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What changed in RCI HOSPITALITY HOLDINGS, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of RCI HOSPITALITY HOLDINGS, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+218 added−214 removedSource: 10-K (2026-03-19) vs 10-K (2024-12-16)

Top changes in RCI HOSPITALITY HOLDINGS, INC.'s 2025 10-K

218 paragraphs added · 214 removed · 176 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

25 edited+7 added−7 removed16 unchanged
Biggest changeOver a five-year period from fiscal 2019 through fiscal 2024, our diluted earnings per share declined at a compound annual growth rate (“CAGR”) of 30.9%, which was mainly caused by increasing revenue at a CAGR of 10.3%, with impairment of assets as the most significant offset at a CAGR of 44.9% increase.
Biggest changeOur financial targets by fiscal 2029 are to achieve: • Total revenues of $400 million • Free cash flow of $75 million • Shares outstanding of 7.5 million Over a five-year period from fiscal 2020 through fiscal 2025, our income from operations increased at a compound annual growth rate (“CAGR”) of 62%, which was mainly caused by increasing revenue at a CAGR of 16% and decreasing impairment of assets at a CAGR of 13%.
Same-stores sales for Nightclubs in 2024 was -2.1%. For a list of our nightclub locations, refer to Item 2—“Properties.” Bombshells Segment Our Bombshells segment operates a restaurant and bar concept that sets itself apart with décor that pays homage to all branches of the U.S. military.
Same-stores sales for Nightclubs in 2025 was -2.1%. For a list of our nightclub locations, refer to Item 2—“Properties.” Bombshells Segment Our Bombshells segment operates a restaurant and bar concept that sets itself apart with décor that pays homage to all branches of the U.S. military.
As of this date, we have pending registration applications for the names “TOOTSIES CABARET,” “RICK'S REWARDS,” “VENICE CABARET,” "CHERRY CREEK FOOD HALL AND BREWERY," and “THE MANSION.” We also own the rights to numerous trade names associated with our media division.
As of this date, we have pending registration applications for the names “TOOTSIES CABARET,” “RICK'S REWARDS,” “VENICE CABARET,” “CHERRY CREEK FOOD HALL AND BREWERY,” and “THE MANSION.” We also own the rights to numerous trade names associated with our media division.
Drink Robust is licensed to sell Robust Energy Drink in the United States. 5 Table of Contents OUR STRATEGY Our overall objective is to create value for our shareholders by developing and operating profitable businesses in the hospitality and related space.
Drink Robust is licensed to sell Robust Energy Drink in the United States. 6 Table of Contents OUR STRATEGY Our overall objective is to create value for our shareholders by developing and operating profitable businesses in the hospitality and related space.
References to years 2024, 2023, and 2022 are for fiscal years ended September 30, 2024, 2023, and 2022, respectively. Our fiscal quarters chronologically end on December 31, March 31, June 30 and September 30. OUR BUSINESS Through our subsidiaries, we operate several businesses, which we aggregate for financial reporting purposes into two reportable segments – Nightclubs and Bombshells.
References to years 2025, 2024, and 2023 are for fiscal years ended September 30, 2025, 2024, and 2023, respectively. Our fiscal quarters chronologically end on December 31, March 31, June 30 and September 30. OUR BUSINESS Our subsidiaries operate several businesses, which we aggregate for financial reporting purposes into two reportable segments – Nightclubs and Bombshells.
There can be no assurance that these steps we have taken to protect our service marks will be adequate to deter misappropriation of our protected intellectual property rights. 7 Table of Contents EMPLOYEES AND INDEPENDENT CONTRACTORS Our people are employed by the parent company or by its subsidiaries.
There can be no assurance that these steps we have taken to protect our service marks will be adequate to deter misappropriation of our protected intellectual property rights. EMPLOYEES AND INDEPENDENT CONTRACTORS Our people are employed by the parent company or by its subsidiaries.
We have also obtained service mark registrations from the Patent and Trademark Office for “RICK’S AND STARS DESIGN” logo, “RCI HOSPITALITY HOLDINGS, INC.,” “RICK’S,” “RICK’S CABARET,” “CLUB ONYX,” “XTC CABARET,” “SCARLETT’S CABARET,” “SILVER CITY CABARET,” “BOMBSHELLS RESTAURANT AND BAR,” “THE SEVILLE CLUB,” “DOWN IN TEXAS SALOON,” “HOOPS CABARET,” “VEE LOUNGE,” “STUDIO 80,” “FOXY’S CABARET,” “EXOTIC DANCER,” “TOYS FOR TATAS,” "LA BOHEME GENTLEMAN'S CLUB," “MILE HIGH MEN’S CLUB,” “MHMC logo,” “AFTER DARK,” “COUNTRY ROCK CABARET,” “PT’S,” “DIAMOND CABARET,” "CABARET ROYALE," "BABY DOLLS SALOON," "BABY DOLLS TOPLESS SALOON," "BABY DOLLS," "JAGUARS," and “BOMBSHELLS OFFICER’S CLUB” are registered through service mark registrations issued by the United States Patent and Trademark Office.
We have also obtained service mark registrations from the Patent and Trademark Office for “RICK’S AND STARS DESIGN” logo, “RCI HOSPITALITY HOLDINGS, INC.,” “RICK’S,” “RICK’S CABARET,” “CLUB ONYX,” “XTC CABARET,” “SCARLETT’S CABARET,” “SILVER CITY CABARET,” “BOMBSHELLS RESTAURANT AND BAR,” “THE SEVILLE CLUB,” “DOWN IN TEXAS SALOON,” “HOOPS CABARET,” “VEE LOUNGE,” “STUDIO 80,” “FOXY’S CABARET,” “EXOTIC DANCER,” “TOYS FOR TATAS,” “LA BOHEME GENTLEMAN'S CLUB,” “MILE HIGH MEN’S CLUB,” “MHMC logo,” “AFTER DARK,” “COUNTRY ROCK CABARET,” “PT’S,” “DIAMOND CABARET,” “CABARET ROYALE,” “BABY DOLLS SALOON,” “BABY DOLLS TOPLESS SALOON,” “BABY DOLLS,” “JAGUARS," and “BOMBSHELLS OFFICER’S CLUB” are registered through service mark registrations issued by the United States Patent and Trademark Office.
Information contained in the corporate website shall not be construed as part of this Form 10-K. 8 Table of Contents
Information contained in the corporate website shall not be construed as part of this Form 10-K. 9 Table of Contents
Executive officers are employed by the registrant (parent company); shared services personnel and managers responsible for multiple clubs or restaurants are employed by RCI Management Services, Inc.; and the rest are employed by the individual operating entities.
Executive officers are employed by the registrant (parent company); shared services personnel and managers responsible for multiple clubs or restaurants are employed by RCI Internet Services, Inc. and SWR Consulting, Inc.; and the rest are employed by the individual operating entities.
During fiscal 2024, our Nightclub segment sales mix was 40.3% service revenue; 43.3% alcoholic beverages; and 16.4% food, merchandise, and other. Segment gross margin (revenues less cost of goods sold, divided by revenues) was approximately 88.3%. Our Nightclubs segment revenue increased by approximately 3.0% and income from operations decreased by 20.6% compared to the prior year.
During fiscal 2025, our Nightclub segment sales mix was 40% service revenue; 43% alcoholic beverages; and 17% food, merchandise, and other. Segment gross margin (revenues less cost of goods sold, divided by revenues) was approximately 88.6%. Our Nightclubs segment revenue decreased by approximately 0.6% and income from operations increased by 20.1% compared to the prior year.
We also operate one dance club under the brand name Studio 80. We generate revenue from our nightclubs through the sale of alcoholic beverages, food, and merchandise items; service in the form of cover charge, licensing fees, and room rentals; and through other related means such as ATM commissions and vending income, among others.
We generate revenue from our nightclubs through the sale of alcoholic beverages, food, and merchandise items; service in the form of cover charge, licensing fees, and room rentals; and through other related means such as ATM commissions and vending income, among others.
The Media Group produces two nationally recognized industry award shows for the readers of both ED Club Bulletin and StorErotica magazines, and maintains a number of B-to-B and consumer websites for both industries.
The Media Group produces two nationally recognized industry award shows for the readers of both ED Magazine and StorErotica Magazine, and maintains several B-to-B and consumer websites for both industries.
The table below shows the number of Nightclubs and Bombshells open by state as of September 30, 2024: Nightclubs Bombshells (1) Total Arizona 1 — 1 Colorado 5 1 6 Florida 4 — 4 Illinois 5 — 5 Indiana 1 — 1 Kentucky 1 — 1 Louisiana 1 — 1 Maine 1 — 1 Minnesota 3 — 3 New York 4 — 4 North Carolina 2 — 2 Pennsylvania 1 — 1 Texas 27 12 39 56 13 69 (1) Includes one food hall location. 4 Table of Contents Nightclubs Segment Our Nightclubs subsidiaries operate our adult entertainment nightclubs through several brands that target many different demographics of customers by providing a unique, quality entertainment environment.
The table below shows the number of Nightclubs and Bombshells open by state as of September 30, 2025: Nightclubs Bombshells Total Arizona 1 — 1 Colorado 6 1 7 Florida 4 — 4 Illinois 5 — 5 Indiana 1 — 1 Kentucky 1 — 1 Louisiana 1 — 1 Maine 1 — 1 Michigan 1 — 1 Minnesota 3 — 3 New York 4 — 4 North Carolina 2 — 2 Pennsylvania 2 — 2 South Carolina 1 — 1 Texas 26 10 36 59 11 70 4 Table of Contents Nightclubs Segment Our Nightclubs subsidiaries operate our adult entertainment nightclubs through several brands that target many different demographics of customers by providing a unique, quality entertainment environment.
TRADEMARKS Our rights to the trade names “RCI Hospitality Holdings, Inc.,” “Rick’s,” “Rick’s Cabaret,” “Tootsie’s Cabaret,” “Club Onyx,” “XTC Cabaret,” “Temptations,” “Jaguars,” “Downtown Cabaret,” “Cabaret East,” “Bombshells Restaurant and Bar,” “Vee Lounge,” “Mile High Men’s Club,” “Country Rock Cabaret,” “PT’s,” and “Diamond Cabaret” are established under common law, based upon our substantial and continuous use of these trade names in interstate commerce, some of which have been in use at least as early as 1987.
In all states where we operate, management believes we are in compliance with applicable city, county, state or other local laws governing the sale of alcohol and sexually oriented businesses. 8 Table of Contents TRADEMARKS Our rights to the trade names “RCI Hospitality Holdings, Inc.,” “Rick’s,” “Rick’s Cabaret,” “Tootsie’s Cabaret,” “Club Onyx,” “XTC Cabaret,” “Temptations,” “Jaguars,” “Downtown Cabaret,” “Cabaret East,” “Bombshells Restaurant and Bar,” “Vee Lounge,” “Mile High Men’s Club,” “Country Rock Cabaret,” “PT’s,” and “Diamond Cabaret” are established under common law, based upon our substantial and continuous use of these trade names in interstate commerce, some of which have been in use at least as early as 1987.
