 8,396 2,657 Payments on debt obligations ( 10,321 ) ( 10,630 ) Purchase of treasury stock ( 6,114 ) ( 3,602 ) Payment of dividends ( 1,242 ) ( 1,122 ) Payment of loan origination costs ( 71 ) ( 136 ) Net cash used in financing activities ( 9,352 ) ( 12,833 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 313 ( 1,050 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,350 21,023 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,663 $ 19,973 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share and number of share data) (unaudited) Three Months Ended March 31, Six Months Ended March 31, 2025 2024 2025 2024 Revenues Sales of alcoholic beverages $ 28,866 $ 32,907 $ 61,054 $ 66,223 Sales of food and merchandise 9,411 11,068 19,517 21,870 Service revenues 22,912 23,564 47,093 48,683 Other 4,687 4,744 9,695 9,414 Total revenues 65,876 72,283 137,359 146,190 Operating expenses Cost of goods sold Alcoholic beverages sold 5,204 5,891 11,050 12,172 Food and merchandise sold 3,182 3,993 6,745 8,031 Service and other 25 35 97 75 Total cost of goods sold (exclusive of items shown separately below) 8,411 9,919 17,892 20,278 Salaries and wages 20,491 20,975 41,055 42,307 Selling, general and administrative 22,900 24,653 49,107 49,854 Depreciation and amortization 3,776 3,884 7,345 7,737 Impairments and other charges (gains), net 2,127 8,195 ( 117 ) 8,192 Total operating expenses 57,705 67,626 115,282 128,368 Income from operations 8,171 4,657 22,077 17,822 Other income (expenses) Interest expense ( 4,048 ) ( 3,999 ) ( 8,200 ) ( 8,215 ) Interest income 139 96 318 190 Gain on lease termination — — 979 — Income before income taxes 4,262 754 15,174 9,797 Income tax expense 1,068 5 2,915 1,804 Net income 3,194 749 12,259 7,993 Net loss (income) attributable to noncontrolling interests 37 25 ( 4 ) 7 Net income attributable to RCIHH common stockholders $ 3,231 $ 774 $ 12,255 $ 8,000 Earnings per share Basic and diluted $ 0.36 $ 0.08 $ 1.38 $ 0.85 Weighted average shares used in computing earnings per share Basic and diluted 8,861,854 9,350,292 8,891,638 9,358,768 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands, except number of shares) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Noncontrolling Interests Total Equity Number of Shares Amount Number of Shares Amount Balance at September 30, 2024 8,955,000 $ 90 $ 61,511 $ 201,759 — $ — $ ( 250 ) $ 263,110 Purchase of treasury shares — — — — ( 66,000 ) ( 3,218 ) — ( 3,218 ) Canceled treasury shares ( 66,000 ) ( 1 ) ( 3,217 ) — 66,000 3,218 — — Excise tax on stock repurchases — — ( 33 ) — — — — ( 33 ) Payment of dividends ($ 0.07 per share) — — — ( 623 ) — — — ( 623 ) Stock-based compensation — — 470 — — — — 470 Net income — — — 9,024 — — 41 9,065 Balance at December 31, 2024 8,889,000 89 58,731 210,160 — — ( 209 ) 268,771 Purchase of treasury shares — — — — ( 56,875 ) ( 2,896 ) — ( 2,896 ) Canceled treasury shares ( 56,875 ) ( 1 ) ( 2,895 ) — 56,875 2,896 — — Excise tax on stock repurchases — — ( 29 ) — — — — ( 29 ) Payment of dividends ($ 0.07 per share) — — — ( 619 ) — — — ( 619 ) Stock-based compensation — — 118 — — — — 118 Net income (loss) — — — 3,231 — — ( 37 ) 3,194 Balance at March 31, 2025 8,832,125 $ 88 $ 55,925 $ 212,772 — $ — $ ( 246 ) $ 268,539 Balance at September 30, 2023 9,397,639 $ 94 $ 80,437 $ 201,050 — $ — $ ( 257 ) $ 281,324 Purchase of treasury shares — — — — ( 37,954 ) ( 2,072 ) — ( 2,072 ) Canceled treasury shares ( 37,954 ) — ( 2,072 ) — 37,954 2,072 — — Excise tax on stock repurchases — — ( 20 ) — — — — ( 20 ) Payment of dividends ($ 0.06 per share) — — — ( 562 ) — — — ( 562 ) Stock-based compensation — — 470 — — — — 470 Net income — — — 7,226 — — 18 7,244 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 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value and number of shares) March 31, 2025 September 30, 2024 (unaudited) ASSETS Current assets Cash and cash equivalents $ 32,663 $ 32,350 Receivables, net 4,174 5,832 Inventories 4,645 4,676 Prepaid expenses and other current assets 4,071 4,427 Total current assets 45,553 47,285 Property and equipment, net 283,442 280,075 Operating lease right-of-use assets, net 24,905 26,231 Notes receivable, net of current portion 4,031 4,174 Goodwill 62,524 61,911 Intangibles, net 167,383 163,461 Other assets 1,918 1,227 Total assets $ 589,756 $ 584,364 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 5,652 $ 5,637 Accrued liabilities 18,161 20,280 Current portion of debt obligations, net 19,737 18,871 Current portion of operating lease liabilities 3,073 3,290 Total current liabilities 46,623 48,078 Deferred tax liability, net 21,451 22,693 Debt, net of current portion and debt discount and issuance costs 221,725 219,326 Operating lease liabilities, net of current portion 26,677 30,759 