RCI HOSPITALITY HOLDINGS, INC. 10-Q

Item 1. Financial Statements. RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except number of shares) (unaudited) Six Months Ended March 31, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ ( 4,868 ) $ 12,259 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 8,204 7,345 Impairment of assets 8,433 1,780 Deferred income tax benefit ( 2,223 ) ( 1,242 ) Stock-based compensation 589 588 Loss (gain) on sale of businesses and assets 184 ( 1,248 ) Amortization of debt discount and issuance costs 265 290 Noncash lease expense 1,479 1,326 Gain on insurance ( 187 ) ( 1,150 ) Credit loss reversal on notes receivable ( 11 ) — Premium on stock repurchase 9,885 — Changes in operating assets and liabilities, net of business acquisitions: Receivables 745 1,714 Inventories 112 64 Prepaid expenses, other current and other assets ( 1,209 ) ( 530 ) Accounts payable, accrued and other liabilities ( 3,701 ) 695 Net cash provided by operating activities 17,697 21,891 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of businesses and assets 1,675 1,085 Proceeds from insurance 184 1,150 Proceeds from notes receivable 107 147 Payments for property and equipment and intangible assets ( 4,199 ) ( 8,608 ) Acquisition of businesses, net of cash acquired — ( 6,000 ) Net cash used in investing activities ( 2,233 ) ( 12,226 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt obligations 2,253 8,396 Payments on debt obligations ( 12,785 ) ( 10,321 ) Payment of loan origination costs ( 40 ) ( 71 ) Purchase of treasury stock ( 12,269 ) ( 6,114 ) Payment of dividends ( 1,162 ) ( 1,242 ) Investment from noncontrolling partner 1,800 — Payments to noncontrolling interests ( 80 ) — Net cash used in financing activities ( 22,283 ) ( 9,352 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 6,819 ) 313 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 33,709 32,350 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26,890 $ 32,663 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, 2026 2025 2026 2025 Revenues Sales of alcoholic beverages $ 28,817 $ 28,866 $ 58,956 $ 61,054 Sales of food and merchandise 9,539 9,411 19,505 19,517 Service revenues 25,448 22,912 51,259 47,093 Other 4,918 4,687 9,830 9,695 Total revenues 68,722 65,876 139,550 137,359 Operating expenses Cost of goods sold Alcoholic beverages sold 5,231 5,204 10,742 11,050 Food and merchandise sold 3,558 3,182 7,187 6,745 Service and other 16 25 117 97 Total cost of goods sold (exclusive of items shown separately below) 8,805 8,411 18,046 17,892 Salaries and wages 21,242 20,491 42,685 41,055 Selling, general, and administrative 23,197 22,900 47,901 49,107 Depreciation and amortization 4,017 3,776 8,204 7,345 Impairments and other charges (gains), net 7,649 2,127 7,866 ( 117 ) Total operating expenses 64,910 57,705 124,702 115,282 Income from operations 3,812 8,171 14,848 22,077 Other income (expenses) Interest expense ( 4,515 ) ( 4,048 ) ( 8,865 ) ( 8,200 ) Interest income 82 139 181 318 Non-operating gains (losses), net 4 — ( 9,881 ) 979 Income (loss) before income taxes ( 617 ) 4,262 ( 3,717 ) 15,174 Income tax expense (benefit) ( 398 ) 1,068 1,151 2,915 Net income (loss) ( 219 ) 3,194 ( 4,868 ) 12,259 Net loss (income) attributable to noncontrolling interests ( 107 ) 37 ( 192 ) ( 4 ) Net income (loss) attributable to RCIHH common stockholders $ ( 326 ) $ 3,231 $ ( 5,060 ) $ 12,255 Earnings (loss) per share Basic and diluted $ ( 0.04 ) $ 0.36 $ ( 0.63 ) $ 1.38 Weighted average shares used in computing earnings per share Basic and diluted 7,741,522 8,861,854 8,021,747 8,891,638 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, 2025 8,684,061 $ 87 $ 50,908 $ 210,106 — $ — $ ( 222 ) $ 260,879 Purchase of treasury shares — — — — ( 895,061 ) ( 21,946 ) — ( 21,946 ) Canceled treasury shares ( 895,061 ) ( 9 ) ( 21,937 ) — 895,061 21,946 — — Excise tax on stock repurchases — — ( 219 ) — — — — ( 219 ) Payment of dividends ($ 0.07 per share) — — — ( 545 ) — — — ( 545 ) Stock-based compensation — — 392 — — — — 392 Investment from noncontrolling partner — — — ( 790 ) — — 2,590 1,800 