Item 1. BUSINESS. OUR COMPANY RCI Hospitality Holdings, Inc. is a holding company that, through its subsidiaries, engages in businesses that offer live adult entertainment and/or high-quality dining experiences to its guests. Our subsidiaries operated 69 establishments in 13 states as of September 30, 2024.
Item 1. BUSINESS. OUR COMPANY RCI Hospitality Holdings, Inc. is a holding company that, through its subsidiaries, engages in businesses that offer live adult entertainment and/or high-quality dining experiences to its guests. Our subsidiaries operated 71 establishments in 15 states as of September 30, 2025, including one club that was temporarily closed due to fire damage and one for rebranding.
Included in the Media Group is ED Publications, publishers of the bimonthly ED Club Bulletin, the only national business magazine serving the 2,200-plus adult nightclubs in North America, which collectively have annual revenues in excess of $5 billion, according to the Association of Club Executives.
Included in the Media Group is ED Publications, publishers of the bimonthly ED (Exotic Dancer) Magazine, the only national business magazine serving the 2,000 adult nightclubs of North America, which collectively have revenue in excess of $5 billion, according to the Association of Club Executives (an industry lobbying organization that was founded by ED Publications in 1999).
During 2022, we achieved our highest financial performance in terms of profitability and cash flow due to government stimulus due to the pandemic and the fact that our restaurants and clubs were among the first to open and resume business operations. Compared to our record net income in 2022, our 2024 net income decreased by 93%.
See discussions of our non-GAAP financial measures starting on page 45 . 7 Table of Contents During 2022, we achieved our highest financial performance in terms of profitability and cash flow due to government stimulus prompted by the pandemic and the fact that our restaurants and clubs were among the first to open and resume business operations.
We strive to achieve that by providing an attractive price-value entertainment, dining experience, and top-notch service; by attracting and retaining quality personnel; and by focusing on unit-level operating performance. Aside from our operating strategy, we employ a capital allocation strategy.
We strive to achieve that by providing an attractive price-value entertainment, dining experience, and top-notch service; by attracting and retaining quality personnel; and by focusing on unit-level operating performance. In December 2024, we launched our five-year Back-to-Basics strategy where we focus on improving performance of existing clubs and Bombshells units to fuel our capital allocation priorities.
Businesses that are not included as Nightclubs or Bombshells are combined as “Other.” During fiscal 2024, 2023, and 2022, consolidated revenues were $295.6 million, $293.8 million, and $267.6 million, respectively, generating diluted earnings per share of $0.33, $3.13, and $4.91, respectively.
During fiscal 2025, 2024, and 2023, consolidated revenues were $279.4 million, $295.6 million, and $293.8 million, respectively, generating diluted earnings per share of $1.23, $0.33, and $3.13, respectively.
But for the same time period, our net cash from operating activities only decreased by 13%. We are managing this by carefully evaluating our Bombshells program in view of recent performance trends. Currently, we have three locations that are under construction and do not plan to add anymore locations after those.
Compared to our record net income in 2022, our 2025 net income decreased by 77%. But for the same time period, our net cash from operating activities only decreased by 23%. We are managing this by carefully evaluating our Bombshells program in view of recent performance trends.
As of September 30, 2024, we had the following employees: Operations Managers Non-Managers Corporate Total Hourly 68 3,041 15 3,124 Salaried 367 44 78 489 435 3,085 93 3,613 Additionally, as of September 30, 2024, we had independent contractor entertainers who are self-employed and conduct business at our locations on a non-exclusive basis.
As of September 30, 2025, we had the following employees: Operations Managers Non-Managers Corporate Total Hourly 60 2,874 8 2,942 Salaried 365 49 88 502 425 2,923 96 3,444 Additionally, as of September 30, 2025, we had independent contractor entertainers who are self-employed and conduct business at our locations on a non-exclusive basis.
It owns a national industry convention and trade show; two national industry trade publications; two national industry award shows; and more than a dozen industry and social media websites.
Our Media Group is the leading business communications company serving the multibillion-dollar adult nightclubs industry and the adult retail products industry. It owns a national industry convention and trade show; two national industry trade publications; two national industry award shows; and more than a dozen industry and social media websites.
Excluding noncash and certain nonrecurring items, our non-GAAP diluted earnings per share improved at a CAGR of 14.1%. Net cash provided by operating activities improved at 8.5% and free cash flow also improved at 7.8% CAGR for the same period. See discussions of our non-GAAP financial measures starting on page 44 .
Excluding noncash and certain nonrecurring items, our non-GAAP diluted earnings per share improved at a CAGR of 33%. Net cash provided by operating activities improved by 26% and free cash flow also improved by 28% CAGR for the same period. We have steadily increased our quarterly dividend payments from $0.03 in fiscal 2016 to $0.07 in fiscal 2025.
Bombshells segment revenue decreased by 9.2%, while income from operations decreased by 263.7% from prior year. Same-stores sales for Bombshells in 2024 was -18.4%. For a list of our Bombshells locations, refer to Item 2—“Properties.” Other Segment We group together all businesses not belonging to either Nightclubs and Bombshells as Other reportable segment.
Same-stores sales for Bombshells in 2025 was -13.6%. 5 Table of Contents For a list of our Bombshells locations, refer to Item 2—“Properties.” Other Segment We group together all businesses not belonging to either Nightclubs and Bombshells as Other reportable segment. This is made up of several wholly-owned subsidiaries composed primarily of our Media Group and Drink Robust.
We terminated our franchising program, and are aggressively closing underperforming locations. 6 Table of Contents COMPETITION The adult entertainment and the restaurant/sports bar businesses are highly competitive with respect to price, service and location. All of our nightclubs compete with a number of locally owned adult clubs, some of whose brands may have name recognition that equals that of ours.
All of our nightclubs compete with a number of locally owned adult clubs, some of whose brands may have name recognition that equals that of ours.
Removed
During fiscal 2024, we opened one Bombshells location in Stafford, Texas and sold one location in San Antonio, Texas. During fiscal 2024, Bombshells sales mix was 54.3% alcoholic beverages and 45.7% food, merchandise, and other. Segment gross margin (revenues less cost of goods sold, divided by revenues) was approximately 75.9%.
Added
Businesses that are not included as Nightclubs or Bombshells are combined as “Other.” We adopted Accounting Standards Update 2023-07, Segment Reporting , as of September 30, 2025. Segment-related disclosures, except for those in Note 4 to our consolidated financial statements, relate to amounts exclusive of intersegment items.
Removed
This is made up of several wholly-owned subsidiaries composed primarily of our Media Group and Drink Robust. Our Media Group is the leading business communications company serving the multibillion-dollar adult nightclubs industry and the adult retail products industry.
Added
We also operate one dance club under the brand name Studio 80. In 2025, we acquired clubs doing business as Flight Club, Platinum West, and Platinum Plus.
Removed
ED Publications, founded in 1991, also publishes the Annual VIP Guide of adult nightclubs, touring entertainers and industry vendors; and produces the Annual Gentlemen’s Club Owners EXPO, a national convention and trade show.
Added
During fiscal 2025, we opened two Bombshells locations in Denver, Colorado and Lubbock, Texas and closed three locations in Austin, Houston, and Spring, Texas, and one food hall in Denver, Colorado. During fiscal 2025, Bombshells sales mix was 52% alcoholic beverages and 48% food, merchandise, and other.
Removed
Capital Allocation Strategy Our capital allocation strategy provides us with disciplined guidelines on how we should use our free cash flows; provided however, that we may deviate from this strategy if other strategic rationale warrants. We calculate free cash flow as net cash flows from operating activities minus maintenance capital expenditures.
Added
Segment gross margin (revenues less cost of goods sold, divided by revenues) was approximately 76.1%. Bombshells segment revenue decreased by 29.2%, while income from operations improved to a $177,000 income from a $10.8 million loss in the prior year.
Removed
Using the after-tax yield of buying our own stock as baseline, management believes that we are able to make better investment decisions.
Added
In addition, ED Publications produces the bimonthly StorErotica Magazine, which is mailed to over 2,500 adult retail stores and lingerie boutiques across the US. ED Publications, founded in 1991, also produces the Annual ED EXPO, the only convention and tradeshow in the world for the multi-billion-dollar adult nightclub industry.
Removed
Based on our current capital allocation strategy: • We consider buying back our own stock if the after-tax yield on free cash flow is above 10%; • We consider acquiring or developing our own clubs or restaurants that we believe have the potential to provide a minimum cash on cash return of 25%-33%, absent an otherwise strategic rationale; • We consider disposing of underperforming units to free up capital for more productive use; • We consider paying down our most expensive debt if it makes sense on a tax-adjusted basis, or there is an otherwise strategic rationale.
Added
For the allocation of our free cash flow, we currently divide it among club acquisitions (investing), share buybacks (financing), and dividends (financing).
Removed
In all states where we operate, management believes we are in compliance with applicable city, county, state or other local laws governing the sale of alcohol and sexually oriented businesses.
Added
Currently, we have one location that is under construction and do not plan to add anymore locations after that. COMPETITION The adult entertainment and the restaurant/sports bar businesses are highly competitive with respect to price, service and location.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+17 added−15 removed105 unchanged
Biggest changeAs 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).
Biggest changeAs 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 19 Table of Contents 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).
A summary of our risk factors is as follows: Risks related to our business ◦ We may deviate from our present capital allocation strategy. ◦ We may need additional financing, or our business expansion plans may be significantly limited. ◦ There is substantial competition in the nightclub entertainment industry, which may affect our ability to operate profitably or acquire additional clubs. ◦ The adult entertainment industry is extremely volatile. ◦ Private advocacy group actions targeted at the kind of adult entertainment we offer could result in limitations and our inability to operate in certain locations and negatively impact our business. ◦ We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business. ◦ We are exposed to risks related to cyber security and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and employees or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs and litigation. ◦ Our acquisitions may result in disruptions in our business and diversion of management’s attention. ◦ The impact of new club or restaurant openings could result in fluctuations in our financial performance. ◦ Our ability to grow sales through delivery orders is uncertain. ◦ We incur significant costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives. ◦ We have identified material weaknesses in our internal control over financial reporting. ◦ We may have uninsured risks in excess of our insurance coverage or self-insurance. ◦ We are subject to increasing legal complexity and could be party to litigation that could adversely affect us. ◦ Our previous liability insurer may be unable to provide coverage to us and our subsidiaries. ◦ The protection provided by our service marks is limited. ◦ We are dependent on key personnel. ◦ 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. 9 Table of Contents ◦ A failure to maintain food safety throughout the supply chain and food-borne illness concerns may have an adverse effect on our business. ◦ Our venture, expansion, and renovation projects may face significant inherent risks. ◦ Other risk factors may adversely affect our financial performance.
