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Item 1. Financial Statements

2025-08-11 compared with 2025-05-12 · 196 added, 133 removed, 502 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

14 unchanged sentences

Prepaid expenses, other current, and other assets 400 ( 3,484 )

( 530 ) ( 6,420 )

Accounts payable, accrued, and other liabilities 6,463 2,591

14 unchanged sentences

Net cash used in financing activities ( 16,350 ) ( 9,219 )

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

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

( 2,753 ) 13,924

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 32,350 21,023

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 29,597 $ 34,947

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except per share and number of share data)

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

Three Months Ended June 30, Nine Months Ended June 30,

2025 2024 2025 2024

13 unchanged sentences

Depreciation and amortization 3,892 3,901 11,237 11,638

Impairments and other charges (gains), net

2,127 8,195 ( 117 ) 8,192

Impairments and other charges, net 2,349 18,260 2,232 26,452

Total operating expenses 62,432 78,716 177,714 207,084

Income from operations 8,171 4,657 22,077 17,822

Income (loss) from operations 8,713 ( 2,536 ) 30,790 15,286

Other income (expenses)

1 unchanged sentence

Interest income 117 130 435 320

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

Gain on lease termination and other ( 5 ) — 974 —

Income (loss) before income taxes 4,793 ( 6,646 ) 19,967 3,151

Income tax expense (benefit) 733 ( 1,426 ) 3,648 378

Net income (loss) 4,060 ( 5,220 ) 16,319 2,773

Net income attributable to noncontrolling interests ( 2 ) ( 13 ) ( 6 ) ( 6 )

Net income (loss) attributable to RCIHH common stockholders $ 4,058 $ ( 5,233 ) $ 16,313 $ 2,767

Earnings (loss) per share

Basic and diluted $ 0.46 $ ( 0.56 ) $ 1.84 $ 0.30

Weighted average shares used in computing earnings per share

Weighted average shares used in computing earnings (loss) per share

Basic and diluted 8,793,809 9,278,921 8,859,028 9,332,249

27 unchanged sentences

Balance at March 31, 2025 8,832,125 88 55,925 212,772 — — ( 246 ) 268,539

Purchase of treasury shares — — — — ( 75,325 ) ( 3,044 ) — ( 3,044 )

Canceled treasury shares ( 75,325 ) ( 1 ) ( 3,043 ) — 75,325 3,044 — —

Excise tax on stock repurchases — — ( 30 ) — — — — ( 30 )

Payment of dividends ($ 0.07 per share)

— — — ( 614 ) — — — ( 614 )

Stock-based compensation — — 392 — — — — 392

— — — 4,058 — — 2 4,060

Balance at June 30, 2025

8,756,800 $ 87 $ 53,244 $ 216,216 — $ — $ ( 244 ) $ 269,303

Balance at September 30, 2023

16 unchanged sentences

Balance at March 31, 2024 9,332,420 93 77,742 207,928 — $ — ( 264 ) 285,499

Purchase of treasury shares — — — — ( 202,630 ) ( 9,173 ) — ( 9,173 )

Canceled treasury shares ( 202,630 ) ( 2 ) ( 9,171 ) — 202,630 9,173 — —

Excise tax on stock repurchases — — ( 92 ) — — — — ( 92 )

Payment of dividends ($ 0.06 per share)

— — — ( 552 ) — — — ( 552 )

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

Net income (loss) — — — ( 5,233 ) — — 13 ( 5,220 )

Balance at June 30, 2024

9,129,790 $ 91 $ 68,950 $ 202,143 — $ — $ ( 251 ) $ 270,933

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

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

March 31, 2025 September 30, 2024

June 30, 2025 September 30, 2024

Current assets

3 unchanged sentences

Prepaid expenses and other current assets 3,214 4,427

Assets held for sale 3,394 —

Total current assets 45,307 47,285

24 unchanged sentences

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

8,756,800 and 8,955,000 shares issued and outstanding as of June 30, 2025, and September 30, 2024, respectively

Additional paid-in capital 53,244 61,511

16 unchanged sentences

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

Operating results for the six months ended March 31, 2025, are not necessarily indicative of the results that may be expected for the year ending September 30, 2025.

Operating results for the nine months ended June 30, 2025, are not necessarily indicative of the results that may be expected for the year ending September 30, 2025.