Other long-term liabilities 4,741 398 Total liabilities 321,217 321,254 Commitments and contingencies ( Note 9 ) Equity Preferred stock, $ 0.10 par value per share; 1,000,000 shares authorized; none issued and outstanding — — Common stock, $ 0.01 par value per share; 20,000,000 shares authorized; 8,832,125 and 8,955,000 shares issued and outstanding as of March 31, 2025, and September 30, 2024, respectively 88 90 Additional paid-in capital 55,925 61,511 Retained earnings 212,772 201,759 Total RCIHH stockholders’ equity 268,785 263,360 Noncontrolling interests ( 246 ) ( 250 ) Total equity 268,539 263,110 Total liabilities and equity $ 589,756 $ 584,364 See accompanying notes to unaudited condensed consolidated financial statements. 7 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of RCI Hospitality Holdings, Inc. (the “Company,” “RCIHH,” “we,” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The consolidated balance sheet data as of September 30, 2024, were derived from audited financial statements but do not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended September 30, 2024, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 16, 2024. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. 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 six months ended March 31, 2025, are not necessarily indicative of the results that may be expected for the year ending September 30, 2025. 2. Recent Accounting Standards and Pronouncements In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions . The amendments in this ASU clarify that an entity should measure the fair value of an equity security subject to contractual sale restriction the same way it measures an identical equity security that is not subject to such a restriction. The FASB said the contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not affect its fair value. The ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2022-03 on October 1, 2024. Our adoption of this ASU did not have a significant impact on our consolidated financial statements. In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. The ASU requires all companies to amortize leasehold improvements associated with common control leases over the asset's useful life to the common control group regardless of the lease term. It also allows private and certain not-for-profit entities to use the written terms and conditions of an agreement to account for common control leases without further assessing the legal enforceability of those terms. The guidance is effective for all entities in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. We adopted ASU 2023-01 on October 1, 2024. Our adoption of this ASU did not have a significant impact on our consolidated financial statements. In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement , which addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The objectives of the ASU are to (1) provide decision-useful information to investors and other allocators of capital in a joint venture's financial statements and (2) reduce diversity in practice. The FASB decided to require a joint venture to apply a new basis of accounting upon formation that will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments of this ASU are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. early adoptions is permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively. We adopted the provisions of ASU 2023-05 on October 1, 2024, and will apply them on future joint ventures. 8 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 2. Recent Accounting Standards and Pronouncements — continued In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in the ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. The ASU applies to all public entities that are required to report segment information in accordance with ASC 280, and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are evaluating the impact of this ASU on our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . Under the ASU, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The amendments of the ASU are effective for public business entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard for annual financial statements that have not been issued or made available for issuance. We are enhancing our income tax reporting system to be able to capture the required disclosures of this ASU. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which expands disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated statements of income in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, as clarified by ASU 2025-01, with early adoption permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of this guidance on our financial statement disclosures. 