A summary of our risk factors is as follows: Risks related to our business ◦ We may deviate from our present capital allocation strategy. ◦ We may need additional financing, or our business expansion plans may be significantly limited. ◦ There is substantial competition in the nightclub entertainment industry, which may affect our ability to operate profitably or acquire additional clubs. ◦ The adult entertainment industry is extremely volatile. ◦ Private advocacy group actions targeted at the kind of adult entertainment we offer could result in limitations and our inability to operate in certain locations and negatively impact our business. ◦ We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business. ◦ We are exposed to risks related to cyber security and protection of confidential information, and failure to protect the integrity and security of payment card or individually identifiable information of our guests and employees or confidential and proprietary information of the Company could damage our reputation and expose us to loss of revenues, increased costs and litigation. ◦ Our acquisitions may result in disruptions in our business and diversion of management’s attention. ◦ The impact of new club or restaurant openings could result in fluctuations in our financial performance. ◦ Our ability to grow sales through delivery orders is uncertain. ◦ We incur significant costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives. ◦ We have identified material weaknesses in our internal control over financial reporting. ◦ We may have uninsured risks in excess of our insurance coverage or self-insurance. ◦ We are subject to increasing legal complexity and could be party to litigation that could adversely affect us. ◦ Our previous liability insurer may be unable to provide coverage to us and our subsidiaries. ◦ The protection provided by our service marks is limited. ◦ We are dependent on key personnel. ◦ 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. ◦ A failure to maintain food safety throughout the supply chain and food-borne illness concerns may have an adverse effect on our business. 10 Table of Contents ◦ Our venture, expansion, and renovation projects may face significant inherent risks. ◦ Other risk factors may adversely affect our financial performance.
Risk related to our common stock ◦ We must continue to meet NASDAQ Global Market Continued Listing Requirements, or we risk delisting. ◦ 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. ◦ Our quarterly operating results may fluctuate and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price. ◦ Anti-takeover effects of the issuance of our preferred stock could adversely affect our common stock. ◦ Future sales or the perception of future sales of a substantial amount of our common stock may depress our stock price. ◦ Our stock price has been volatile and may fluctuate in the future. ◦ Cumulative voting is not available to our stockholders. ◦ Our directors and officers have limited liability and have rights to indemnification. 10 Table of Contents Details of our risk factors are as follows: Risks related to our business We may deviate from our present capital allocation strategy.
Risk related to our common stock ◦ We must continue to meet NASDAQ Global Market Continued Listing Requirements, or we risk delisting. ◦ 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. ◦ Our quarterly operating results may fluctuate and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price. ◦ Anti-takeover effects of the issuance of our preferred stock could adversely affect our common stock. ◦ Future sales or the perception of future sales of a substantial amount of our common stock may depress our stock price. ◦ Our stock price has been volatile and may fluctuate in the future. ◦ Cumulative voting is not available to our stockholders. ◦ Our directors and officers have limited liability and have rights to indemnification. 11 Table of Contents Details of our risk factors are as follows: Risks related to our business We may deviate from our present capital allocation strategy.
Inconsistent standards imposed by governmental authorities can adversely affect our business and increase our exposure to litigation which could result in significant judgments, including punitive and liquidated damages, and injunctive relief. 14 Table of Contents Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for an illness or injury they suffered as a result of a visit to our clubs or restaurants, or that we have problems with food quality or operations.
Inconsistent standards imposed by governmental authorities can adversely affect our business and increase our exposure to litigation which could result in significant judgments, including punitive and liquidated damages, and injunctive relief. 15 Table of Contents Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for an illness or injury they suffered as a result of a visit to our clubs or restaurants, or that we have problems with food quality or operations.
In addition to possibly limiting our operations and financing options, negative publicity campaigns, lawsuits and boycotts could negatively affect our businesses and cause additional financial harm by discouraging investors from investing in our securities or requiring that we incur significant expenditures to defend our business. 11 Table of Contents We rely heavily on information technology in our operations and any material failure, weakness, interruption, or breach of security could prevent us from effectively operating our business.
In addition to possibly limiting our operations and financing options, negative publicity campaigns, lawsuits and boycotts could negatively affect our businesses and cause additional financial harm by discouraging investors from investing in our securities or requiring that we incur significant expenditures to defend our business. 12 Table of Contents We rely heavily on information technology in our operations and any material failure, weakness, interruption, or breach of security could prevent us from effectively operating our business.
Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014. 15 Table of Contents 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.
Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014. 16 Table of Contents 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.
Our liquidity position is, in part, dependent upon our ability to borrow funds from financial institutions and/or private individuals. Certain of our debts have financial covenants that require us to maintain certain operating income to debt service ratios. As of September 30, 2024, we were in compliance with all covenants.
Our liquidity position is, in part, dependent upon our ability to borrow funds from financial institutions and/or private individuals. Certain of our debts have financial covenants that require us to maintain certain operating income to debt service ratios. As of September 30, 2025, we were in compliance with all covenants.
In performing this evaluation and testing, both our management and our independent registered public accounting firm concluded that our internal control over financial reporting is not effective as of September 30, 2024. We are, however, addressing this issue and remediating our material weaknesses.
In performing this evaluation and testing, both our management and our independent registered public accounting firm concluded that our internal control over financial reporting is not effective as of September 30, 2025. We are, however, addressing this issue and remediating our material weaknesses.
A failure to comply with the financial covenants under our credit facility or obtain waivers would give rise to an event of default under the terms of certain of our debts, allowing the lenders to accelerate repayment of any outstanding debt. 18 Table of Contents We have recorded impairment charges in current and past periods and may record additional impairment charges in future periods.
A failure to comply with the financial covenants under our credit facility or obtain waivers would give rise to an event of default under the terms of certain of our debts, allowing the lenders to accelerate repayment of any outstanding debt. We have recorded impairment charges in current and past periods and may record additional impairment charges in future periods.
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. 13 Table of Contents We have identified material weaknesses in our internal control over financial reporting.
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.
Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations. 17 Table of Contents Other risk factors may adversely affect our financial performance.
Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations. Other risk factors may adversely affect our financial performance.
We have experienced and may continue to experience challenges in hiring and retaining restaurant and club employees and in maintaining full restaurant 16 Table of Contents 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.
Accordingly, the holder or holders of a majority of the outstanding shares of our common stock may elect all of our directors. 21 Table of Contents Our directors and officers have limited liability and have rights to indemnification.
Accordingly, the holder or holders of a majority of the outstanding shares of our common stock may elect all of our directors. Our directors and officers have limited liability and have rights to indemnification.
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 14 Table of Contents 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.
In that event, the price of our common stock would likely decrease. Anti-takeover effects of the issuance of our preferred stock could adversely affect our common stock.
In that event, the price of our common stock would likely decrease. 21 Table of Contents Anti-takeover effects of the issuance of our preferred stock could adversely affect our common stock.
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.
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 factors.
Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September with the strongest operating results occurring from October through March. As a result, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly as a result of seasonality and the factors discussed above.
Historically, we have experienced reduced revenues from April through September with the strongest operating results occurring from October through March. As a result, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly as a result of seasonality and the factors discussed above.
Our current and future projects could also experience: • delays and significant cost increases; • delays in obtaining or inability to obtain necessary permits, licenses and approvals; • lack of sufficient, or delays in the availability of, financing; • shortages of materials; • shortages of skilled labor, work stoppages or labor disputes; • poor performance or nonperformance by any third parties on whom we place reliance; • unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems, including defective plans and specifications; • weather interference, floods, fires or other casualty losses; and • COVID-19 related delays.
Our current and future projects could also experience: • delays and significant cost increases; • delays in obtaining or inability to obtain necessary permits, licenses and approvals; • lack of sufficient, or delays in the availability of, financing; • shortages of materials; • shortages of skilled labor, work stoppages or labor disputes; • poor performance or nonperformance by any third parties on whom we place reliance; • unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems, including defective plans and specifications; • weather interference, floods, fires or other casualty losses; and 18 Table of Contents The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons.
As of September 30, 2024, we have 1 remaining unresolved claim out of the original 71 claims. The protection provided by our service marks is limited.
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.
We have made and may continue to make acquisitions of complementary nightclubs, restaurants or related operations. Any acquisitions will require the integration of the operations, products and personnel of the acquired businesses and the training and motivation of these individuals.
Our acquisitions may result in disruptions in our business and diversion of management’s attention. We have made and may continue to make acquisitions of complementary nightclubs, restaurants or related operations. Any acquisitions will require the integration of the operations, products and personnel of the acquired businesses and the training and motivation of these individuals.
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. ◦ 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.
Risks related to general macroeconomic and safety conditions ◦ 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. ◦ 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.
We have added certain preventive measures to reduce cyber risks. However, we cannot provide assurance that our security frameworks and measures will be successful in preventing future significant cyber-attacks or data loss. Our acquisitions may result in disruptions in our business and diversion of management’s attention.
We have added certain preventive measures to reduce cyber risks. However, we cannot provide assurance that our security frameworks and measures will be successful in preventing future significant cyber-attacks or data loss.
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.
We have identified material weaknesses in our internal control over financial reporting. 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.
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.
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.
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 identified material weaknesses related to (1) ineffective design and operation of controls over certain information technology general controls, including change management and vendor management controls; (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.
Accordingly, sales achieved by new or reconcepted locations may not be indicative of future operating results. Additionally, we incur substantial pre-opening expenses each time we open a new establishment, which expenses may be higher than anticipated.
New clubs and restaurants typically encounter higher customer traffic and sales in their initial months, which may decrease over time. Accordingly, sales achieved by new or reconcepted locations may not be indicative of future operating results. Additionally, we incur substantial pre-opening expenses each time we open a new establishment, which expenses may be higher than anticipated.
We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us.
Many of these costs can increase over time as the project is built to completion. We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us.
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.
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.
The inclusion of these provisions in the Articles may have the effect of reducing the likelihood of derivative litigation against directors and officers and may discourage or deter stockholders or management from bringing a lawsuit against directors and officers for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders.
The inclusion of these provisions in the Articles may have the effect of reducing the likelihood of derivative litigation against directors and officers and may discourage or deter stockholders or management from bringing a lawsuit against directors and officers for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders. 22 Table of Contents The Articles provide for the indemnification of our officers and directors, and the advancement to them of expenses in connection with any proceedings and claims, to the fullest extent permitted by Texas law.
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. 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.
There can be no assurance that any of our key personnel will continue to be employed by us. 17 Table of Contents 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.
The loss of the intellectual property rights owned or claimed by us could have a material adverse effect on our business. 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. Mr.