Recent Accounting Standards and Pronouncements

48 unchanged sentences

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

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total

7 unchanged sentences

$ 62,336 $ 8,609 $ 200 $ 71,145 $ 62,823 $ 13,139 $ 218 $ 76,180

Six Months Ended March 31, 2025 Six Months Ended March 31, 2024

Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024

Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total

18 unchanged sentences

Recognized in

Revenue Balance at March 31, 2025

Revenue Balance at June 30, 2025

Ad revenue $ 31 $ 344 $ ( 297 ) $ 78

3 unchanged sentences

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

Certain VIP cards to be issued as part of a settlement agreement (see Note 9 ) will be reclassified to unearned revenues upon issuance of the VIP cards.

RCI HOSPITALITY HOLDINGS, INC.

9 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

25 unchanged sentences

Segment Information — continued

March 31, 2025 September 30, 2024

June 30, 2025 September 30, 2024

Nightclubs $ 477,731 $ 454,892

3 unchanged sentences

$ 597,412 $ 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.

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs, Other, and Corporate segments for the three months ended June 30, 2025, amounting to $ 4.9 million, $ 45,000 , and $ 0 , respectively, and for the nine months ended June 30, 2025, amounting to $ 14.5 million, $ 90,000 , and $ 385,000 , respectively;

and intercompany sales of Robust Energy Drink included in Other segment for the three and nine months ended June 30, 2025, amounting to $ 58,000 and $ 195,000 , respectively.

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs, Other, and Corporate segments for the three months ended June 30, 2024, amounting to $ 4.7 million, $ 0 , and $ 21,000 , respectively, and for the nine months ended June 30, 2024, amounting to $ 13.8 million, $ 0 , and $ 269,000 , respectively;

and intercompany sales of Robust Energy Drink included in Other segment for the three and nine months ended June 30, 2024, amounting to $ 66,000 and $ 194,000 , 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.

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, unallocated self-insurance reserve, depreciation and other corporate costs such as automobile and travel costs.

Management considers these to be non-allocable costs for segment purposes.

3 unchanged sentences

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

March 31, 2025 September 30, 2024

June 30, 2025 September 30, 2024

Credit card receivables $ 2,010 $ 2,056

1 unchanged sentence

ATM in-transit 839 877

Insurance claims receivable 30 —

Current portion of notes receivable 314 269

6 unchanged sentences

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

March 31, 2025 September 30, 2024

June 30, 2025 September 30, 2024

Prepaid insurance $ 1,012 $ 2,792

5 unchanged sentences

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

March 31, 2025 September 30, 2024

June 30, 2025 September 30, 2024

Insurance $ 37 $ 2,390

5 unchanged sentences

Unearned revenues 451 99

Income taxes 572 —

Lawsuit settlement 5,248 1,985

4 unchanged sentences

The components of other long-term liabilities are as follows (in thousands):

March 31, 2025 September 30, 2024

June 30, 2025 September 30, 2024

Estimated self-insurance liability

1 unchanged sentence

Total other long-term liabilities $ 7,765 $ 398

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.

See also tables of accrued liabilities (above) and selling, general and administrative expenses (below).

RCI HOSPITALITY HOLDINGS, INC.

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

13 unchanged sentences

Total selling, general and administrative expenses $ 26,140 $ 25,057 $ 75,247 $ 74,911

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

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

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

3 unchanged sentences

Gain on insurance ( 1,134 ) — ( 2,151 ) —

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.

Total impairments and other charges, net $ 2,349 $ 18,260 $ 2,232 $ 26,452

During the second quarter ended March 31, 2025, we recorded $ 1.8 million in SOB license impairment related to four clubs.

During the second 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 third quarter ended June 30, 2024, we recorded $ 6.0 million in goodwill impairment related to four clubs, $ 5.7 million in operating lease right-of-use asset impairment related to five Bombshells restaurants, $ 1.4 million in SOB license impairment related to two clubs, and $ 4.8 million in property and equipment impairment related to one club and five restaurants.

During the third quarter ended June 30, 2025, we recorded $ 2.95 million for a class action settlement agreement to resolve claims under the Illinois Biometric Information Privacy Act.

During the first 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.

During the first quarter ended December 31, 2024, we received insurance recovery amounting to $ 1.15 million for a club razed by fire in a prior period.

RCI HOSPITALITY HOLDINGS, INC.

3 unchanged sentences

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 bears an interest rate of 6.99 % per annum for the first five years after which it 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.

1 unchanged sentence

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.

The 8 % promissory note is payable in 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 March 9, 2027.

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):

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.

On June 7, 2025, in relation to a club acquisition (see Note 13 ), the Company executed a seller-financed promissory note for $ 500,000 bearing an interest of 7 % per annum.

The promissory note matures in five years and is payable in equal monthly installments of $ 9,901 in principal and interest.

