What changed in this filing

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Item 1A. Risk Factors

2026-03-19 compared with 2024-12-16 · 46 added, 46 removed, 331 unchanged (22% of the section changed)

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Risks related to general macroeconomic and safety conditions

◦ The novel coronavirus (COVID-19) pandemic has disrupted and may continue to disrupt our business, which has and could continue to materially affect our operations, financial condition, and results of operations for an extended period of time.

◦ Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing war between Russia and Ukraine and the Israel-Hamas war.

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These impacts could also occur if we are perceived either to have had an attack or to have failed to properly respond to an incident.

Like many other customer facing companies we have experienced, and will likely continue to experience, attempts to compromise our information technology systems.

Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.

In addition, the rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate.

While we continue to make significant investment in physical and technological security measures, employee training, and third-party services designed to anticipate cyber-attacks and prevent breaches, our information technology networks and infrastructure or those of our third-party vendors and other service providers could be vulnerable to damage, disruptions, shutdowns or breaches of confidential information due to criminal conduct, employee error or malfeasance, utility failures, natural disasters, or other catastrophic events.

Due to these scenarios we cannot provide assurance that we will be successful in preventing such breaches or data loss.

We are subject to a variety of continually evolving and developing laws and regulations regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

The use and disclosure of such information is regulated and enforced at the federal, state and international levels, and these laws, rules and regulations are subject to change.

Additionally, the information, security and privacy requirements imposed by governmental regulation are increasingly demanding.

Our systems may not be able to satisfy these changing requirements and guest and employee expectations, or may require significant additional investments or time in order to do so.

Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our information systems and records and that of our service providers.

As privacy and information security laws and regulations change or cyber risks evolve pertaining to data, we may incur significant additional costs in technology, third-party services, and personnel to maintain systems designed to anticipate and prevent cyber-attacks.

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However, we cannot provide assurance that our security frameworks and measures will be successful in preventing future significant cyber-attacks or data loss.

A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits.

Additionally, a significant theft, loss or misappropriation of, or access to, guests’ or other proprietary data or other breach

of our information technology systems could result in fines, legal claims or proceedings including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and employees, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our acquisitions may result in disruptions in our business and diversion of management’s attention.

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We are, however, addressing this issue and remediating our material weaknesses.

When we were to identify a material weakness, correcting that issue, and thereafter our continued compliance with Section 404 require that we incur substantial accounting expense and expend significant management efforts.

When we were to

identify a material weakness, correcting that issue, and thereafter our continued compliance with Section 404 require that we incur substantial accounting expense and expend significant management efforts.

Moreover, if we are not able to correct an internal control issue and comply with the requirements of Section 404 in a timely manner, or if in the future we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

We have identified material weaknesses in our internal control over financial reporting.

Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of September 30, 2024, and concluded that we did not maintain effective internal control over financial reporting.

Management identified material weaknesses related to (1) ineffective design and operation of controls over certain information technology general controls, including change management, user access, and vendor management controls;

(2) ineffective design and operation of controls , which include management review controls, over the accounting for business combinations;

and (3) ineffective design and operation of controls, which include management review controls, over the Company's assessments of potential impairment.

Management, including our Interim Chief Executive Officer and our Interim Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of September 30, 2025, and concluded that we did not maintain effective internal control over financial reporting.

(2) ineffective design and operation of controls, which include management review controls, over the accounting for business combinations and contingent liabilities;

and (3) ineffective design and operation of controls, which include management review controls, over the impairment assessments over long-lived assets, definite- and indefinite-lived intangible assets, and goodwill.

See Item 9A, “Controls and Procedures,” below.

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Historically, we have maintained insurance in amounts we consider adequate for personal injury and property damage to which the business of the Company may be subject.

As of October 1, 2024, however, we discontinued general liability and liquor insurance coverage in a number of establishments due to increasingly prohibitive costs of such coverage, and we are currently in the process of establishing self-insurance for the claims for which third-party insurance coverage is financially prohibitive.

During fiscal 2025, however, we self-insured certain general liability and liquor insurance coverage in a number of establishments due to increasingly prohibitive costs of such coverage.

However, we still carry at least the minimum insurance coverage where it is required by law for licensing requirements.

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Claims brought by government authorities have the potential to be especially disruptive to our business and operations.

As described further under “Legal Matters” in Note 10 to our consolidated financial statements, in 2024, the New York State Attorney General (“NY AG”) and the New York State Department of Taxation and Finance (“NY DTF”) has executed search warrants on the Company’s corporate headquarters in Houston, Texas, three separate clubs in New York, New York, and has sent the Company a subpoena 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.

As described further under “Legal Matters” in Note 11 to our consolidated financial statements, on September 16, 2025, the Company was indicted in the Supreme Court of the State of New York, County of New York, along with two executive officers of the Company (Eric Langan, then Chief Executive Officer, and Bradley Chhay, then Chief Financial Officer, who each subsequently stepped down from those positions in November 2025), three employees of subsidiaries, and the Company’s subsidiaries Peregrine Enterprises, Inc.

(the operator of Rick’s Cabaret in New York City), RCI Dining Services (37th Street), Inc.