The loss of the intellectual property rights owned or claimed by us could have a material adverse effect on our business. We are dependent on key personnel. Our future success is dependent, in a large part, on retaining the services of individuals who possess comprehensive knowledge of our industry.
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.
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.
Langan possesses a unique and comprehensive knowledge of our industry. While Mr. 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. Mr.
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.
Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these costs can increase over time as the project is built to completion.
Actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors.
We are subject to risks associated with activities or conduct at our nightclubs that are illegal or violate the terms of necessary business licenses. Some of our nightclubs operate under licenses for sexually oriented businesses and are afforded some protection under the First Amendment to the U.S. Constitution.
Some of our nightclubs operate under licenses for sexually oriented businesses and are afforded some protection under the First Amendment to the U.S. Constitution.
It is not possible at this time to determine whether the Company will incur any fines, penalties, or liabilities in connection with the investigation.
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.
Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose customers. 20 Table of Contents Our quarterly operating results may fluctuate and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
Our quarterly operating results may fluctuate and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price. Our nightclub operations are affected by seasonal factors.
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.
Risks related to general macroeconomic and safety conditions 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.
However, such policies, no matter how well designed and enforced, can provide only reasonable, not absolute, assurance that the policies’ objectives are being achieved. Because of the inherent limitations in all control systems and policies, there can be no assurance that our policies will prevent deliberate acts by persons attempting to violate or circumvent them.
Because of the inherent limitations in all control systems and policies, there can be no assurance that our policies will prevent deliberate acts by persons attempting to violate or circumvent them. Notwithstanding the foregoing limitations, management believes that our policies are reasonably effective in achieving their purposes.
In all states where we operate, management believes we are in compliance with applicable city, county, state or other local laws governing the sale of alcohol. 19 Table of Contents Activities or conduct at our nightclubs may cause us to lose necessary business licenses, expose us to liability, or result in adverse publicity, which may increase our costs and divert management’s attention from our business.
Activities or conduct at our nightclubs may cause us to lose necessary business licenses, expose us to liability, or result in adverse publicity, which may increase our costs and divert management’s attention from our business. We are subject to risks associated with activities or conduct at our nightclubs that are illegal or violate the terms of necessary business licenses.
In such case, our shareholders’ ability to trade or obtain quotations of the market value of shares of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities.
If our securities are ever delisted from NASDAQ, they may trade on the over-the-counter market, which may be a less liquid market. In such case, our shareholders’ ability to trade or obtain quotations of the market value of shares of our common stock would be severely limited because of lower trading volumes and transaction delays.
Notwithstanding the foregoing limitations, management believes that our policies are reasonably effective in achieving their purposes. Risk related to our common stock We must continue to meet NASDAQ Global Market Continued Listing Requirements, or we risk delisting. Our securities are currently listed for trading on the NASDAQ Global Market.
Risk related to our common stock We must continue to meet NASDAQ Global Market Continued Listing Requirements, or we risk delisting. Our securities are currently listed for trading on the NASDAQ Global Market. We must continue to satisfy NASDAQ’s continued listing requirements or risk delisting which would have an adverse effect on our business.
Performance of any new club or restaurant location will usually differ from its originally targeted performance due to a variety of factors, and these differences may be material. New clubs and restaurants typically encounter higher customer traffic and sales in their initial months, which may decrease over time.
The impact of new club or restaurant openings could result in fluctuations in our financial performance. Performance of any new club or restaurant location will usually differ from its originally targeted performance due to a variety of factors, and these differences may be material.
If management is unable to fully integrate acquired business, products, or persons with existing operations, we may not receive the benefits of the acquisitions, and our revenues and stock trading price may decrease. 12 Table of Contents The impact of new club or restaurant openings could result in fluctuations in our financial performance.
In addition, our profitability may suffer because of acquisition-related costs or amortization, or impairment costs for acquired goodwill and other intangible assets. If management is unable to fully integrate acquired business, products, or persons with existing operations, we may not receive the benefits of the acquisitions, and our revenues and stock trading price may decrease.
The temporary or permanent suspension or revocations of any such permits would have a material adverse effect on our revenues, financial condition and results of operations.
The temporary or permanent suspension or revocations of any such permits would have a material adverse effect on our revenues, financial condition and results of operations. In all states where we operate, management believes we are in compliance with applicable city, county, state or other local laws governing the sale of alcohol.
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.
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.
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.
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. 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.
Illegal activities or conduct at any of our nightclubs may result in negative publicity or litigation. Such consequences may increase our cost of doing business, divert management’s attention from our business and make an investment in our securities unattractive to current and potential investors, thereby lowering our profitability and our stock price.
Such consequences may increase our cost of doing business, divert management’s attention from our business and make an investment in our securities unattractive to current and potential investors, thereby lowering our profitability and our stock price. 20 Table of Contents We have developed comprehensive policies aimed at ensuring that the operation of each of our nightclubs is conducted in conformance with local, state and federal laws.
We have developed comprehensive policies aimed at ensuring that the operation of each of our nightclubs is conducted in conformance with local, state and federal laws. We have a “no tolerance” policy on illegal drug use in or around our facilities. We continually monitor the actions of entertainers, waitresses and customers to ensure that proper behavior standards are met.
We have a “no tolerance” policy on illegal drug use in or around our facilities. We continually monitor the actions of entertainers, waitresses and customers to ensure that proper behavior standards are met. However, such policies, no matter how well designed and enforced, can provide only reasonable, not absolute, assurance that the policies’ objectives are being achieved.
However, we still carry at least the minimum insurance coverage where it is required by law for licensing requirements.
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.
The Articles provide for the indemnification of our officers and directors, and the advancement to them of expenses in connection with any proceedings and claims, to the fullest extent permitted by Texas law. The Articles include related provisions meant to facilitate the indemnitee’s receipt of such benefits.
The Articles include related provisions meant to facilitate the indemnitee’s receipt of such benefits.
The harm may be immediate without affording us an opportunity for redress or correction.
The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose customers.
Removed
In addition, our profitability may suffer because of acquisition-related costs or amortization, or impairment costs for acquired goodwill and other intangible assets.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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. Our previous liability insurer may be unable to provide coverage to us and our subsidiaries.
Added
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.
Removed
Chhay possesses thorough familiarity with our accounting system and how it affects our operations. Mr. 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. Chhay. Although Messrs.
Added
Additionally, a significant theft, loss or misappropriation of, or access to, guests’ or other proprietary data or other breach 13 Table of Contents 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.
Removed
The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons. Actual costs and construction periods for any of our projects can differ significantly from initial expectations.
Added
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.
Removed
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.
Added
(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).
Removed
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.
Added
The indictment alleges that the defendants committed conspiracy, bribery, criminal tax fraud, and offering a false instrument for filing.
Removed
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.
Added
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.
Removed
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.
Added
The Company and its subsidiaries changed insurance companies on that date.
Removed
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.
Added
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.
Removed
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.
Added
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+0 added−0 removed12 unchanged
Biggest changeWe have an information technology team, led by our director of information technology, that is responsible for implementing and maintaining cybersecurity and data protection practices at the Company in close coordination with our senior management team.
Biggest changeWe have an information technology team, led by our Director of Information Technology, that is responsible for implementing and maintaining cybersecurity and data protection practices at the Company in close coordination with our senior management team. Our Director of Information Technology has more than 20 years of extensive work experience in technology, business systems, and operations.
These updates include matters such as ongoing changes in our external and internal cyber threat landscape, new technology trends and regulatory developments, evolving internal policies and practices used to manage and mitigate cyber and technology-related risks, and trends in various metrics that are used to help assess our overall cybersecurity program effectiveness. 23 Table of Contents
These updates include matters such as ongoing changes in our external and internal cyber threat landscape, new technology trends and regulatory developments, evolving internal policies and practices used to manage and mitigate cyber and technology-related risks, and trends in various metrics that are used to help assess our overall cybersecurity program effectiveness. 24 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

7 edited+0 added−1 removed1 unchanged
Biggest changeLouis, IL 2022 (1) PT's Showclub, Indianapolis, IN 2022 Rick's Cabaret, Raleigh, NC 2022 (1) Rick's Cabaret, Portland, ME 2022 PT's Showclub, Louisville, KY 2022 PT's Centerfold, Denver, CO 2022 Mansion Gentlemen's Club & Steakhouse, Newburgh, NY 2022 Bombshells, Arlington, TX 2022 Playmates Club, Miami, FL 2022 Cheetah Gentlemen's Club, Miami, FL 2022 PT's Showclub, Odessa, TX 2022 Heartbreakers Gentlemen's Club, Dickinson, TX 2023 Cherry Creek Food Hall, Denver, CO 2023 Baby Dolls, Dallas, TX 2023 Chicas Locas, Dallas, TX 2023 Chicas Locas, Arlington, TX 2023 Chicas Locas, Houston, TX 2023 Baby Dolls, Fort Worth, TX 2023 (2) PT's Centerfold, Lubbock, TX 2024 Bombshells, Stafford, TX 2024 (1) Leased location.
Biggest changeLouis, IL 2022 (1) PT's Showclub, Indianapolis, IN 2022 Rick's Cabaret, Raleigh, NC 2022 (1) Rick's Cabaret, Portland, ME 2022 PT's Showclub, Louisville, KY 2022 PT's Centerfold, Denver, CO 2022 Mansion Gentlemen's Club & Steakhouse, Newburgh, NY 2022 Bombshells, Arlington, TX 2022 Playmates Club, Miami, FL 2022 Cheetah Gentlemen's Club, Miami, FL 2022 PT's Showclub, Odessa, TX 2022 Heartbreakers Gentlemen's Club, Dickinson, TX 2023 Baby Dolls, Dallas, TX 2023 Chicas Locas, Dallas, TX 2023 Chicas Locas, Arlington, TX 2023 Chicas Locas, Houston, TX 2023 Baby Dolls, Fort Worth, TX 2023 (2) PT's Centerfold, Lubbock, TX 2024 Bombshells, Stafford, TX 2024 Bombshells, Denver, CO 2025 Flight Club, Inkster, MI 2025 Platinum West, West Columbia, SC 2025 Platinum Plus, Allentown, PA 2025 (1) Rick's Cabaret, Central City, CO 2025 Bombshells, Lubbock, TX 2025 (1) Leased location.
Eight of our owned properties are in locations where we previously operated clubs or are adjacent to acquired clubs, but now lease the buildings to third parties. Twenty two are non-income-producing properties for corporate use (including our corporate office) or future club or restaurant locations, or may be offered for sale in the future.
Eight of our owned properties are in locations where we previously operated clubs or are adjacent to acquired clubs, but now lease the buildings to third parties. Twenty are non-income-producing properties for corporate use (including our corporate office) or future club or restaurant locations, or may be offered for sale in the future.