Future maturities of debt obligations as of June 30, 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

July 2025 - June 2026 $ 19,117 $ — $ 19,117

July 2026 - June 2027 16,008 15,676 31,684

July 2027 - June 2028 16,458 11,207 27,665

July 2028 - June 2029 16,927 — 16,927

July 2029 - June 2030 15,481 2,524 18,005

Thereafter 45,187 85,213 130,400

$ 129,178 $ 114,620 $ 243,798

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.

Stock-based Compensation

6 unchanged sentences

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.

RCI HOSPITALITY HOLDINGS, INC.

1 unchanged sentence

Stock-based Compensation — continued

Stock-based compensation, which is included in corporate segment selling, general and administrative expenses amounted to $ 392,000 and $ 980,000 during the three and nine months ended June 30, 2025, respectively, and $ 471,000 and $ 1.4 million during the three and nine months ended June 30, 2024, respectively.

As of June 30, 2025, we had unrecognized compensation cost amounting to $ 981,000 related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 0.6 years.

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

All of the options will expire, if not vested, at the end of five years .

All of the options will expire, if not exercised, 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:

The following table summarizes information about stock option activity during the nine months ended June 30, 2025, under the 2022 Plan:

Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands)

1 unchanged sentence

Forfeited ( 50,000 ) $ 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.

Outstanding at June 30, 2025 250,000 $ 100.00 1.6 $ —

Exercisable at June 30, 2025 200,000 $ 100.00 1.6 $ —

For the three and nine months ended June 30, 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.

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.

Income taxes were an expense of $ 733,000 and $ 3.6 million during the three and nine months ended June 30, 2025, respectively, and a benefit of $ 1.4 million and an expense of $ 378,000 during the three and nine months ended June 30, 2024, respectively.

The effective income tax rate was 15.3 % and 18.3 % for the three and nine months ended June 30, 2025, respectively, and 21.5 % and 12.0 % for the three and nine months ended June 30, 2024, respectively.

The disproportionate tax rates during the nine months ended June 30, 2024, were caused by the decrease in 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

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

Amount % Amount %

Federal statutory income tax expense $ 895 21.0 % $ 158 21.0 %

Federal statutory income tax expense (benefit) $ 1,006 21.0 % $ ( 1,395 ) 21.0 %

State income taxes, net of federal benefit 145 3.0 % ( 214 ) 3.2 %

2 unchanged sentences

Other 8 0.2 % 9 ( 0.1 ) %

Total income tax expense $ 1,068 25.1 % $ 5 0.7 %

Total income tax expense (benefit) $ 733 15.3 % $ ( 1,426 ) 21.5 %

RCI HOSPITALITY HOLDINGS, INC.

1 unchanged sentence

Income Taxes — continued

Six Months Ended March 31, 2025 Six Months Ended March 31, 2024

Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024

Amount % Amount %

9 unchanged sentences

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

On July 4, 2025, President Trump signed into law the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H.

14" (the "Act") and commonly referred to as the One Big Beautiful Bill Act.

Among other things, the Act extends certain expiring, and in some cases expired, provisions of the 2017 Tax Cuts and Jobs Act.

The Act also adjusted a number of provisions affecting businesses that were subject to sunsets, phase-outs, or phase-ins that would have taken effect in the absence of action by Congress or that have already taken effect.

The Company has reviewed the changes from the Act and determined that any impact would be immaterial.

Commitments and Contingencies

2 unchanged sentences

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.

On that date, the Company transitioned to a new insurance provider and has since obtained general liability coverage from other insurers to cover claims arising from actions occurring after October 25, 2013.

On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (the “Rehabilitation Order”) declaring IIC impaired, insolvent, and in an unsafe financial condition.

The Court placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (the “Commissioner”), as receiver.

The Rehabilitation Order authorized the Commissioner to rehabilitate IIC by, among other things, gathering and marshaling assets.

The order also stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.

On April 10, 2014, the Court entered a Liquidation and Injunction Order With Bar Date (the “Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies issued by IIC.

The Liquidation Order established a claims bar date of January 16, 2015, and further stayed or abated pending lawsuits involving IIC through October 7, 2014.

As a result of this order, the Company no longer had insurance coverage under the IIC policy for any claims.

The Company retained counsel to defend and evaluate affected claims and lawsuits and has funded 100 % of the associated litigation costs.

The Company timely filed claims with the Receiver and has continued to provide information and updates as requested;

however, there is no assurance that any recovery will be received from the IIC estate.

The ultimate financial impact of this uncertainty remains unknown.

RCI HOSPITALITY HOLDINGS, INC.