(the operator of Vivid Cabaret in New York City) and RCI 33rd Street Ventures, Inc.

(the operator of Hoops Cabaret and Sports Bar in New York City).

The indictment alleges that the defendants committed conspiracy, bribery, criminal tax fraud, and offering a false instrument for filing.

These charges, which resulted from a previously disclosed investigation by the Office of the Attorney General of New York, allege that a tax auditor with the New York State Department of Taxation and Finance was provided complimentary admission to clubs, restaurant meals, private dances and travel expenses in exchange for the reduction of certain sales tax liabilities in connection with the use of “Dance Dollars.” The Company is continuing to evaluate the charges in the indictment and intends to vigorously defend itself against them, while also continuing to seek a just resolution.

The charges are merely allegations, and the defendants are presumed innocent unless and until proven guilty in a court of law.

It is not possible at this time to determine whether the Company will incur any fines, penalties, or liabilities in connection with the investigation.

If, however, a government authority was to allege that illegal conduct was committed by the Company or any of its employees or executives, regardless of whether any such claims are valid, such claims have the potential to affect our business and defending such claims may be expensive and may divert time, attention and money away from our operations and hurt our performance.

Further, adverse publicity resulting from these claims may hurt our business.

Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time, attention and money away from our operations and hurt our performance.

A judgment significantly in excess of any applicable insurance coverage could have significant adverse effect on our financial condition or results of operations.

Further, adverse publicity resulting from these claims may hurt our business.

Further, adverse publicity resulting from these claims may negatively affect our business.

Our previous liability insurer may be unable to provide coverage to us and our subsidiaries.

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It is unknown at this time what effect this uncertainty will have on the Company.

As of September 30, 2024, we have 1 remaining unresolved claim out of the original 71 claims.

As of September 30, 2025, we have no remaining unresolved claims out of the original 71 claims.

The protection provided by our service marks is limited.

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We are dependent on key personnel.

Our future success is dependent, in a large part, on retaining the services of Eric Langan, our President and Chief Executive Officer, and Bradley Chhay, our Chief Financial Officer.

Langan possesses a unique and comprehensive knowledge of our industry.

Langan has no present plans to leave or retire in the near future, his loss could have a negative effect on our operating, marketing and financial performance if we are unable to find an adequate replacement with similar knowledge and experience within our industry.

Chhay possesses thorough familiarity with our accounting system and how it affects our operations.

Chhay is also vital in our due diligence efforts when acquiring clubs.

We maintain key-man life insurance with respect to Mr.

Langan but not for Mr.

Although Messrs.

Langan and Chhay have signed employment agreements with us (as described herein), there can be no assurance that Mr.

Langan or Mr.

Chhay will continue to be employed by us.

Our future success is dependent, in a large part, on retaining the services of individuals who possess comprehensive knowledge of our industry.

Eric Langan, our former President and Chief Executive Officer, and Bradley Chhay, our former Chief Financial Officer, have served these roles in the past, but both individuals stepped down as executive officers in November 2025.

Travis Reese and Albert Molina have stepped in to fill these positions and Messrs.

Langan and Chhay have remained with the Company in different roles.

Our executive officers have vast experience in the adult nightclub and/or hospitality industries, with Mr.

Molina having specialized familiarity with our accounting systems and how they affect our operations.

The loss of key personnel could have a negative effect on our operating, marketing and financial performance if we are unable to find an adequate replacement with similar knowledge and experience within our industry.

There can be no assurance that any of our key personnel will continue to be employed by us.

If we are not able to hire, develop, and retain qualified club and restaurant employees and/or appropriately plan our workforce, our growth plan and profitability could be adversely affected.

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The market for qualified talent continues to be competitive and we must ensure that we continue to offer competitive wages, benefits, and workplace conditions to retain qualified employees.

We have experienced and may continue to experience challenges in hiring and retaining restaurant and club employees and in maintaining full restaurant

and or club staffing in various locations, which has resulted in longer wait times for guest orders and potentially decreased employee satisfaction.

We have experienced and may continue to experience challenges in hiring and retaining restaurant and club employees and in maintaining full restaurant and or club staffing in various locations, which has resulted in longer wait times for guest orders and potentially decreased employee satisfaction.

A shortage of qualified candidates who meet all legal work authorization and training requirements, failure to hire and retain new restaurant or club employees in a timely manner or higher than expected turnover levels could affect our ability to open new restaurants, grow sales at existing restaurants and clubs or meet our labor cost objectives.

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• weather interference, floods, fires or other casualty losses;

• COVID-19 related delays.

The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons.

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Other risk factors that could cause our actual results to differ materially from those indicated in the forward-looking statements by affecting, among many things, pricing, consumer spending and consumer confidence, include, without limitation, changes in economic conditions and financial and credit markets, credit availability, increased fuel costs and availability for our employees, customers and suppliers, health epidemics or pandemics or the prospects of these events (such as reports on avian flu or COVID-19), consumer perceptions of food safety, changes in consumer tastes and behaviors, governmental monetary policies, changes in demographic trends, terrorist acts, energy shortages and rolling blackouts, and weather (including, major hurricanes and regional snow storms) and other acts of God.