Thirteen of our clubs and restaurants are in leased locations. Our principal corporate office is located at 10737 Cutten Road, Houston, Texas 77066, consisting of a 21,000-square foot corporate office and an 18,000-square foot warehouse facility.
Eleven of our clubs and restaurants are in leased locations. Our principal corporate office is located at 10737 Cutten Road, Houston, Texas 77066, consisting of a 21,000-square foot corporate office and an 18,000-square foot warehouse facility.
Below is a list of locations we operated as of September 30, 2024: Name of Establishment Fiscal Year Acquired/Opened Club Onyx, Houston, TX 1995 Rick’s Cabaret, Minneapolis, MN 1998 XTC Cabaret, Austin, TX 1998 Scarlett's Cabaret, San Antonio, TX 1998 Rick’s Cabaret, New York City, NY 2005 Club Onyx, Charlotte, NC 2005 (1) Jaguars Club, San Antonio, TX 2006 Rick’s Cabaret, Fort Worth, TX 2007 Tootsie’s Cabaret, Miami Gardens, FL 2008 Dallas Showclub, Dallas, TX 2008 Rick’s Cabaret, Round Rock, TX 2009 Cabaret East, Fort Worth, TX 2010 Rick’s Cabaret DFW, Fort Worth, TX 2011 Downtown Cabaret, Minneapolis, MN 2011 Silver City Cabaret, Dallas, TX 2012 Jaguars Club, Odessa, TX 2012 Jaguars Club, Phoenix, AZ 2012 Jaguars Club, Longview, TX 2012 Baby Dolls, Tye, TX 2012 Jaguars Club, Edinburg, TX 2012 Chicas Locas, El Paso, TX 2012 Chicas Locas, Harlingen, TX 2012 Studio 80, Fort Worth, TX 2013 (1) Bombshells, Dallas, TX 2013 Scarlett's Cabaret, Sulphur, LA 2013 Temptations, Beaumont, TX 2013 Vivid Cabaret, New York, NY 2014 (1) Bombshells, Austin, TX 2014 (1) Rick’s Cabaret, Odessa, TX 2014 Bombshells, Spring, TX 2014 (1) Bombshells Fuqua, Houston, TX 2014 (1) Foxy’s Cabaret, Austin TX 2015 The Seville, Minneapolis, MN 2015 24 Table of Contents Hoops Cabaret and Sports Bar, New York, NY 2016 (1) Bombshells, Highway 290 Houston, TX 2017 (1) Scarlett’s Cabaret, Washington Park, IL 2017 Scarlett’s Cabaret, Miami, FL 2017 Bombshells, Pearland, TX 2018 Kappa Men’s Club, Kappa, IL 2018 Rick’s Cabaret, Chicago, IL 2019 Rick’s Cabaret, Pittsburgh, PA 2019 Bombshells I-10, Houston, TX 2019 Bombshells 249, Houston, TX 2019 Bombshells, Katy, TX 2020 Bombshells 59, Houston, TX 2020 Diamond Cabaret, Denver, CO 2022 (1) Scarlett's Cabaret, Denver, CO 2022 PT's Showclub, Denver, CO 2022 Rick's Cabaret, Denver, CO 2022 (1) Diamond Cabaret, St.
Below is a list of locations we operated as of September 30, 2025: Name of Establishment Fiscal Year Acquired/Opened Club Onyx, Houston, TX 1995 Rick’s Cabaret, Minneapolis, MN 1998 XTC Cabaret, Austin, TX 1998 Scarlett's Cabaret, San Antonio, TX 1998 Rick’s Cabaret, New York City, NY 2005 Club Onyx, Charlotte, NC 2005 (1) Jaguars Club, San Antonio, TX 2006 Rick’s Cabaret, Fort Worth, TX 2007 Tootsie’s Cabaret, Miami Gardens, FL 2008 Dallas Showclub, Dallas, TX 2008 Rick’s Cabaret, Round Rock, TX 2009 Cabaret East, Fort Worth, TX 2010 Rick’s Cabaret DFW, Fort Worth, TX 2011 Downtown Cabaret, Minneapolis, MN 2011 Silver City Cabaret, Dallas, TX 2012 Jaguars Club, Odessa, TX 2012 Jaguars Club, Phoenix, AZ 2012 Jaguars Club, Longview, TX 2012 Baby Dolls, Tye, TX 2012 Jaguars Club, Edinburg, TX 2012 (3) Chicas Locas, El Paso, TX 2012 (3) Studio 80, Fort Worth, TX 2013 (1) Bombshells, Dallas, TX 2013 Scarlett's Cabaret, Sulphur, LA 2013 Temptations, Beaumont, TX 2013 Vivid Cabaret, New York, NY 2014 (1) Rick’s Cabaret, Odessa, TX 2014 Foxy’s Cabaret, Austin TX 2015 The Seville, Minneapolis, MN 2015 Hoops Cabaret and Sports Bar, New York, NY 2016 (1) Bombshells, Highway 290 Houston, TX 2017 (1) Scarlett’s Cabaret, Washington Park, IL 2017 Scarlett’s Cabaret, Miami, FL 2017 Bombshells, Pearland, TX 2018 25 Table of Contents Name of Establishment Fiscal Year Acquired/Opened Kappa Men’s Club, Kappa, IL 2018 Rick’s Cabaret, Chicago, IL 2019 Rick’s Cabaret, Pittsburgh, PA 2019 Bombshells I-10, Houston, TX 2019 Bombshells 249, Houston, TX 2019 Bombshells, Katy, TX 2020 Bombshells 59, Houston, TX 2020 Diamond Cabaret, Denver, CO 2022 (1) Scarlett's Cabaret, Denver, CO 2022 PT's Showclub, Denver, CO 2022 Rick's Cabaret, Denver, CO 2022 (1) Diamond Cabaret, St.
Item 2. PROPERTIES. As of September 30, 2024, we own 87 real estate properties. On 57 of these properties, we operate clubs or restaurants, including those temporarily closed. We lease multiple other properties to third-party tenants.
Item 2. PROPERTIES. As of September 30, 2025, we own 88 real estate properties. On 60 of these properties, we operate clubs or restaurants, including those temporarily closed. We lease multiple other properties to third-party tenants.
(2) Temporarily closed due to fire. Our property leases are typically for a fixed rental rate with contingent rent for certain locations. The lease terms generally have initial terms of 10 to 20 years with renewal terms of 5 to 20 years.
(2) Temporarily closed due to fire. (3) Closed or sold subsequent to September 30, 2025. 26 Table of Contents Our property leases are typically for a fixed rental rate with contingent rent for certain locations. The lease terms generally have initial terms of 10 to 20 years with renewal terms of 5 to 20 years.
At September 30, 2024, certain of the properties we own were collateral for mortgage debt amounting to approximately $151.1 million. We believe that our existing facilities, both owned and leased, are in good condition and adequate and suitable for the conduct of our business.
At September 30, 2025, certain of the properties we own were collateral for mortgage debt amounting to approximately $150.6 million. We believe that our existing facilities, both owned and leased, are in good condition and adequate and suitable for the conduct of our business. See related information in Notes 7 and 9 to our consolidated financial statements.
Removed
See related information in Notes 6 and 8 to our consolidated financial statements. 25 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS. See the “ Legal Matters ” section within Note 10 to our consolidated financial statements within this Annual Report on Form 10-K for the requirements of this Item, which section is incorporated herein by reference. Item 4. MINE SAFETY DISCLOSURES. Not applicable. 26 Table of Contents PART II
Biggest changeItem 3. LEGAL PROCEEDINGS. See the “Legal Matters” section within Note 11 to our consolidated financial statements within this Annual Report on Form 10-K for the requirements of this Item, which section is incorporated herein by reference. Item 4. MINE SAFETY DISCLOSURES. Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBelow are our historical dividend payments: Quarterly Dividend per Share Second quarter 2016 through third quarter 2019 $0.03 Fourth quarter 2019 $0.04 First quarter 2020 $0.03 Second quarter 2020 $0.04 Third quarter 2020 $0.03 Fourth quarter 2020 through first quarter 2022 $0.04 Second quarter 2022 through first quarter 2023 $0.05 Second quarter 2023 though third quarter 2024 $0.06 Fourth quarter 2024 through current $0.07 During fiscal 2024, 2023, and 2022, we paid cash dividends totaling $2.3 million, $2.1 million, and $1.8 million, respectively. 27 Table of Contents Purchases of Equity Securities by the Issuer Our share repurchase activity during the three months ended September 30, 2024 was as follows: Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) (1) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs July 1-31, 2024 130,244 $ 44.85 130,244 $ 23,025,567 August 1-31, 2024 21,895 $ 45.23 21,895 $ 22,035,349 September 1-30, 2024 22,651 $ 44.16 22,651 $ 21,035,109 174,790 174,790 (1) Prices include any commissions and transaction costs, excluding excise tax on stock buybacks.
Biggest changeBelow are our historical dividend payments: Quarterly Dividend per Share Second quarter 2016 through third quarter 2019 $0.03 Fourth quarter 2019 $0.04 First quarter 2020 $0.03 Second quarter 2020 $0.04 Third quarter 2020 $0.03 Fourth quarter 2020 through first quarter 2022 $0.04 Second quarter 2022 through first quarter 2023 $0.05 Second quarter 2023 though third quarter 2024 $0.06 Fourth quarter 2024 through first quarter 2026 $0.07 Second quarter 2026 through current $0.08 During fiscal 2025, 2024, and 2023, we paid cash dividends totaling $2.5 million, $2.3 million, and $2.1 million, respectively. 28 Table of Contents Purchases of Equity Securities by the Issuer Our share repurchase activity during the three months ended September 30, 2025 was as follows: Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) (1) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs July 1-31, 2025 27,939 $ 38.96 27,939 $ 10,788,525 August 1-31, 2025 29,400 $ 36.44 29,400 $ 9,717,204 September 1-30, 2025 15,400 $ 35.22 15,400 $ 9,174,873 72,739 $ 37.15 72,739 (1) Prices include any commissions and transaction costs, excluding excise tax on stock buybacks.
Currently, we estimate that there are approximately 11,700 stockholders having beneficial ownership in street name. Transfer Agent and Registrar The transfer agent and registrar for our common stock is Colonial Stock Transfer Company, Inc., 66 Exchange Place, 1st Floor, Salt Lake City, Utah 84111. Dividend Policy Prior to 2016, we had not paid cash dividends on our common stock.
Currently, we estimate that there are approximately 11,400 stockholders having beneficial ownership in street name. Transfer Agent and Registrar The transfer agent and registrar for our common stock is Colonial Stock Transfer Company, Inc., 66 Exchange Place, 1st Floor, Salt Lake City, Utah 84111. Dividend Policy Prior to 2016, we had not paid cash dividends on our common stock.
The graph assumes a hypothetical investment of $100 on September 30, 2019 in each of our common stock and each of the indices, and that all dividends were reinvested. The measurement points utilized in the graph consist of the last trading day as of September 30 each year, representing the last day of our fiscal year.