Payments to noncontrolling interests — — — — — — ( 36 ) ( 36 ) Net income (loss) — — — ( 4,734 ) — — 85 ( 4,649 ) Balance at December 31, 2025 7,789,000 78 29,144 204,037 — — 2,417 235,676 Purchase of treasury shares — — — — ( 103,000 ) ( 2,438 ) — ( 2,438 ) Canceled treasury shares ( 103,000 ) ( 1 ) ( 2,437 ) — 103,000 2,438 — — Excise tax on stock repurchases — — ( 24 ) — — — — ( 24 ) Payment of dividends ($ 0.08 per share) — — — ( 617 ) — — — ( 617 ) Stock-based compensation — — 197 — — — — 197 Payments to noncontrolling interests — — — — — — ( 44 ) ( 44 ) Net income (loss) — — — ( 326 ) — — 107 ( 219 ) Balance at March 31, 2026 7,686,000 $ 77 $ 26,880 $ 203,094 — $ — $ 2,480 $ 232,531 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 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, 2026 September 30, 2025 (unaudited) ASSETS Current assets Cash and cash equivalents $ 26,890 $ 33,709 Receivables, net 2,627 3,940 Inventories 4,745 4,857 Prepaid expenses and other current assets 6,284 4,968 Assets held for sale — 3,394 Total current assets 40,546 50,868 Property and equipment, net 278,069 279,027 Operating lease right-of-use assets 24,311 25,781 Notes receivable, net of current portion 4,326 3,849 Goodwill 62,242 62,725 Intangibles, net 162,271 171,948 Other assets 2,627 2,737 Total assets $ 574,392 $ 596,935 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 6,258 $ 5,836 Accrued liabilities 30,242 32,607 Current portion of debt obligations, net 33,396 21,198 Current portion of operating lease liabilities 3,379 3,314 Total current liabilities 73,275 62,955 Deferred tax liability, net 19,466 21,689 Debt, net of current portion and debt discount and issuance costs 215,325 214,583 Operating lease liabilities, net of current portion 25,628 27,320 Other long-term liabilities 8,167 9,509 Total liabilities 341,861 336,056 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; 7,686,000 and 8,684,061 shares issued and outstanding as of March 31, 2026, and September 30, 2025, respectively 77 87 Additional paid-in capital 26,880 50,908 Retained earnings 203,094 210,106 Total RCIHH stockholders’ equity 230,051 261,101 Noncontrolling interests 2,480 ( 222 ) Total equity 232,531 260,879 Total liabilities and equity $ 574,392 $ 596,935 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 September 30, 2025 consolidated balance sheet data 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, 2025, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 19, 2026. 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, 2026, are not necessarily indicative of the results that may be expected for the year ending September 30, 2026. 2. Recent Accounting Standards and Pronouncements In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 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 ASU 2024-03 on our financial statement disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which intended to improve the navigability of the guidance in Accounting Standards Codification ("ASC") Topic 270 and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. The ASU also addresses the form and content of such financial statements, adds list to ASC 270 of the interim disclosures required by all other ASC topics, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments are not intended to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather to reflect the effects of the SEC's form and content requirements related to interim reporting. The amendments of this ASU are effective to us for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. This ASU may be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of ASU 2025-11 on our interim reporting financial statement disclosures. 8 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. 