9 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Revenues Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 4 ), are shown below (in thousands): Three Months Ended March 31, 2025 Three Months Ended March 31, 2024 Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total Sales of alcoholic beverages $ 24,575 $ 4,291 $ — $ 28,866 $ 25,946 $ 6,961 $ — $ 32,907 Sales of food and merchandise 5,519 3,892 — 9,411 5,346 5,722 — 11,068 Service revenues 22,870 42 — 22,912 23,562 2 — 23,564 Other revenues 4,577 4 106 4,687 4,518 86 140 4,744 $ 57,541 $ 8,229 $ 106 $ 65,876 $ 59,372 $ 12,771 $ 140 $ 72,283 Recognized at a point in time $ 57,129 $ 8,228 $ 106 $ 65,463 $ 58,949 $ 12,770 $ 140 $ 71,859 Recognized over time 412 * 1 — 413 423 * 1 — 424 $ 57,541 $ 8,229 $ 106 $ 65,876 $ 59,372 $ 12,771 $ 140 $ 72,283 Six Months Ended March 31, 2025 Six Months Ended March 31, 2024 Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total Sales of alcoholic beverages $ 51,610 $ 9,444 $ — $ 61,054 $ 52,182 $ 14,041 $ — $ 66,223 Sales of food and merchandise 11,255 8,262 — 19,517 10,586 11,284 — 21,870 Service revenues 47,048 45 — 47,093 48,681 2 — 48,683 Other revenues 9,352 65 278 9,695 8,956 175 283 9,414 $ 119,265 $ 17,816 $ 278 $ 137,359 $ 120,405 $ 25,502 $ 283 $ 146,190 Recognized at a point in time $ 118,440 $ 17,814 $ 278 $ 136,532 $ 119,549 $ 25,500 $ 283 $ 145,332 Recognized over time 825 * 2 — 827 856 * 2 — 858 $ 119,265 $ 17,816 $ 278 $ 137,359 $ 120,405 $ 25,502 $ 283 $ 146,190 * Lease revenue (included in Other Revenues) as covered by ASC 842. All other revenues are covered by ASC 606. 10 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Revenues — continued The Company does not have contract assets with customers. The Company’s unconditional right to consideration for goods and services transferred to the customer is included in accounts receivable, net in our unaudited condensed consolidated balance sheet. A reconciliation of contract liabilities with customers is presented below (in thousands): Balance at September 30, 2024 Net Consideration Received Recognized in Revenue Balance at March 31, 2025 Ad revenue $ 31 $ 247 $ ( 185 ) $ 93 Expo revenue 1 234 — 235 Franchise fees and other 67 33 ( 3 ) 97 $ 99 $ 514 $ ( 188 ) $ 425 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. 11 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Segment Information The Company owns and operates adult nightclubs and Bombshells Restaurants and Bars. The Company has identified such segments based on management responsibility and the nature of the Company’s products, services, and costs. There are no major distinctions in geographical areas served as all operations are in the United States. The Company measures segment profit (loss) as income (loss) from operations. Segment assets are those assets controlled by each reportable segment. The Other category below includes our media and energy drink divisions that are not significant to the unaudited condensed consolidated financial statements. Below is the financial information related to the Company’s segments (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2025 2024 2025 2024 Revenues (from external customers) Nightclubs $ 57,541 $ 59,372 $ 119,265 $ 120,405 Bombshells 8,229 12,771 17,816 25,502 Other 106 140 278 283 $ 65,876 $ 72,283 $ 137,359 $ 146,190 Income (loss) from operations Nightclubs $ 14,603 $ 11,021 $ 35,485 $ 31,390 Bombshells ( 227 ) 699 1,744 785 Other ( 680 ) ( 277 ) ( 851 ) ( 473 ) Corporate ( 5,525 ) ( 6,786 ) ( 14,301 ) ( 13,880 ) $ 8,171 $ 4,657 $ 22,077 $ 17,822 Depreciation and amortization Nightclubs $ 3,158 $ 2,927 $ 6,129 $ 5,832 Bombshells 339 650 659 1,293 Other 14 2 27 4 Corporate 265 305 530 608 $ 3,776 $ 3,884 $ 7,345 $ 7,737 Capital expenditures Nightclubs $ 692 $ 2,699 $ 2,246 $ 4,231 Bombshells 1,727 1,535 5,646 3,443 Other 352 2,205 437 3,703 Corporate 83 1,228 279 1,425 $ 2,854 $ 7,667 $ 8,608 $ 12,802 12 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Segment Information — continued March 31, 2025 September 30, 2024 Total assets Nightclubs $ 462,985 $ 454,892 Bombshells 75,413 79,091 Other 19,702 14,197 Corporate 31,656 36,184 $ 589,756 $ 584,364 Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs, Other, and Corporate segments for the three months ended March 31, 2025, amounting to $ 4.9 million, $ 45,000 , and $ 0 , respectively, and for the six months ended March 31, 2025, amounting to $ 9.6 million, $ 45,000 , and $ 385,000 , respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2025, amounting to $ 65,000 and $ 137,000 , respectively. Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs, Other, and Corporate segments for the three months ended March 31, 2024, amounting to $ 4.6 million, $ 0 , and $ 21,000 , respectively, and for the six months ended March 31, 2024, amounting to $ 9.1 million, $ 0 , 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. These intercompany revenue amounts are eliminated upon consolidation. General corporate expenses include corporate salaries, health insurance and social security taxes for officers, legal, accounting and information technology employees, corporate taxes and insurance, legal and accounting fees, depreciation and other corporate costs such as automobile and travel costs. Management considers these to be non-allocable costs for segment purposes. Certain real estate assets previously wholly assigned to Bombshells have been subdivided and allocated to other future development or investment projects. Accordingly, those asset costs have been transferred out of the Bombshells segment. 5. Selected Account Information The components of receivables, net are as follows (in thousands): March 31, 2025 September 30, 2024 Credit card receivables $ 1,957 $ 2,056 Income tax refundable — 2,017 ATM in-transit 888 877 Current portion of notes receivable 325 269 Other (net of allowance for doubtful accounts of $ 70 and $ 42 , respectively) 1,004 613 Total receivables, net $ 4,174 $ 5,832 Notes receivable consist primarily of secured promissory notes executed between the Company and various buyers of our businesses and assets with interest rates ranging from 6 % to 9 % per annum and having original terms ranging from 1 to 20 years. 13 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Selected Account Information — continued The components of prepaid expenses and other current assets are as follows (in thousands): March 31, 2025 September 30, 2024 Prepaid insurance $ 1,814 $ 2,792 Prepaid legal 71 177 Prepaid taxes and licenses 797 522 Prepaid rent 516 322 Other 873 614 Total prepaid expenses and other current assets $ 4,071 $ 4,427 The components of accrued liabilities are as follows (in thousands): March 31, 2025 September 30, 2024 Insurance $ 861 $ 2,390 Sales and liquor taxes 2,455 2,440 Payroll and related costs 4,772 4,676 Property taxes 1,870 3,347 Interest 588 568 Patron tax 826 1,024 Unearned revenues 425 99 Income taxes 572 — Lawsuit settlement 2,050 1,985 Construction in progress 740 1,012 Estimated self-insurance liability 1,119 — Other 1,883 2,739 Total accrued liabilities $ 18,161 $ 20,280 The components of other long-term liabilities are as follows (in thousands): March 31, 2025 September 30, 2024 Estimated self-insurance liability $ 4,348 $ — Other 393 398 Total other long-term liabilities $ 4,741 $ 398 14 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Selected Account Information — continued The components of selling, general and administrative expenses are as follows (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2025 2024 2025 2024 Taxes and permits $ 3,418 $ 3,967 $ 7,246 $ 8,009 Advertising and marketing 2,601 2,993 5,563 6,467 Supplies and services 2,468 2,736 4,956 5,431 Insurance 2,823 3,265 8,106 6,580 Legal 1,369 1,116 2,755 1,849 Lease 1,537 1,785 3,139 3,609 Charge card fees 1,650 1,682 3,398 3,414 Utilities 1,508 1,462 2,879 2,947 Security 1,018 1,287 2,102 2,698 Stock-based compensation 118 471 588 941 Accounting and professional fees 1,177 1,136 2,311 2,322 Repairs and maintenance 1,288 1,114 2,491 2,213 Other 1,925 1,639 3,573 3,374 Total selling, general and administrative expenses $ 22,900 $ 24,653 $ 49,107 $ 49,854 The components of impairments and other charges (gains), net are as follows (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2025 2024 2025 2024 Impairment of assets $ 1,780 $ 8,033 $ 1,780 $ 8,033 Settlement of lawsuits 127 167 306 167 Loss (gain) on sale of businesses and assets 220 ( 5 ) ( 1,186 ) ( 8 ) Gain on insurance — — ( 1,017 ) — Total impairments and other charges (gains), net $ 2,127 $ 8,195 $ ( 117 ) $ 8,192 During the quarter ended March 31, 2025, we recorded $ 1.8 million in SOB license impairment related to four clubs. 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. During the quarter ended December 31, 2024, we sold Bombshells Austin for a gain of $ 1.3 million. See Note 13 . During the quarter ended December 31, 2024, we received insurance recovery amounting to $ 1.15 million for a club razed by fire in a prior period. 