We are also subject to the general risks of inflation, increases in minimum wage, health care, and other benefits that may have a material adverse effect on our cost structure, and the disruption in our supply chain caused by several factor, including the COVID-19 pandemic.

Risks related to general macroeconomic and safety conditions

The novel coronavirus (COVID-19) pandemic has disrupted and may continue to disrupt our business, which has and could continue to materially affect our operations, financial condition and results of operations for an extended period of time.

The COVID-19 pandemic had an adverse effect that was material on our business.

The COVID-19 pandemic, federal, state and local government responses to COVID-19, our customers’ responses to the pandemic, and our Company’s responses to the pandemic all disrupted our business.

In the United States, state and local governments imposed a variety of restrictions on people and businesses and public health authorities offered regular guidance on health and safety.

Once COVID-19 vaccines were approved and moved into wider distribution in the United States in early 2021, public health conditions improved and almost all of the COVID-19 restrictions on businesses eased.

During fiscal 2022, increases in the numbers of cases of COVID-19 throughout the United States including the Omicron variant which impacted our restaurants in the second quarter, mostly in January 2022, subjected some of our restaurants to other COVID-19-related restrictions such as mask and/or vaccine requirements for team members, guests or both.

Exclusions and quarantines of restaurant team members or groups thereof disrupt an individual restaurant’s operations and often come with little or no notice to the local restaurant management.

In the last couple of years, along with COVID-19, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and other cost of goods sold.

These events further impacted the availability of team members needed to staff our restaurants and caused additional disruptions in our product supply chain.

Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing war between Russia and Ukraine and the Israel-Hamas war.

The ongoing war between Russia and Ukraine and the more recent Israel-Hamas war could have adverse effects on global macroeconomic conditions which could negatively impact our business, financial condition, and results of operations.

These conflicts are highly unpredictable and have already resulted in significant volatility in oil and natural gas prices worldwide.

Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing war and other geopolitical conflict.

Ongoing war and other geopolitical conflicts could have adverse effects on global macroeconomic conditions which could negatively impact our business, financial condition, and results of operations.

These conflicts are highly unpredictable and have historically resulted in significant volatility in oil and natural gas prices worldwide.

If we are unable to maintain compliance with certain of our debt covenants or unable to obtain waivers, we may be unable to make additional borrowings and be declared in default where our debt will be made immediately due and payable.

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Generally accepted accounting principles require periodic impairment review of indefinite-lived intangible assets, long-lived assets, and goodwill to determine if, or when events and circumstances indicate that, the fair value of these assets is not recoverable.

As a result of our periodic impairment reviews, we recorded impairment charges of $38.5 million in 2024 (representing $8.9 million of goodwill impairment on four clubs, $11.8 million of SOB license impairment on seven clubs, $10.6 million of property and equipment impairment on four clubs and nine Bombshells units, $6.5 million of operating lease right-of-use assets impairment on five Bombshells units, $693,000 of tradename impairment on one club, and $68,000 related to other assets);

$12.6 million in 2023 (representing $4.2 million of goodwill impairment on four clubs, $6.5 million of SOB license impairment on eight clubs, $1.0 million of operating lease right-of-use asset on one club, $814,000 of software impairment on two investment projects, and $58,000 of property and equipment impairment on one club);

and $1.9 million in 2022 (representing $566,000 of goodwill impairment on one club, $293,000 of SOB license impairment on one club, and $1.0 million of property and equipment impairment on one club and one Bombshells unit).

As a result of our periodic impairment reviews, we recorded impairment charges of $5.3 million in 2025 (representing $3.8 million of SOB license impairment on six clubs and $1.6 million of property and equipment impairment on one food hall operated under the Bombshells segment);

$38.5 million in 2024 (representing $8.9 million of goodwill impairment, $11.8 million of SOB license impairment on seven clubs, $10.6 million of property and equipment impairment on four clubs and nine Bombshells units, $6.5 million of operating lease right-of-use assets impairment on five Bombshells units, $693,000 of tradename impairment on one club, and $68,000 related to other assets);

and $12.6 million in 2023 (representing $4.2 million of goodwill impairment, $6.5 million of SOB

license impairment on eight clubs, $1.0 million of operating lease right-of-use asset on one club, $814,000 of software impairment on two investment projects, and $58,000 of property and equipment impairment on one club).

If difficult market and economic conditions materialize over the next year and/or we experience a decrease in revenue at one or more nightclubs or restaurants, we could incur a decline in fair value of one or more of our nightclubs or restaurants.

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These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities.

Additionally, we are presently not in compliance with NASDAQ Listing Rule 5250(c)(1), which requires timely filing of all required periodic financial reports with the SEC.

Although we intend to regain compliance with Listing Rule 5250(c)(1) by filing all such reports as soon as practicable, there is no assurance that we will be able to maintain compliance with Listing Rule 5250(c)(1) or any of the other NASDAQ continued listing requirements.

We may be subject to allegations, defamations, or other detrimental conduct by third parties, which could harm our reputation and cause us to lose customers and/or contribute to a deflation of our stock price.

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

What changed 10-K

Item 1A. Risk Factors