1 unchanged sentence

Commitments and Contingencies — continued

As of June 30, 2025, only 1 claim remains unresolved out of the original 71 claims associated with IIC.

The sole remaining matter is the Dupray case, as described below, involving a traffic accident allegedly caused by a third party after being served alcohol at a JAI Phoenix location.

The Company continues to vigorously defend this matter and pursue all available rights to potential reimbursement through the IIC liquidation process.

On June 23, 2014, Mark H.

1 unchanged sentence

(“JAI Phoenix”), in the Superior Court of Arizona for Maricopa County.

The suit alleged that Mr.

The complaint 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.

Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix and asserted claims against JAI Phoenix under theories of common law dram shop negligence and dram shop negligence per se.

Following a jury trial, in April 2017 the court entered judgment in favor of the plaintiffs and awarded compensatory and punitive damages, allocating approximately $ 1.4 million in compensatory damages and $ 4.0 million in punitive damages to JAI Phoenix.

JAI Phoenix filed post-trial motions, which were denied in August 2017, and subsequently filed a notice of appeal in September 2017.

In June 2018, the Arizona Court of Appeals heard the matter and, on November 15, 2018, issued a decision vacating the jury’s verdict and remanding the case for a new trial.

The retrial was held in June 2025.

The jury found Mr.

Panameno 94 % responsible and JAI Phoenix 6 % responsible.

The jury awarded total damages of $ 5.1 million and punitive damages of $ 125,000 .

Based on the jury’s allocation of fault, JAI Phoenix is responsible for $ 332,884 of the total award.

Under applicable law, plaintiffs retain the right to appeal;

however, it is not known at this time whether an appeal will be filed, but if an appeal is filed, the Company will vigorously defend.

The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees.

9 unchanged sentences

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 investigation appears to be related to the Company’s New York State tax filings, audits thereof, and entertainment benefits provided to a former NY DTF employee.

On or about July 2, 2025, the Company received a second subpoena from the NY AG requesting additional documents and information related to the same issues.

The Company is cooperating with the NY AG and its investigation.

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Commitments and Contingencies — continued

On or about May 20, 2025, the Company received a subpoena from the U.S.

Securities and Exchange Commission ("SEC") seeking certain documents and information related to the NY AG investigation and NY DTF issues.

The Company is cooperating with the SEC and its investigation.

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 SEC investigation.

On April 14, 2025, the Company's subsidiaries, RCI Management Services, Inc., Pooh Bah Enterprises, Inc., and RCI Dining Services (Harvey), Inc.

(collectively, "Defendants") entered into a class action settlement agreement to resolve claims under the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seg., arising from the alleged collection of customer fingerprints at Rick's Cabaret in Chicago and Scarlett's Cabaret in Washington Park, Illinois.

The settlement resolves two consolidated cases:

RCI Management Services, Inc.

22LA0884 (St, Clair County, Illinois) and Loera v.

Pooh Bah Enterprises, Inc.

2021CH04759 (Cook County, Illinois).

Under the terms of the agreement, and without admitting any liability, Defendants will provide a settlement fund valued at approximately $ 2.95 million, consisting of $ 1.25 million in cash and $ 1.7 million in VIP cards.

The settlement includes payments to class members submitting valid claims, attorneys' fees of up to 40 % of the fund, incentive awards to named plaintiffs, and administrative costs.

Any unclaimed funds remaining after payment of valid claims, fees, and costs will revert to the Defendants.

The Company denies all allegations of wrongdoing.

The settlement remains subject to final court approval.

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.

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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.

The Company recorded lawsuit settlements incurred amounting to $ 3.3 million and $ 3.6 million for the three and nine months ended June 30, 2025, respectively, and $ 141,000 and $ 308,000 for the three and nine months ended June 30, 2024, respectively.

As of June 30, 2025, and September 30, 2024, the Company has accrued $ 5.2 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

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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.

We recorded estimated self-insurance expense amounting to $ 4.0 million and $ 9.4 million during the three and nine months ended June 30, 2025.

As of June 30, 2025, the Company has self-insurance liability amounting to $ 9.4 million.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

1 unchanged sentence

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

The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of 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.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions — continued

The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of June 30, 2025, and September 30, 2024, was $ 136.9 million and $ 135.3 million, respectively.

Included in the debt balance as of June 30, 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 Tall Oak Custom Furniture, and previously Nottingham Creations, both furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance.

Tall Oak Custom Furniture is owned by a brother of Eric Langan (as was Nottingham Creations).