15 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6. Debt On November 26, 2024, the Company converted a bank loan secured on October 10, 2022 to purchase real property into a construction loan with the same bank lender. The old loan had a remaining principal balance of $ 2.4 million. The new construction loan has maximum principal limit of $ 6.3 million and has a term of 204 months. The loan bears an interest rate of 6.99 % per annum for the first five years after which will adjust annually to a new rate equal to the then-current Wall Street Journal Prime Rate plus 0.25 % per annum, with a floor of 6.99 % per annum. The loan is payable interest-only during the first 24 months, then payable for the next 36 months in equal installments of $ 60,162 in principal and interest, after which will be payable based on the adjusted interest rate for the next 143 months, with the remaining principal and accrued interest payable at maturity. There are certain financial covenants with which the Company is to be in compliance related to this loan. On January 21, 2025, in relation to a club acquisition (see Note 13 ), the Company executed a promissory note for $ 5.0 million with the seller. The 8 % promissory note is payable 59 monthly installments of $ 67,718 in principal and interest, with the balance of principal and accrued interest payable at maturity. On February 26, 2025, the Company extended its line-of-credit facility with a lender bank for a maximum availability of $ 5.0 million to mature on June 7, 2025. All other terms and conditions in the original line-of-credit remain unchanged. Future maturities of debt obligations as of March 31, 2025, are as follows (in thousands): Regular Amortization Balloon Payments Total Payments April 2025 - March 2026 $ 15,841 $ 4,400 $ 20,241 April 2026 - March 2027 15,049 11,376 26,425 April 2027 - March 2028 15,551 8,556 24,107 April 2028 - March 2029 15,938 2,651 18,589 April 2029 - March 2030 14,865 2,524 17,389 Thereafter 52,013 85,365 137,378 $ 129,257 $ 114,872 $ 244,129 On April 7, 2025, in relation to a club acquisition (see Note 13 ), the Company executed a seller-financed promissory note for $ 2.5 million bearing an interest of 7 % per annum. The promissory note matures in five years and is payable in equal monthly installments of $ 49,503 in principal and interest. 7. Stock-based Compensation On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000 . The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each to six members of management subject to the approval of the 2022 Plan. Stock-based compensation, which is included in corporate segment selling, general and administrative expenses amounted to $ 118,000 and $ 588,000 during the three and six months ended March 31, 2025, respectively, and $ 471,000 and $ 941,000 during the three and six months ended March 31, 2024, respectively. As of March 31, 2025, we had unrecognized compensation cost amounting to $ 1.4 million related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 0.9 years. 16 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Stock-based Compensation — continued The February 9, 2022 stock options vest over four years with the first 20 % having vested on the approval of the 2022 Plan at the 2022 annual stockholders' meeting on August 23, 2022, and 20 % vesting on February 9 of each year thereafter, provided however that the options will be subject to earlier vesting under certain events set forth in the Plan, including without limitation a change in control. All of the options will expire, if not vested, at the end of five years . The weighted average grant-date fair value of the stock options was $ 31.37 . The following table summarizes information about stock option activity during the six months ended March 31, 2025, under the 2022 Plan: Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at September 30, 2024 300,000 Granted — Exercised — Forfeited ( 20,000 ) $ 100.00 Outstanding at March 31, 2025 280,000 $ 100.00 1.7 $ — Exercisable at March 31, 2025 230,000 $ 100.00 1.7 $ — For the three and six months ended March 31, 2025, and 2024, we excluded the impact of 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. 8. Income Taxes Income tax expense was $ 1.1 million and $ 2.9 million during the three and six months ended March 31, 2025, respectively, and $ 5,000 and $ 1.8 million during the three and six months ended March 31, 2024, respectively. The effective income tax rate was 25.1 % and 19.2 % for the three and six months ended March 31, 2025, respectively, and 0.7 % and 18.4 % for the three and six months ended March 31, 2024, 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 then-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 (dollars in thousands). Three Months Ended March 31, 2025 Three Months Ended March 31, 2024 Amount % Amount % Federal statutory income tax expense $ 895 21.0 % $ 158 21.0 % State income taxes, net of federal benefit 116 2.7 % 39 5.2 % Permanent differences 20 0.5 % 36 4.8 % Tax credits ( 209 ) ( 4.9 ) % ( 228 ) ( 30.2 ) % Other 246 5.8 % — — % Total income tax expense $ 1,068 25.1 % $ 5 0.7 % 17 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 8. Income Taxes — continued Six Months Ended March 31, 2025 Six Months Ended March 31, 2024 Amount % Amount % Federal statutory income tax expense $ 3,187 21.0 % $ 2,057 21.0 % State income taxes, net of federal benefit 416 2.7 % 349 3.6 % Permanent differences 127 0.8 % 78 0.8 % Tax credits ( 979 ) ( 6.5 ) % ( 680 ) ( 6.9 ) % Other 164 1.1 % — — % Total income tax expense $ 2,915 19.2 % $ 1,804 18.4 % The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. Fiscal year ended September 30, 2021, and subsequent years remain open to federal tax examination. The Company ordinarily goes through various federal and state reviews and examinations for various tax matters. 