The graph assumes a hypothetical investment of $100 on September 30, 2020, in each of our common stock and each of the indices, and that all dividends were reinvested. The measurement points utilized in the graph consist of the last trading day as of September 30 each year, representing the last day of our fiscal year.
See Note 1 1 to our consolidated financial statements for details. 28 Table of Contents Stock Performance Graph The following chart compares the five-year cumulative total stock performance of our common stock; the NASDAQ Composite Index (IXIC); the Russell 2000 Index (RUT); and the Dow Jones U.S. Restaurant & Bar Index (DJUSRU), our peer index.
See Note 13 to our consolidated financial statements for details. 29 Table of Contents Stock Performance Graph The following chart compares the five-year cumulative total stock performance of our common stock; the NASDAQ Composite Index (IXIC); the Russell 2000 Index (RUT); and the Dow Jones U.S. Restaurant & Bar Index (DJUSRU), our peer index.
Our common stock is quoted on the NASDAQ Global Market under the symbol “RICK.” Holders On December 13, 2024, the closing stock price for our common stock as reported by NASDAQ was $52.09, and there were 87 stockholders of record of our common stock (excluding broker held shares in “street name”).
Our common stock is quoted on the NASDAQ Global Market under the symbol “RICK.” Holders On March 13, 2026, the closing stock price for our common stock as reported by NASDAQ was $21.42, and there were 75 stockholders of record of our common stock (excluding broker held shares in “street name”).
(2) All shares were purchased pursuant to the repurchase plans approved by the board of directors. On July 9, 2024, the board of directors approved a $25.0 million increase in the Company's share repurchase program. Equity Compensation Plan Information On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”).
(2) All shares were purchased pursuant to the repurchase plans approved by the board of directors as disclosed in our most recent Annual Report on Form 10-K. Equity Compensation Plan Information On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”).
The historical stock performance presented below is not intended to and may not be indicative of future stock performance. 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 RCI Hospitality Holdings, Inc. $ 100.00 $ 98.88 $ 332.43 $ 315.45 $ 293.07 $ 215.37 NASDAQ Composite Index $ 100.00 $ 139.61 $ 180.62 $ 132.21 $ 165.26 $ 227.38 Dow Jones U.S.
The historical stock performance presented below is not intended to and may not be indicative of future stock performance. 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 9/30/2025 RCI Hospitality Holdings, Inc. $ 100.00 $ 336.19 $ 319.02 $ 296.39 $ 217.81 $ 149.49 NASDAQ Composite Index $ 100.00 $ 129.38 $ 94.70 $ 118.37 $ 162.88 $ 202.91 Dow Jones U.S.
Restaurant & Bar Index $ 100.00 $ 101.30 $ 124.18 $ 106.75 $ 121.60 $ 148.63 Russell 2000 Index $ 100.00 $ 98.97 $ 144.70 $ 109.28 $ 117.18 $ 146.38 Item 6. [RESERVED] 29 Table of Contents
Restaurant & Bar Index $ 100.00 $ 122.58 $ 105.38 $ 120.03 $ 146.72 $ 146.83 Russell 2000 Index $ 100.00 $ 146.21 $ 110.42 $ 118.40 $ 147.91 $ 161.60 Item 6. [RESERVED] 30 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables present our non-GAAP performance measures for the periods indicated (in thousands, except per share amounts and percentages): 2024 2023 2022 Reconciliation of GAAP net income to Adjusted EBITDA Net income attributable to RCIHH common stockholders $ 3,011 $ 29,246 $ 46,041 Income tax expense (benefit) (410) 6,846 14,071 Interest expense, net 16,197 15,538 11,539 Settlement of lawsuits 520 3,759 1,417 Impairment of assets 38,517 12,629 1,888 Gain on sale of businesses and assets (2,140) (682) (2,375) Depreciation and amortization 15,395 15,151 12,391 Gain on debt extinguishment — — (138) Gain on insurance (327) (77) (463) Stock-based compensation 1,882 2,588 2,353 Adjusted EBITDA $ 72,645 $ 84,998 $ 86,724 Reconciliation of GAAP net income to non-GAAP net income Net income attributable to RCIHH common stockholders $ 3,011 $ 29,246 $ 46,041 Amortization of intangibles 2,494 3,528 2,118 Settlement of lawsuits 520 3,759 1,417 Impairment of assets 38,517 12,629 1,888 Gain on sale of businesses and assets (2,140) (682) (2,375) Gain on debt extinguishment — — (138) Gain on insurance (327) (77) (463) Stock-based compensation 1,882 2,588 2,353 Change in deferred tax asset valuation allowance 143 (176) 343 Net income tax effect (410) (5,068) (729) Non-GAAP net income $ 43,690 $ 45,747 $ 50,455 45 Table of Contents 2024 2023 2022 Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share Diluted shares 9,250,245 9,335,983 9,383,445 GAAP diluted earnings per share $ 0.33 $ 3.13 $ 4.91 Amortization of intangibles 0.27 0.38 0.23 Settlement of lawsuits 0.06 0.40 0.15 Impairment of assets 4.16 1.35 0.20 Gain on sale of businesses and assets (0.23) (0.07) (0.25) Gain on debt extinguishment — — (0.01) Gain on insurance (0.04) (0.01) (0.05) Stock-based compensation 0.20 0.28 0.25 Change in deferred tax asset valuation allowance 0.02 (0.02) 0.04 Net income tax effect (0.04) (0.54) (0.08) Non-GAAP diluted earnings per share $ 4.72 $ 4.90 $ 5.38 Reconciliation of GAAP operating income to non-GAAP operating income Income from operations $ 18,805 $ 51,484 $ 71,459 Amortization of intangibles 2,494 3,528 2,118 Settlement of lawsuits 520 3,759 1,417 Impairment of assets 38,517 12,629 1,888 Gain on sale of businesses and assets (2,140) (682) (2,375) Gain on insurance (327) (77) (463) Stock-based compensation 1,882 2,588 2,353 Non-GAAP operating income $ 59,751 $ 73,229 $ 76,397 Reconciliation of GAAP operating margin to non-GAAP operating margin GAAP operating margin 6.4 % 17.5 % 26.7 % Amortization of intangibles 0.8 % 1.2 % 0.8 % Settlement of lawsuits 0.2 % 1.3 % 0.5 % Impairment of assets 13.0 % 4.3 % 0.7 % Gain on sale of businesses and assets (0.7) % (0.2) % (0.9) % Gain on insurance (0.1) % — % (0.2) % Stock-based compensation 0.6 % 0.9 % 0.9 % Non-GAAP operating margin 20.2 % 24.9 % 28.5 % The adjustments to reconcile net income attributable to RCIHH common stockholders to non-GAAP net income exclude the impact of adjustments related to noncontrolling interests, which is immaterial. 46 Table of Contents LIQUIDITY AND CAPITAL RESOURCES At September 30, 2024, our cash and cash equivalents were $32.4 million as compared to $21.0 million at September 30, 2023.
Biggest changeThe following tables present our non-GAAP performance measures for the periods indicated (in thousands, except per share amounts and percentages): 2025 2024 2023 Reconciliation of GAAP net income to Adjusted EBITDA Net income attributable to RCIHH common stockholders $ 10,811 $ 3,011 $ 29,246 Income tax expense (benefit) 4,609 (410) 6,846 Interest expense, net 15,787 16,197 15,538 Settlement of lawsuits 3,948 520 3,759 Impairment of assets 5,340 38,517 12,629 Gain on sale of businesses and assets (982) (2,140) (682) Depreciation and amortization 15,078 15,395 15,151 Gain on insurance (2,358) (327) (77) Gain on lease termination (979) — — Stock-based compensation 1,373 1,882 2,588 Adjusted EBITDA $ 52,627 $ 72,645 $ 84,998 Reconciliation of GAAP net income to non-GAAP net income Net income attributable to RCIHH common stockholders $ 10,811 $ 3,011 $ 29,246 Amortization of intangibles 2,362 2,494 3,528 Settlement of lawsuits 3,948 520 3,759 Impairment of assets 5,340 38,517 12,629 Gain on sale of businesses and assets (982) (2,140) (682) Gain on insurance (2,358) (327) (77) Gain on lease termination (979) — — Stock-based compensation 1,373 1,882 2,588 Change in deferred tax asset valuation allowance 64 143 (176) Net income tax effect (867) (410) (5,068) Non-GAAP net income $ 18,712 $ 43,690 $ 45,747 46 Table of Contents 2025 2024 2023 Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share Diluted shares 8,822,758 9,250,245 9,335,983 GAAP diluted earnings per share $ 1.23 $ 0.33 $ 3.13 Amortization of intangibles 0.27 0.27 0.38 Settlement of lawsuits 0.45 0.06 0.40 Impairment of assets 0.61 4.16 1.35 Gain on sale of businesses and assets (0.11) (0.23) (0.07) Gain on insurance (0.27) (0.04) (0.01) Gain on lease termination (0.11) — — Stock-based compensation 0.16 0.20 0.28 Change in deferred tax asset valuation allowance 0.01 0.02 (0.02) Net income tax effect (0.10) (0.04) (0.54) Non-GAAP diluted earnings per share $ 2.12 $ 4.72 $ 4.90 Reconciliation of GAAP operating income to non-GAAP operating income Income from operations $ 30,267 $ 18,805 $ 51,484 Amortization of intangibles 2,362 2,494 3,528 Settlement of lawsuits 3,948 520 3,759 Impairment of assets 5,340 38,517 12,629 Gain on sale of businesses and assets (982) (2,140) (682) Gain on insurance (2,358) (327) (77) Stock-based compensation 1,373 1,882 2,588 Non-GAAP operating income $ 39,950 $ 59,751 $ 73,229 Reconciliation of GAAP operating margin to non-GAAP operating margin GAAP operating margin 10.8 % 6.4 % 17.5 % Amortization of intangibles 0.8 % 0.8 % 1.2 % Settlement of lawsuits 1.4 % 0.2 % 1.3 % Impairment of assets 1.9 % 13.0 % 4.3 % Gain on sale of businesses and assets (0.4) % (0.7) % (0.2) % Gain on insurance (0.8) % (0.1) % — % Stock-based compensation 0.5 % 0.6 % 0.9 % Non-GAAP operating margin 14.3 % 20.2 % 24.9 % The adjustments to reconcile net income attributable to RCIHH common stockholders to non-GAAP net income exclude the impact of adjustments related to noncontrolling interests, which is immaterial. 47 Table of Contents LIQUIDITY AND CAPITAL RESOURCES At September 30, 2025, our cash and cash equivalents were $33.7 million as compared to $32.4 million at September 30, 2024.