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, 2026 2025 Cash paid during the period for: Interest, net of amounts capitalized $ 8,494 $ 7,890 Income taxes, net of refunds of $ 17 and $ 51 , respectively $ 1,628 $ 1,568 Noncash investing and financing transactions: Debt incurred in connection with stock repurchases $ 22,000 $ — Debt incurred in connection with acquisition of businesses $ — $ 5,000 Note receivable from sale of business $ — $ 60 Unpaid excise tax on stock repurchases $ 243 $ 62 Unpaid liabilities on capital expenditures $ 312 $ 1,170 On November 21, 2025, the Company repurchased 821,000 shares of its own common stock from a single stockholder for $ 30.0 million, paid $ 8.0 million in cash and $ 22.0 million under a two-year 12 % unsecured promissory note (see Note 7 ). Subsequent to the balance sheet date through May 22, 2026, we repurchased 41,500 shares of our common stock at an average price of $ 24.72 per share. 4. Segment Information The Company, through its subsidiaries, owns and operates adult nightclubs and Bombshells Restaurants and Bars. The Company has identified such segments based on how the chief operating decision maker assigns management responsibility; how financial information is regularly reviewed; the nature of the Company’s products, services, and costs; regulatory environments; and how resources are allocated. There are no major distinctions in geographical areas served as all operations are in the United States. The Company's chief operating decision maker ("CODM") is its chief executive officer. 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 consolidated financial statements. In adopting ASU 2023-07, we recast one of our shared-services subsidiary from Other to Corporate. We also recast three previously planned and previously reported casino-related subsidiaries classified in Other to Nightclubs and Bombshells. We reclassified certain prior year segment disclosures to conform to current year presentation. 9 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Segment Information — continued Below is the financial information (in thousands) related to the Company’s reportable segments as provided to the CODM: Three Months Ended March 31, 2026 Three Months Ended March 31, 2025 Nightclubs Bombshells Total Nightclubs Bombshells Total Revenues Third party $ 60,275 $ 8,359 $ 68,634 $ 57,541 $ 8,229 $ 65,770 Intersegment 1,323 — 1,323 1,114 — 1,114 61,598 8,359 69,957 58,655 8,229 66,884 Reconciliation of revenue Other revenues, including intersegment 187 171 Elimination of intersegment revenues ( 1,422 ) ( 1,179 ) Total consolidated revenues 68,722 65,876 Less: Cost of goods sold, including intersegment 6,733 2,064 8,797 6,512 1,882 8,394 Salaries and wages 14,565 2,817 17,382 14,091 2,791 16,882 Selling, general, and administrative, including intersegment 17,240 4,456 21,696 17,278 4,198 21,476 Depreciation and amortization 3,395 338 3,733 3,158 351 3,509 Impairments and other charges (gains), net 7,584 67 7,651 1,970 159 2,129 Other segment items — — — — — — Segment income (loss) 12,081 ( 1,383 ) 10,698 15,646 ( 1,152 ) 14,494 Reconciliation of segment income (loss) Other loss ( 163 ) ( 197 ) Interest expense, net ( 4,433 ) ( 3,909 ) Elimination of intersegment loss 36 11 Unallocated corporate overhead ( 6,755 ) ( 6,137 ) Consolidated income (loss) before income taxes $ ( 617 ) $ 4,262 Segment capital expenditures $ 1,349 $ 387 $ 1,736 $ 692 $ 1,727 $ 2,419 Reconciliation to consolidated capital expenditures Other operating segments 3 352 Unallocated corporate 129 83 Consolidated capital expenditures $ 1,868 $ 2,854 10 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Segment Information — continued Six Months Ended March 31, 2026 Six Months Ended March 31, 2025 Nightclubs Bombshells Total Nightclubs Bombshells Total Revenues Third party $ 122,584 $ 16,740 $ 139,324 $ 119,265 $ 17,816 $ 137,081 Intersegment 2,646 — 2,646 2,133 — 2,133 125,230 16,740 141,970 121,398 17,816 139,214 Reconciliation of revenue Other revenues, including intersegment 398 415 Elimination of intersegment revenues ( 2,818 ) ( 2,270 ) Total consolidated revenues 139,550 137,359 Less: Cost of goods sold, including intersegment 13,895 4,051 17,946 13,636 4,174 17,810 Salaries and wages 29,307 5,693 35,000 28,021 5,598 33,619 Selling, general, and administrative, including intersegment 35,242 8,785 44,027 34,946 8,567 43,513 Depreciation and amortization 6,895 753 7,648 6,129 682 6,811 Impairments