9. Commitments and Contingencies Legal Matters Indemnity Insurance Corporation As previously reported, the Company and its subsidiaries were insured under a liability policy issued by Indemnity Insurance Corporation, RRG (“IIC”) through October 25, 2013. The Company and its subsidiaries changed insurance companies on that date. On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014. On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must have been filed with the Receiver before the close of business on January 16, 2015 and that all pending lawsuits involving IIC as the insurer were further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer had insurance coverage under the liability policy with IIC. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100 % of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As 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 March 31, 2025, we have 1 remaining unresolved claim out of the original 71 claims. 18 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Commitments and Contingencies — continued Other On June 23, 2014, Mark H. Dupray and Ashlee Dupray filed a lawsuit against Pedro Antonio Panameno and our subsidiary JAI Dining Services (Phoenix) Inc. (“JAI Phoenix”) in the Superior Court of Arizona for Maricopa County. The suit alleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix. The suit alleged that JAI Phoenix was liable under theories of common law dram shop negligence and dram shop negligence per se. After a jury trial proceeded to a verdict in favor of the plaintiffs against both defendants, in April 2017 the Court entered a judgment under which JAI Phoenix’s share of compensatory damages is approximately $ 1.4 million and its share of punitive damages is $ 4.0 million. In May 2017, JAI Phoenix filed a motion for judgment as a matter of law or, in the alternative, motion for new trial. The Court denied this motion in August 2017. In September 2017, JAI Phoenix filed a notice of appeal. In June 2018, the matter was heard by the Arizona Court of Appeals. On November 15, 2018 the Court of Appeals vacated the jury’s verdict and remanded the case to the trial court. A new trial has been set for June 2025. JAI Phoenix will continue to vigorously defend itself. The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. While we take steps to ensure that our adult entertainers are deemed independent contractors, from time to time, we are named in lawsuits related to the alleged misclassification of entertainers. Claims are brought under both federal and where applicable, state law. Based on the industry standard, the manner in which the independent contractor entertainers are treated at the clubs, and the entertainer license agreements governing the entertainer’s work at the clubs, the Company believes that these lawsuits are without merit. Lawsuits are handled by attorneys with an expertise in the relevant law and are defended vigorously. 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 fiscal year ended September 30, 2023. On or about May 29, 2024, search warrants were executed on the Company’s corporate headquarters in Houston, Texas, three separate clubs in New York, New York, and for the mobile phone of three individuals (including two executive officers and a non-executive corporate employee) by the New York State Attorney General (“NY AG”) and the New York State Department of Taxation and Finance (“NY DTF”). On June 7, 2024, the Company received a subpoena from the NY AG requesting documents and other information with respect to certain clubs in New York and Florida. The investigation appears to be related to the Company’s New York State tax filings and possible entertainment benefits provided to NY DTF personnel. The Company is cooperating with the NY AG and its investigation. As a result of this investigation, a non-executive corporate employee was placed on administrative leave during the pendency of an internal review process. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the investigation. 