The effective income tax rate for fiscal 2024 was also affected by the low pretax income that caused a high offsetting rate for tax credits, whose dollar value does not change based on pretax income. 43 Table of Contents Non-GAAP Financial Measures In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future.
The effective income tax rate for fiscal 2024 was also affected by the low pretax income that caused a high offsetting rate for tax credits, whose dollar value does not change based on pretax income. 44 Table of Contents Non-GAAP Financial Measures In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future.
Legal and Other Contingencies As mentioned in Item 3 – “Legal Proceedings” and in a more detailed discussion in Note 10 to our consolidated financial statements, we are involved in various suits and claims in the normal course of business. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable.
Legal and Other Contingencies As mentioned in Item 3 – “Legal Proceedings” and in a more detailed discussion in Note 11 to our consolidated financial statements, we are involved in various suits and claims in the normal course of business. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable.
Acquisition-related costs are expensed as incurred. 32 Table of Contents Stock-based Compensation We recognize expense for stock-based compensation awards, which is equal to the fair value of the awards at grant date, ratably in selling, general and administrative expenses in our consolidated statements of income over their requisite service period.
Acquisition-related costs are expensed as incurred. 33 Table of Contents Stock-based Compensation We recognize expense for stock-based compensation awards, which is equal to the fair value of the awards at grant date, ratably in selling, general and administrative expenses in our consolidated statements of income over their requisite service period.
The fair value is then compared to the carrying value and an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. We recorded impairment charges for tradenames amounting to $693,000 in 2024 related to one club, $0 in 2023, and $0 in 2022.
The fair value is then compared to the carrying value and an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. We recorded impairment charges for tradenames amounting to $0 in 2025, $693,000 in 2024 related to one club, and $0 in 2023.
Adjustment items are: (a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, (f) gain on debt extinguishment, (g) stock-based compensation, (h) the income tax effect of the above-described adjustments, and (i) change in deferred tax asset valuation allowance.
Adjustment items are: (a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, (f) gain on lease termination, (g) stock-based compensation, (h) the income tax effect of the above-described adjustments, and (i) change in deferred tax asset valuation allowance.
See page 34 above for the breakdown of percentages for each line item of consolidated cost of goods sold as it relates to the respective consolidated revenue line.
See page 36 above for the breakdown of percentages for each line item of consolidated cost of goods sold as it relates to the respective consolidated revenue line.
We believe that excluding and including such items help management and investors better understand our operating activities. 44 Table of Contents Adjusted EBITDA .
We believe that excluding and including such items help management and investors better understand our operating activities. 45 Table of Contents Adjusted EBITDA .
Total occupancy cost rate (total occupancy cost as a percentage of revenues) is shown in the table below. 2024 2023 2022 Lease 2.4 % 2.5 % 2.5 % Interest 5.6 % 5.4 % 4.5 % Total occupancy cost 8.0 % 7.9 % 7.0 % Income Taxes Income tax was approximately a $410,000 benefit in 2024, a $6.8 million expense in 2023, and a $14.1 million expense in 2022.
Total occupancy cost rate (total occupancy cost as a percentage of revenues) is shown in the table below. 2025 2024 2023 Lease 2.3 % 2.4 % 2.5 % Interest 5.9 % 5.6 % 5.4 % Total occupancy cost 8.1 % 8.0 % 7.9 % Income Taxes Income tax was approximately a $4.6 million expense in 2025, $410,000 benefit in 2024, and a $6.8 million expense in 2023.
We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense, (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) impairment of assets, (g) settlement of lawsuits, (h) gain on debt extinguishment, and (i) stock-based compensation.
We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) impairment of assets, (g) settlement of lawsuits, (h) gain on lease termination, and (i) stock-based compensation.
GAAP measures. 34 Table of Contents The following common size tables present a comparison of our results of operations as a percentage of total revenues for the three most recently completed fiscal years: 2024 2023 2022 Revenues Sales of alcoholic beverages 45.0 % 43.3 % 42.3 % Sales of food and merchandise 15.1 % 14.9 % 16.6 % Service revenues 33.3 % 35.3 % 35.1 % Other 6.6 % 6.5 % 6.0 % Total revenues 100.0 % 100.0 % 100.0 % Operating expenses Cost of goods sold Alcoholic beverages sold 18.2 % 18.3 % 17.8 % Food and merchandise sold 36.7 % 35.1 % 35.1 % Service and other 0.3 % 0.2 % 0.3 % Total cost of goods sold (exclusive of items shown separately below) 13.9 % 13.3 % 13.5 % Salaries and wages 28.5 % 27.1 % 25.6 % Selling, general and administrative 33.7 % 31.7 % 29.5 % Depreciation and amortization 5.2 % 5.2 % 4.6 % Impairments and other charges, net 12.4 % 5.3 % 0.2 % Total operating expenses 93.6 % 82.5 % 73.3 % Income from operations 6.4 % 17.5 % 26.7 % Other income (expenses) Interest expense (5.6) % (5.4) % (4.5) % Interest income 0.2 % 0.1 % 0.2 % Non-operating gains, net — % — % 0.1 % Income before income taxes 0.9 % 12.2 % 22.5 % Income tax expense (benefit) (0.1) % 2.3 % 5.3 % Net income 1.0 % 9.9 % 17.2 % † Percentages may not foot due to rounding in this and in all of the succeeding tables presenting percentages in this report.
GAAP measures. 35 Table of Contents The following common size income statements present a comparison of our consolidated results of operations as a percentage of total revenues for the three most recently completed fiscal years: 2025 2024 2023 Revenues Sales of alcoholic beverages 43.7 % 45.0 % 43.3 % Sales of food and merchandise 14.3 % 15.1 % 14.9 % Service revenues 34.7 % 33.3 % 35.3 % Other 7.3 % 6.6 % 6.5 % Total revenues 100.0 % 100.0 % 100.0 % Operating expenses Cost of goods sold Alcoholic beverages sold 18.1 % 18.2 % 18.3 % Food and merchandise sold 35.3 % 36.7 % 35.1 % Service and other 0.3 % 0.3 % 0.2 % Total cost of goods sold (exclusive of items shown separately below) 13.1 % 13.9 % 13.3 % Salaries and wages 29.9 % 28.5 % 27.1 % Selling, general, and administrative 38.6 % 33.7 % 31.7 % Depreciation and amortization 5.4 % 5.2 % 5.2 % Impairments and other charges, net 2.1 % 12.4 % 5.3 % Total operating expenses 89.2 % 93.6 % 82.5 % Income from operations 10.8 % 6.4 % 17.5 % Other income (expenses) Interest expense (5.9) % (5.6) % (5.4) % Interest income 0.2 % 0.2 % 0.1 % Non-operating gains, net 0.3 % — % — % Income before income taxes 5.5 % 0.9 % 12.2 % Income tax expense (benefit) 1.6 % (0.1) % 2.3 % Net income 3.9 % 1.0 % 9.9 % † Percentages may not foot due to rounding in this and in all of the succeeding tables presenting percentages in this report.
Cost of goods sold . Cost of goods sold includes cost of alcoholic and non-alcoholic beverages, food, cigars and cigarettes, merchandise, media printing/binding, and Drink Robust. As a percentage of consolidated revenues, consolidated cost of goods sold was 13.9%, 13.3%, and 13.5% for fiscal 2024, 2023, and 2022, respectively.
Cost of goods sold . Cost of goods sold includes cost of alcoholic and non-alcoholic beverages, food, cigars and cigarettes, merchandise, media printing/binding, and Drink Robust. As a percentage of consolidated revenues, consolidated cost of goods sold was 13.1%, 13.9%, and 13.3% for fiscal 2025, 2024, and 2023, respectively.
For the Nightclubs segment, cost of goods sold was 11.7%, 11.1%, and 10.5% for fiscal 2024, 2023, and 2022, respectively, which was primarily caused by shifts in sales mix among the three fiscal years. Bombshells cost of goods sold was 24.1%, 22.4%, and 23.5% for fiscal 2024, 2023, and 2022, respectively, which was mainly driven by food cost inflation.
For the Nightclubs segment, cost of goods sold was 11.4%, 11.7%, and 11.1% for fiscal 2025, 2024, and 2023, respectively, which was primarily caused by shifts in sales mix among the three fiscal years. Bombshells cost of goods sold was 23.9%, 24.1%, and 22.4% for fiscal 2025, 2024, and 2023, respectively, which was mainly driven by food cost inflation.
These nightclubs are in Houston, Austin, San Antonio, Dallas, Fort Worth, Beaumont, Longview, Harlingen, Edinburg, Tye, Lubbock, Round Rock, El Paso and Odessa, Texas; Denver, Colorado; Charlotte and Raleigh, North Carolina; Minneapolis, Minnesota; New York and Newburgh, New York; Miami Gardens, Pembroke Park and Miami, Florida; Pittsburgh, Pennsylvania; Phoenix, Arizona; Louisville, Kentucky; Portland, Maine; Indianapolis, Indiana; and Washington Park, Kappa, Sauget and Chicago, Illinois.
These nightclubs are in Houston, Austin, San Antonio, Dallas, Fort Worth, Beaumont, Longview, Harlingen, Edinburg, Tye, Lubbock, Round Rock, El Paso and Odessa, Texas; Central City and Denver, Colorado; Charlotte and Raleigh, North Carolina; Minneapolis, Minnesota; New York and Newburgh, New York; Miami Gardens, Pembroke Park and Miami, Florida; Pittsburgh and Allentown, Pennsylvania; Phoenix, Arizona; Louisville, Kentucky; Portland, Maine; Indianapolis, Indiana; Washington Park, Kappa, Sauget and Chicago, Illinois; Inkster, Michigan; and West Columbia, South Carolina.
We believe that we can borrow capital if needed but currently we do not have unused credit facilities so there can be no guarantee that additional liquidity will be readily available or available on favorable terms. We have not recently raised capital through the issuance of equity securities although we have used equity recently in our acquisitions.
We believe that we can borrow capital if needed but there can be no guarantee that additional liquidity will be readily available or available on favorable terms although we have unused credit facilities as of September 30, 2025. We have not recently raised capital through the issuance of equity securities although we have used equity recently in our acquisitions.
Media business revenues were $1.0 million, $1.1 million, and $1.2 million in fiscal 2024, 2023, and 2022, respectively. Operating Expenses Total operating expenses, as a percent of consolidated revenues, were 93.6%, 82.5%, and 73.3% for the fiscal year 2024, 2023, and 2022, respectively. Significant contributors to the change in operating expenses as a percent of revenues are explained below.
Media business revenues were $991,000, $1.0 million, and $1.1 million in fiscal 2025, 2024, and 2023, respectively. Operating Expenses Total operating expenses, as a percent of consolidated revenues, were 89.2%, 93.6%, and 82.5% for the fiscal year 2025, 2024, and 2023, respectively. Significant contributors to the change in operating expenses as a percent of revenues are explained below.