and other charges (gains), net 7,765 96 7,861 1,148 ( 1,171 ) ( 23 ) Other segment items — — — — ( 979 ) ( 979 ) Segment income (loss) 32,126 ( 2,638 ) 29,488 37,518 945 38,463 Reconciliation of segment income (loss) Other loss ( 293 ) ( 277 ) Interest expense, net ( 8,684 ) ( 7,882 ) Elimination of intersegment loss (income) 1 ( 23 ) Unallocated corporate overhead ( 24,229 ) ( 15,107 ) Consolidated income (loss) before income taxes $ ( 3,717 ) $ 15,174 Segment capital expenditures $ 1,933 $ 1,657 $ 3,590 $ 2,246 $ 5,646 $ 7,892 Reconciliation to consolidated capital expenditures Other operating segments 4 437 Unallocated corporate 605 279 Consolidated capital expenditures $ 4,199 $ 8,608 March 31, 2026 September 30, 2025 Nightclubs Bombshells Total Nightclubs Bombshells Total Segment assets $ 460,111 $ 78,138 $ 538,249 $ 478,516 $ 78,877 $ 557,393 Reconciliation to consolidated total assets Other operating segments 3,524 3,775 Unallocated corporate 32,619 35,767 Consolidated total assets $ 574,392 $ 596,935 General corporate overhead includes 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. 11 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. 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, 2026 Three Months Ended March 31, 2025 Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total Sales of alcoholic beverages $ 24,354 $ 4,463 $ — $ 28,817 $ 24,575 $ 4,291 $ — $ 28,866 Sales of food and merchandise 5,657 3,882 — 9,539 5,519 3,892 — 9,411 Service revenues 25,444 4 — 25,448 22,870 42 — 22,912 Other revenues 4,820 10 88 4,918 4,577 4 106 4,687 $ 60,275 $ 8,359 $ 88 $ 68,722 $ 57,541 $ 8,229 $ 106 $ 65,876 Recognized at a point in time $ 59,485 $ 8,359 $ 88 $ 67,932 $ 57,129 $ 8,228 $ 106 $ 65,463 Recognized over time* 790 — — 790 412 1 — 413 $ 60,275 $ 8,359 $ 88 $ 68,722 $ 57,541 $ 8,229 $ 106 $ 65,876 Six Months Ended March 31, 2026 Six Months Ended March 31, 2025 Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total Sales of alcoholic beverages $ 50,149 $ 8,807 $ — $ 58,956 $ 51,610 $ 9,444 $ — $ 61,054 Sales of food and merchandise 11,593 7,912 — 19,505 11,255 8,262 — 19,517 Service revenues 51,254 5 — 51,259 47,048 45 — 47,093 Other revenues 9,588 16 226 9,830 9,352 65 278 9,695 $ 122,584 $ 16,740 $ 226 $ 139,550 $ 119,265 $ 17,816 $ 278 $ 137,359 Recognized at a point in time $ 121,364 $ 16,740 $ 226 $ 138,330 $ 118,440 $ 17,814 $ 278 $ 136,532 Recognized over time* 1,220 — — 1,220 825 2 — 827 $ 122,584 $ 16,740 $ 226 $ 139,550 $ 119,265 $ 17,816 $ 278 $ 137,359 * Lease revenue (included in Other Revenues in Nightclubs segment) as covered by ASC 842. All other revenues are covered by ASC 606. 12 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. 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 receivable, net in our unaudited condensed consolidated balance sheets. A reconciliation of contract liabilities with customers is presented below (in thousands): Balance at September 30, 2025 Net Consideration Received/Recognized Recognized in Revenue Balance at March 31, 2026 Ad revenue $ 45 $ 203 $ ( 172 ) $ 76 Expo revenue 1 225 — 226 VIP cards — 694 ( 342 ) 352 Other 31 37 ( 35 ) 33 $ 77 $ 1,159 $ ( 549 ) $ 687 Contract liabilities with customers are included in accrued liabilities as unearned revenues in our unaudited condensed consolidated balance sheets (see also Note 6 ), while the revenues associated with these contract liabilities are included in other revenues in our unaudited condensed consolidated statements of income. In relation to the Illinois BIPA settlement (see Notes 6 and 9 ), VIP card claims processed during the first quarter of fiscal 2026 amounting to $ 470,000 were recorded in unearned revenues and subsequently ratably recognized in revenues with no actual cash received. 