19 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Commitments and Contingencies — continued General In the regular course of business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state, and local environmental, labor, health and safety laws and regulations. We assess the probability that we could incur liability in connection with certain of these lawsuits. Our assessments are made in accordance with generally accepted accounting principles, as codified in ASC 450-20, and is not an admission of any liability on the part of the Company or any of its subsidiaries. In certain cases that are in the early stages and in light of the uncertainties surrounding them, we do not currently possess sufficient information to determine a range of reasonably possible liability. In matters where there is insurance coverage, in the event we incur any liability, we believe it is unlikely we would incur losses in connection with these claims in excess of our insurance coverage. The Company recorded lawsuit settlements incurred amounting to $ 127,000 and $ 306,000 for the three and six months ended March 31, 2025, respectively, and $ 167,000 and $ 167,000 for the three and six months ended March 31, 2024, respectively. As of March 31, 2025, and September 30, 2024, the Company has accrued $ 2.1 million and $ 2.0 million, respectively, related to settlement of lawsuits, which is included in accrued liabilities in our unaudited condensed consolidated balance sheets. Self-insurance Liability In fiscal 2025, the Company started self-insuring a significant portion of expected losses under its general liability and liquor insurance programs due to increasingly prohibitive costs of such coverage from third-party insurers. The Company continues to purchase insurance for workers' compensation, property, auto, and business interruption, as well as the minimum insurance coverage where it is required by law for licensing requirements. We record a liability for unresolved claims and for an estimate of incurred but not reported claims based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic conditions, the frequency and severity of claims development history, and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. We recorded estimated self-insurance expense amounting to $ 4.1 million during the quarter ended December 31, 2024, and $ 1.4 million during the quarter ended March 31, 2025. 10. Related Party Transactions 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. The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of March 31, 2025 and September 30, 2024, was $ 137.3 million and $ 135.3 million, respectively. Included in the debt balance as of March 31, 2025, and September 30, 2024, are notes borrowed from related parties—one note for $ 500,000 (from 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. 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 $ 3,974 and $ 6,754 during the three and six months ended March 31, 2025, respectively, and $ 202,700 and $ 344,798 during the three and six months ended March 31, 2024, respectively. As of March 31, 2025, and September 30, 2024, we owed Nottingham Creations and Sherwood Forest $ 3,312 and $ 18,700 , respectively, in unpaid billings. 20 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 10. Related Party Transactions — continued 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 2025 and 2024. 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 and six months ended March 31, 2025, respectively, and $ 0 and $ 0 for the three and six months ended March 31, 2024, respectively. Amounts billed directly to the Company were $ 681 and $ 1,401 for the three and six months ended March 31, 2025, respectively, and $ 228 and $ 3,160 for the three and six months ended March 31, 2024, respectively. As of March 31, 2025, and September 30, 2024, the Company owed TW Mechanical $ 227 and $ 0 , respectively, in unpaid direct billings. 11. Leases 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, 2025, and 2024 is as follows (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2025 2024 2025 2024 Operating lease expense – fixed payments $ 1,079 $ 1,292 $ 2,188 $ 2,584 Variable lease expense 364 411 759 861 Short-term and other lease expense (includes $ 89 and $ 118 recorded in advertising and marketing for the three months ended March 31, 2025, and 2024, respectively, and $ 191 and $ 225 for the six months ended March 31, 2025, and 2024, respectively; and $ 133 and $ 147 recorded in repairs and maintenance for the three months ended March 31, 2025, and 2024, respectively, and $ 275 and $ 288 for the six months ended March 31, 2025, and 2024, respectively; see Note 5 ) 316 347 658 677 Sublease income — — — — Total lease expense, net $ 1,759 $ 2,050 $ 3,605 $ 4,122 Other information: Operating cash outflows from operating leases $ 1,821 $ 2,016 $ 3,779 $ 4,049 Weighted average remaining lease term – operating leases 9.3 years 10.1 years Weighted average discount rate – operating leases 5.7 % 5.8 % Future maturities of operating lease liabilities as of March 31, 2025, are as follows (in thousands): Principal Payments Interest Payments Total Payments April 2025 - March 2026 $ 3,073 $ 1,540 $ 4,613 April 2026 - March 2027 3,254 1,357 4,611 April 2027 - March 2028 2,860 1,175 4,035 April 2028 - March 2029 2,652 1,015 3,667 April 2029 - March 2030 2,476 858 3,334 Thereafter 15,435 2,497 17,932 $ 29,750 $ 8,442 $ 38,192 21 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 12. Supplemental Disclosure of Cash Flow Information The following table sets forth certain cash and noncash activities (in thousands), as follows: Six Months Ended March 31, 2025 2024 Cash paid for interest, net of amounts capitalized $ 7,890 $ 7,877 Cash paid for income taxes $ 1,619 $ 2,510 Noncash investing and financing transactions: Debt incurred in connection with acquisition of businesses $ 5,000 $ — Note receivable from sale of businesses and assets $ 60 $ — Unpaid excise tax on stock repurchases $ 62 $ 35 Unpaid liabilities on capital expenditures $ 1,170 $ 1,244 Subsequent to the balance sheet date through May 9, 2025, we repurchased 33,875 shares of our common stock at an average price of $ 39.80 per share. 13. Acquisitions and Dispositions Sale of Bombshells Austin On November 14, 2024, the Company sold Bombshells Austin for $ 70,000 in cash and $ 60,000 in a 6 % 12-month promissory note. The Company recognized a $ 1.3 million gain on the sale. Flight Club On January 21, 2025, the Company completed the acquisition of a club in the Detroit, Michigan, market for a total agreed acquisition price of $ 11.0 million, consisting of $ 3.0 million in cash and $ 5.0 million in a seller-financed 8.0 % promissory note (see Note 6 ) for the club, and $ 3.0 million in cash for the associated real estate. The preliminary fair value of the consideration is as follows (in thousands): Cash $ 6,000 Note payable 5,000 Total fair value of consideration $ 11,000 We recognized the assets and liabilities for this acquisition based on our estimates of their acquisition date fair values in our Nightclubs reportable segment. We have not finalized our valuation of the tangible and identifiable intangible assets acquired in this transaction. As of the release of this report, the fair value of the acquired tangible and identifiable intangible assets are provisional pending the completion of the final valuations for those assets. Based on the allocation of the preliminary fair value of the acquisition price and subject to any working capital adjustments, the amount of goodwill is estimated at $ 613,000 . Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired, which is essentially the forward earnings potential of the acquired club and our entry into a new market. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $ 613,000 of the recognized goodwill will be deductible for income tax purposes. 22 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 13. Acquisitions and Dispositions — continued The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of January 21, 2025: Current assets $ 73 Property and equipment 3,305 Licenses 5,928 Tradename 1,081 Total net assets acquired 10,387 Goodwill 613 Total fair value of net assets acquired $ 11,000 Licenses and tradename will not be amortized but will be tested at least annually for impairment. In connection with this acquisition, we incurred approximately $ 114,000 and $ 141,000 in acquisition-related expenses during the three and six months ended March 31, 2025, respectively, which are included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until March 31, 2025, the acquired club contributed the following, which are included in our unaudited condensed consolidated statements of income (in thousands): Three Months Ended March 31, 2025 Six Months Ended March 31, 2025 Revenues $ 681 $ 681 Income from operations $ 184 $ 184 We have not yet received the fiscal 2024 financial statements from the seller, therefore, we could not provide supplemental pro forma information for the combined entities. Sale of Aurora CO Property On March 31, 2025, the Company sold a real estate property in Aurora, Colorado, for $ 825,000 . The Company recognized a loss of $ 88,000 on the sale, including closing costs. Platinum West On April 7, 2025, the Company completed the acquisition of a club in West Columbia, South Carolina, for a total purchase price of $ 8.0 million, consisting of $ 3.75 million cash and $ 2.5 million in a seller-financed 7 % promissory note (see Note 6 ) for the club, and $ 1.75 million cash for the associated real estate. As of the filing of this report, we have not completed our valuation and do not have estimates of fair value for the acquired assets and any assumed liability, if any. 23 Table of Contents