Amounts billed to us for goods and services provided by Tall Oak Custom Furniture and Nottingham Creations were $ 12,344 and $ 19,098 during the three and nine months ended June 30, 2025, respectively, and $ 0 and $ 344,798 during the three and nine months ended June 30, 2024, respectively.

As of June 30, 2025, and September 30, 2024, we owed Tall Oak Custom Furniture and Nottingham Creations $ 3,312 and $ 18,700 , respectively, in unpaid billings.

TW Mechanical LLC provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 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.

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,

Amounts billed by TW Mechanical to the third-party general contractor were $ 0 and $ 0 for the three and nine months ended June 30, 2025, respectively, and $ 0 and $ 0 for the three and nine months ended June 30, 2024, respectively.

Amounts billed directly to the Company were $ 455 and $ 1,856 for the three and nine months ended June 30, 2025, respectively, and $ 0 and $ 3,160 for the three and nine months ended June 30, 2024, respectively.

As of June 30, 2025, and September 30, 2024, the Company owed TW Mechanical $ 0 and $ 0 , respectively, in unpaid direct billings.

Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three and nine months ended June 30, 2025, and 2024 is as follows (dollars in thousands):

Three Months Ended June 30, Nine Months Ended June 30,

2025 2024 2025 2024

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Variable lease expense 435 412 1,194 1,273

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;

Short-term and other lease expense (includes $ 103 and $ 117 recorded in advertising and marketing for the three months ended June 30, 2025, and 2024, respectively, and $ 294 and $ 342 for the nine months ended June 30, 2025, and 2024, respectively;

and $ 140 and $ 159 recorded in repairs and maintenance for the three months ended June 30, 2025, and 2024, respectively, and $ 415 and $ 447 for the nine months ended June 30, 2025, and 2024, respectively;

337 365 995 1,042

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Weighted average discount rate – operating leases 5.8 % 5.8 %

Future maturities of operating lease liabilities as of March 31, 2025, are as follows (in thousands):

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Leases — continued

Future maturities of operating lease liabilities as of June 30, 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

July 2025 - June 2026 $ 3,249 $ 1,661 $ 4,910

July 2026 - June 2027 3,370 1,466 4,836

July 2027 - June 2028 2,865 1,281 4,146

July 2028 - June 2029 2,851 1,112 3,963

July 2029 - June 2030 2,535 947 3,482

Thereafter 16,550 2,685 19,235

$ 31,420 $ 9,152 $ 40,572

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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,

Nine Months Ended June 30,

Cash paid for interest, net of amounts capitalized $ 11,827 $ 12,015

Cash paid for income taxes $ 4,361 $ 3,861

Restricted cash, included in other assets (at end of period) $ 250 $ —

Noncash investing and financing transactions:

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Unpaid liabilities on capital expenditures $ 1,005 $ 524

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.

Restricted cash pertains to the minimum capitalization held by our captive insurance subsidiary, as required by state insurance regulations.

Subsequent to the balance sheet date through August 8, 2025, we repurchased 36,339 shares of our common stock at an average price of $ 38.09 per share.

Acquisitions and Dispositions

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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.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Acquisitions and Dispositions — continued

The preliminary fair value of the consideration is as follows (in thousands):

8 unchanged sentences

Approximately $ 613,000 of the recognized goodwill will be deductible for income tax purposes.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

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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):

In connection with this acquisition, we incurred approximately $ 0 and $ 141,000 in acquisition-related expenses during the three and nine months ended June 30, 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 June 30, 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

June 30, 2025 Nine Months Ended

June 30, 2025

Revenues $ 1,149 $ 1,830

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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

The Company recognized a loss of $ 153,000 on the sale, net of closing costs.

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Acquisitions and Dispositions — continued

Platinum West and Platinum Plus

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.

On June 13, 2025, the Company completed the acquisition of a club in Allentown, Pennsylvania, for a total purchase price of $ 2.0 million, consisting of $ 1.5 million cash and $ 500,000 in seller-financed 7 % promissory note (see Note 6 ).

The Allentown club transaction was completed several weeks after the West Columbia club due to delays in the issuance of licenses.

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.

In connection with this combined acquisition, we incurred approximately $ 52,000 and $ 103,000 in acquisition-related expenses during the three and nine months ended June 30, 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 June 30, 2025, the acquired clubs contributed the following, which are included in our unaudited condensed consolidated statements of income (in thousands):

Three Months Ended

June 30, 2025 Nine Months Ended

June 30, 2025

Revenues $ 1,116 $ 1,116

Income from operations $ 397 $ 394

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.

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

What changed 10-Q

Item 1. Financial Statements