6. Selected Account Information The components of receivables, net are as follows (in thousands): March 31, 2026 September 30, 2025 Credit card receivables $ 1,564 $ 1,637 Income tax refundable — 951 ATM in-transit 376 374 Current portion of notes receivable 210 320 Other (net of allowance for doubtful accounts of $ 112 and $ 91 , respectively) 477 658 Total receivables, net $ 2,627 $ 3,940 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) 6. Selected Account Information — continued The components of prepaid expenses and other current assets are as follows (in thousands): March 31, 2026 September 30, 2025 Prepaid insurance $ 4,411 $ 3,367 Prepaid legal 194 123 Prepaid taxes and licenses 727 498 Prepaid rent 148 324 Other 804 656 Total prepaid expenses and other current assets $ 6,284 $ 4,968 The components of accrued liabilities are as follows (in thousands): March 31, 2026 September 30, 2025 Legal fees $ 6,922 $ 9,366 Insurance 2,901 1,600 Payroll and related costs 5,134 4,930 Property taxes 1,928 3,501 Sales and liquor taxes 2,326 2,303 Lawsuit settlement 2,789 4,173 Estimated self-insurance liability 2,555 2,555 Construction in progress 308 464 Patron tax 1,076 1,078 Income taxes 795 — Interest 630 524 Unearned revenues 687 77 Other 2,191 2,036 Total accrued liabilities $ 30,242 $ 32,607 The components of other long-term liabilities are as follows (in thousands): March 31, 2026 September 30, 2025 Estimated self-insurance liability $ 7,008 $ 7,008 Advances from creditors — 1,250 Other 1,159 1,251 Total other long-term liabilities $ 8,167 $ 9,509 14 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6. 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, 2026 2025 2026 2025 Taxes and permits $ 3,623 $ 3,418 $ 7,216 $ 7,246 Advertising and marketing 2,703 2,601 5,733 5,563 Supplies and services 2,662 2,468 5,445 4,956 Insurance 2,507 2,823 5,225 8,106 Legal 1,162 1,369 2,369 2,755 Lease 1,590 1,537 3,241 3,139 Charge card fees 1,968 1,650 3,923 3,398 Utilities 1,606 1,508 3,176 2,879 Security 1,066 1,018 2,178 2,102 Stock-based compensation 197 118 589 588 Accounting and professional fees 932 1,177 2,429 2,311 Repairs and maintenance 1,404 1,288 2,707 2,491 Other 1,777 1,925 3,670 3,573 Total selling, general, and administrative expenses $ 23,197 $ 22,900 $ 47,901 $ 49,107 The components of impairments and other charges (gains), net are as follows (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2026 2025 2026 2025 Impairment of assets $ 7,270 $ 1,780 $ 8,433 $ 1,780 Settlement of lawsuits, net of recoveries ( Notes 5 and 9 ) 207 127 ( 595 ) 306 Loss (gain) on sale of businesses and assets 218 220 251 ( 1,186 ) Gain on insurance ( 46 ) — ( 223 ) ( 1,017 ) Total impairments and other charges (gains), net $ 7,649 $ 2,127 $ 7,866 $ ( 117 ) The components of non-operating gains (losses), net are as follows (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2026 2025 2026 2025 Premium on stock repurchase $ — $ — $ ( 9,885 ) $ — Gain on lease termination — — — 979 Other 4 — 4 — Non-operating gains (losses), net $ 4 $ — $ ( 9,881 ) $ 979 15 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Debt On October 1, 2025, the Company entered into a debt modification transaction with 22 investors by extending their promissory notes' maturity date to October 2028. Two new investors joined with a combined $ 2.1 million and two existing investors increased their participation by a combined $ 250,000 . The promissory notes continue to bear a 12 % annual interest rate with interest-only monthly installments until full balance at maturity. On November 21, 2025, in connection with a stock repurchase transaction (see Note 3 ), the Company executed a two-year $ 22.0 million unsecured promissory note bearing a 12 % annual interest rate. The note is payable in monthly payments of principal and interest of $ 1.0 million for 23 months with the remaining balance paid at maturity. Future maturities of debt obligations as of March 31, 2026, are as follows (in thousands): Regular Amortization Balloon Payments Total Payments April 2026 - March 2027 $ 27,374 $ 6,500 $ 33,874 April 2027 - March 2028 23,694 10,548 34,242 April 2028 - March 2029 17,645 9,451 27,096 April 2029 - March 2030 19,043 — 19,043 April 2030 - March 2031 15,306 — 15,306 Thereafter 35,288 86,060 121,348 $ 138,350 $ 112,559 $ 250,909 On May 15, 2026, in relation to eleven 12 % unsecured promissory notes included in the above-mentioned debt modification on October 1, 2025, the Company extended several notes and added one new investor note to mature in October 2028, which total principal amount to $ 2.55 million. Several of those notes did not extend and were paid off amounting to $ 1.6 million. The promissory notes continue to bear a 12 % annual interest rate with interest-only monthly installments until full balance at maturity. 8. Income Taxes Income tax was a $ 398,000 benefit and a $ 1.1 million expense during the three months ended March 31, 2026, and 2025, respectively. The effective income tax rate was approximately 64.5 % and 25.1 % for the three months ended March 31, 2026, and 2025, respectively. Income tax expense was $ 1.2 million and $ 2.9 million during the six months ended March 31, 2026, and 2025, respectively. The effective income tax rate was approximately 31.0 % and 19.2 % for the six months ended March 31, 2026, and 2025, respectively. Our effective income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, and the impact of the nondeductible premium on stock repurchase on a pretax loss during the current year, particularly a low pretax loss in the current quarter. 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, 2022, 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. 16 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Commitments and Contingencies Legal Matters New York Indictment and Related Matters 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 Company cooperated with the NY AG during 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. On or about September 16, 2025, the Company, three subsidiaries, and five employees, including two executive officers, were arraigned in connection with an indictment filed by the NY AG in which the defendants were variously charged with committing the crimes of Criminal Tax Fraud in the First Degree in violation of Tax Law §1806, a class B felony; Bribery in the Second Degree in violation of Penal Law §200.03, a class C felony; Criminal Tax Fraud in the Second Degree in violation of Tax Law §1805, a class C felony; Criminal Tax Fraud in the Third Degree in violation of Tax Law §1804, a class D felony; Criminal Tax Fraud in the Fourth Degree in violation of Tax Law §1803, a class E felony; Conspiracy in the Fourth Degree in violation of Penal Law §105.10, a class E felony; and Offering a False Instrument for Filing in the First Degree in violation of Penal Law §175.35(1). According to the NY AG, "an investigation by the Office of the Attorney General revealed that RCI executives bribed an auditor with the NY DTF to avoid paying over $ 8 million in sales taxes to New York City and the state from 2010 to 2024." On November 25, 2025, the board of directors convened and approved a resolution for Eric Langan and Bradley Chhay to step down as CEO and CFO of the Company, respectively, effective November 28, 2025. In the same meeting, the board nominated and approved the appointment of Travis Reese and Albert Molina as Interim President and CEO and Interim CFO, respectively. Messrs. Langan and Chhay remain employed with the Company and will be focusing on operational improvement and strategic efforts as Head of M&A and Head of Corporate Development, respectively. On January 29, 2026, Mr. Langan stepped down as Chairman of the Company’s board of directors. Mr. Langan was replaced by Mr. Reese as Chairman. Mr. Langan remains a member of the board of directors. The non-executive corporate employee mentioned above continues to be on administrative leave during the pendency of the indictment. The defendants entered a plea of not guilty to all of the charges and are vigorously defending themselves against the charges in court. 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 indictment. 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. 17 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Commitments and Contingencies — continued Shareholder Class and Derivative Actions In September 2025, a putative securities class action was filed against RCI Hospitality Holdings, Inc. and certain of its officers in the Southern District of Texas, Houston Division. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and 10b-5 promulgated thereunder based on alleged materially false and misleading statements made in the Company’s SEC filings and disclosures as they relate to the indictment filed by the NY AG and other related issues. The complaints seek unspecified damages, costs, and attorneys’ fees. This lawsuit is captioned Hernandez v. RCI Hospitality Holdings, Inc., et al. (filed September 21, 2025, naming the Company, Eric S. Langan, and Bradley Chhay). On April 14, 2026, the court entered an order appointing the lead plaintiff and the respective lead and liaison counsel for the purported class. The Company has not yet answered or otherwise responded to the complaint, but intends on moving to dismiss the operative pleading for failure to state a claim upon which relief can be granted. The Company intends to continue to vigorously defend against this action. This action is in its early stage, and a potential loss cannot yet be estimated. On November 17, 2025, a shareholder derivative action was filed in Harris County District Court against officers and directors Eric S. Langan, Yura Barabash, Bradley Chhay, Luke Lirot, Elaine J. Martin, Arthur A. Priaulx, Travis Reese, and RCI Hospitality Holdings, Inc., as nominal defendant. The action alleges that the individual officers and directors made or caused the Company to make a series of materially false and/or misleading statements and omissions related to the indictment filed by the NY AG and other related issues and engaged in or caused the Company to, inter alia , fail to maintain internal controls over its business and financial reporting sufficient to ensure the accuracy of its public filings. The action asserts claims for breach of fiduciary duty and unjust enrichment. The complaint seeks injunctive relief, damages, restitution, costs, and attorneys’ fees. The case, Ayers v. RCI Hospitality Holdings, Inc., et al. , is in its early stage, and a potential loss cannot yet be estimated. On March 2, 2026, a shareholder derivative action was filed in the Eleventh Division of the Texas Business Court against officers and directors Eric S. Langan, Yura Barabash, Bradley Chhay, Luke Lirot, Elaine J. Martin, Arthur A. Priaulx, Travis Reese, and Ahmed Anakar. The action alleges that the individual officers and directors breached their fiduciary duties by failing to adequately monitor issues related to the indictment filed by the NY AG and other related issues. The action asserts claims for breaches of fiduciary duties respectively owed by the directors and officers. The complaint seeks injunctive relief, damages, restitution, costs, and attorneys’ fees. The case, Taylor v. Langan, et al. , is in its early stage, and a potential loss cannot yet be estimated. Illinois BIPA Matter 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: Rapp et al. v. RCI Management Services, Inc. et al. , Case No. 22LA0884 (St. Clair County, Illinois) and Loera v. Pooh Bah Enterprises, Inc. , Case No. 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 cash settlement was paid in full in July 2025 and the VIP cards were issued in December 2025, with unclaimed VIP cards amounting to $ 1.23 million. 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 complaint alleged that Mr. Panameno injured Mr. 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. Plaintiffs have filed an appeal in May 2026. The Company intends to vigorously defend against this action. 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. As set forth in the risk factors as disclosed in this report, the adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. 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. 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, net of recoveries, amounting to net settlements of $ 207,000 and net recoveries of $ 595,000 for the three and six months ended March 31, 2026, respectively, and net settlements of $ 127,000 and $ 306,000 for the three and six months ended March 31, 2025, respectively. As of March 31, 2026, and September 30, 2025, the Company has accrued $ 2.8 million and $ 4.2 million, respectively, related to settlement of lawsuits, which is included in accrued liabilities in our unaudited condensed consolidated balance sheets. 19 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 10. Related Party Transactions Presently, our director and former Chairman, President, and CEO, 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, 2026, and September 30, 2025, was $ 135.2 million and $ 139.6 million, respectively. Included in the debt balance as of March 31, 2026, and September 30, 2025, is a note borrowed from a related party for $ 350,000 and $ 150,000 , respectively, from a brother of the Company's former CFO, Bradley Chhay, in which the terms of the note is the same as the rest of the lender group. We used the services of Tall Oak Custom Furniture and Nottingham Barrels and Furniture, previously Nottingham Creations, all furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Tall Oak Custom Furniture and Nottingham Barrels and Furniture are 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, Nottingham Barrels and Furniture, and Nottingham Creations were $ 0 and $ 3,974 during the three months ended March 31, 2026, and 2025, respectively, and $ 0 and $ 6,754 during the six months ended March 31, 2026, and 2025 , respectively. As of March 31, 2026, and September 30, 2025, we owed Tall Oak Custom Furniture, Nottingham Barrels and Furniture, and Nottingham Creations $ 0 and $ 3,312 , 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 2026 and 2025. A son-in-law of Eric Langan owns a 50 % interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were $ 0 and $ 0 for the three months ended March 31, 2026, and 2025, respectively, and $ 0 and $ 0 for the six months ended March 31, 2026, and 2025, respectively. Amounts billed directly to the Company were $ 7,550 and $ 681 for the three months ended March 31, 2026, and 2025, respectively, and $ 7,550 and $ 1,401 for the six months ended March 31, 2026, and 2025. As of March 31, 2026, and September 30, 2025, the Company owed TW Mechanical $ 6,565 and $ 0 , respectively, in unpaid direct billings. 20 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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, 2026, and 2025 is as follows (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2026 2025 2026 2025 Operating lease expense – fixed payments $ 1,154 $ 1,079 $ 2,310 $ 2,188 Variable lease expense 351 364 755 759 Short-term and other lease expense (includes $ 89 and $ 89 recorded in advertising and marketing for the three months ended March 31, 2026, and 2025, respectively, and $ 183 and $ 191 for the six months ended March 31, 2026, and 2025, respectively; and $ 190 and $ 133 recorded in repairs and maintenance for the three months ended March 31, 2026, and 2025, respectively, and $ 343 and $ 275 for the six months ended March 31, 2026, and 2025, respectively; see Note 6 ) 364 316 702 658 Total lease expense, net $ 1,869 $ 1,759 $ 3,767 $ 3,605 Other information: Operating cash outflows from operating leases $ 1,946 $ 1,821 $ 3,915 $ 3,779 Weighted average remaining lease term – operating leases 8.6 years 9.3 years Weighted average discount rate – operating leases 5.8 % 5.7 % Future maturities of operating lease liabilities as of March 31, 2026, are as follows (in thousands): Principal Payments Interest Payments Total Payments April 2026 - March 2027 $ 3,379 $ 1,516 $ 4,895 April 2027 - March 2028 3,003 1,325 4,328 April 2028 - March 2029 2,814 1,155 3,969 April 2029 - March 2030 2,659 985 3,644 April 2030 - March 2031 2,469 841 3,310 Thereafter 14,683 2,067 16,750 $ 29,007 $ 7,889 $ 36,896 12. Dispositions On October 7, 2025, the Company sold 100 % of the common stock of a club subsidiary located in Harlingen, Texas, for $ 600,000 . The sale did not include the real estate where the club is located. The Company recognized a loss of approximately $ 17,000 on the sale. On February 6, 2026, the Company sold a club located in Edinburg, Texas, for $ 1.1 million recognizing a $ 219,000 loss on the sale. Proceeds from the sale were used to pay down certain related debt. 21 Table of Contents