Included in other revenues of the Nightclubs segment is real estate rental revenue amounting to $1.7 million in 2024, $1.8 million in 2023, and $1.6 million in 2022. 37 Table of Contents Bombshells segment revenues.
Included in other revenues of the Nightclubs segment is real estate rental revenue amounting to $1.7 million in 2025, $1.7 million in 2024, and $1.8 million in 2023. 38 Table of Contents Bombshells segment revenues.
The increase in interest expense was primarily caused by the significantly higher average debt balance from borrowings to finance our acquisitions in 2023 and the additional interest expense from construction loans in 2024 related to build-out projects.
The decrease in interest expense in 2025 was primarily caused by a lower average year-over-year debt balance. The increase in interest expense was primarily caused by the significantly higher average debt balance from borrowings to finance our acquisitions in 2023 and the additional interest expense from construction loans in 2024 related to build-out projects.
Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 0.0%, 20.6%, and 22.8% effective tax rate of the pre-tax non-GAAP income before taxes for 2024, 2023, and 2022, respectively, and the GAAP income tax expense.
Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 22.7%, 0.0%, and 20.6% effective tax rate of the non-GAAP income before taxes for 2025, 2024, and 2023, respectively, and the GAAP income tax expense (benefit).
Other revenues included revenues from Drink Robust in all three fiscal years presented. Drink Robust sales were $131,000, $145,000, and $201,000 in fiscal 2024, 2023, and 2022, respectively, which exclude intercompany sales to Nightclubs and Bombshells units amounting to $270,000, $254,000, and $261,000 in fiscal 2024, 2023, and 2022, respectively.
Other segment revenues. Other revenues included revenues from Drink Robust in all three fiscal years presented. Drink Robust sales were $129,000, $131,000, and $145,000 in fiscal 2025, 2024, and 2023, respectively, which exclude intercompany sales to Nightclubs and Bombshells units amounting to $260,000, $270,000, and $254,000 in fiscal 2025, 2024, and 2023, respectively.
We recorded impairment charges for SOB licenses amounting to $11.8 million in 2024 related to seven clubs, $6.5 million in 2023 related to eight clubs, and $293,000 in 2022 related to one club. For indefinite-lived tradename, we determine fair value by using the relief from royalty method.
We recorded impairment charges for SOB licenses amounting to $3.8 million in 2025 related to six clubs, $11.8 million in 2024 related to seven clubs, and $6.5 million in 2023 related to eight clubs. For indefinite-lived tradename, we determine fair value by using the relief from royalty method.
Then starting in the second quarter of 2023 through the third quarter of 2024, we increased our quarterly dividends to $0.06 per share. We paid $0.07 per share in the fourth quarter of 2024. We expect annual dividend payments of $2.5 million in 2025 based on our current quarterly dividend rate.
Then starting in the fourth quarter of 2024 through the first quarter of 2026, we increased our quarterly dividends to $0.07 per share. In the second quarter of 2026, we increased our quarterly dividends to $0.08 per share. We expect annual dividend payments of $2.5 million in 2026 based on our current quarterly dividend rate.
In the next five years, we expect interest payments on our debts to range from $16.0 million in the early years to $9.0 million annually in the latter years for debts we owe as of September 30, 2024. See Note 1 7 for our operating lease payment schedule for the next five years and thereafter.
In the next five years, we expect interest payments on our debts to range from $15.0 million in the early years to $8.0 million annually in the latter years for debts we owe as of September 30, 2025. See Note 12 for our operating lease payment schedule for the next five years and thereafter.
Bombshells operating margin was (21.0)%, 11.7%, and 19.2% in 2024, 2023, and 2022, respectively. 41 Table of Contents Excluding certain items, non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).
Bombshells operating margin was 0.5%, (21.3)%, and 11.7% in 2025, 2024, and 2023, respectively. 42 Table of Contents Excluding certain items, non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).
The following table presents a summary of our net cash flows from operating, investing, and financing activities (in thousands): 2024 2023 2022 Operating $ 55,884 $ 59,130 $ 64,509 Investing (21,015) (64,824) (67,797) Financing (23,542) (9,263) 3,582 Net increase (decrease) in cash and cash equivalents $ 11,327 $ (14,957) $ 294 We require capital principally for the acquisition of new clubs, construction of new Bombshells, renovation of older units, and investments in technology.
The following table presents a summary of our net cash flows from operating, investing, and financing activities (in thousands): 2025 2024 2023 Operating $ 49,418 $ 55,884 $ 59,130 Investing (24,041) (21,015) (64,824) Financing (24,018) (23,542) (9,263) Net increase (decrease) in cash and cash equivalents $ 1,359 $ 11,327 $ (14,957) We require capital principally for the acquisition of new clubs, construction of new Bombshells, renovation of older units, and investments in technology.
We purchased shares of our common stock representing 442,639 shares, 34,086 shares, and 268,185 shares in 2024, 2023, and 2022, respectively. We paid quarterly dividends of $0.04 per share in the first quarter of 2022. In the second quarter of 2022 through the first quarter of 2023, we increased our quarterly dividends to $0.05 per share.
We purchased shares of our common stock representing 270,939 shares, 442,639 shares, and 34,086 shares in 2025, 2024, and 2023, respectively. We paid quarterly dividends of $0.05 per share in the first quarter of 2023. In the second quarter of 2023 through the third quarter of 2024, we increased our quarterly dividends to $0.06 per share.
We recognize goodwill impairment in the amount that the carrying value of the reporting unit exceeds the fair value of the reporting unit, not to exceed the amount of goodwill allocated to the reporting unit, based on the results of our Step 1 analysis.
We recognize goodwill impairment in the amount that the carrying value of the reporting unit exceeds the fair value of the reporting unit, not to exceed the amount of goodwill allocated to the reporting unit, based on the results of our Step 1 analysis. For the year ended September 30, 2025, we did not impair goodwill.
Salaries and wages as a percentage of segment revenue (except Corporate, which is based on consolidated revenues): 2024 2023 2022 Nightclubs 22.2 % 21.3 % 19.8 % Bombshells 29.0 % 26.8 % 24.3 % Other 49.1 % 45.8 % 41.6 % Corporate 5.0 % 4.6 % 4.6 % 28.5 % 27.1 % 25.6 % Bombshells and Other segment salaries and wages decreased in 2024 but as a percentage of revenue they increased due to their decrease in revenue.
Salaries and wages as a percentage of segment revenue (except Corporate, which is based on consolidated revenues): 2025 2024 2023 Nightclubs 23.5 % 22.2 % 21.3 % Bombshells 32.5 % 29.0 % 26.8 % Other 44.7 % 49.1 % 45.8 % Corporate 5.2 % 5.0 % 4.6 % 29.9 % 28.5 % 27.1 % Bombshells segment salaries and wages decreased in 2025 and 2024 but as a percentage of revenue it increased due to decrease in revenue.
Bombshells San Antonio was acquired from our franchisee in the second quarter of 2023. We also acquired a food hall in Greenwood Village, Colorado during the first quarter of 2023. We opened Bombshells Stafford in the first quarter of 2024 and sold Bombshells San Antonio in the fourth quarter of 2024. Other segment revenues.
We also acquired a food hall in Greenwood Village, Colorado, during the first quarter of 2023. We opened Bombshells Stafford in the first quarter of 2024 and sold Bombshells San Antonio in the fourth quarter of 2024.
As a percentage of revenues, consolidated salaries and wages were 28.5%, 27.1%, and 25.6% in 2024, 2023, and 2022, respectively, mainly due to sales trend and the impact of fixed salaries on change in sales. 38 Table of Contents By reportable segment, salaries and wages are broken down as follows (dollar amounts in thousands): 2024 Inc (Dec) 2023 Inc (Dec) 2022 Nightclubs $ 54,217 7.4 % $ 50,489 23.6 % $ 40,859 Bombshells 14,643 (2.0) % 14,949 2.5 % 14,585 Other 571 (5.5) % 604 0.5 % 601 Corporate 14,746 9.6 % 13,458 8.5 % 12,402 $ 84,177 5.9 % $ 79,500 16.1 % $ 68,447 Unit-level manager payroll is included in salaries and wages of each location, while payroll for regional manager and above are included in Corporate.
As a percentage of revenues, consolidated salaries and wages were 29.9%, 28.5%, and 27.1% in 2025, 2024, and 2023, respectively, mainly due to sales trend and the impact of fixed salaries on change in sales. 39 Table of Contents By reportable segment, salaries and wages are broken down as follows (dollar amounts in thousands): 2025 Inc (Dec) 2024 Inc (Dec) 2023 Nightclubs $ 56,969 5.1 % $ 54,217 7.4 % $ 50,489 Bombshells 11,636 (20.5) % 14,643 (2.0) % 14,949 Other 502 (12.1) % 571 (5.5) % 604 Corporate 14,558 (1.3) % 14,746 9.6 % 13,458 $ 83,665 (0.6) % $ 84,177 5.9 % $ 79,500 Unit-level manager payroll is included in salaries and wages of each location, while payroll for regional manager and above are included in Corporate.
We calculate same-store sales by comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells.
Segment-related discussions and analyses in the MD&A relate to amounts exclusive of intersegment items. Same-Store Sales. We calculate same-store sales by comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells.
See table below (in thousands): 2024 2023 2022 Net cash provided by operating activities $ 55,884 $ 59,130 $ 64,509 Less: Maintenance capital expenditures 7,463 5,954 5,598 Free cash flow $ 48,421 $ 53,176 $ 58,911 As a % of revenue 16.4 % 18.1 % 22.0 % We do not include total capital expenditures as a reduction from net cash flow from operating activities to arrive at free cash flow.
See table below (in thousands): 2025 2024 2023 Net cash provided by operating activities $ 49,418 $ 55,884 $ 59,130 Less: Maintenance capital expenditures 4,020 7,463 5,954 Free cash flow $ 45,398 $ 48,421 $ 53,176 As a % of revenue 16.2 % 16.4 % 18.1 % We only include maintenance capital expenditures as a reduction from net cash flow from operating activities to arrive at free cash flow.
During the third quarter of 2023, we impaired one property for $58,000 for its property and equipment and $1.0 million for its operating lease right-of-use asset before the club's permanent closure.
During the third quarter of 2023, we impaired one property for $58,000 for its property and equipment and $1.0 million for its operating lease right-of-use asset before the club's permanent closure. During the fourth quarter of 2023, we also recognized software impairments amounting to $814,000 related to two venture projects.
Our effective income tax rate was (15.7)% in 2024, 19.0% in 2023, and 23.4% in 2022.
Our effective income tax rate was 29.8% in 2025, (15.7)% in 2024, and 19.0% in 2023.
Percentage of revenue for individual cost of goods sold items pertains to their respective revenue line. 35 Table of Contents Below is a table presenting the changes in each line item of the income statement for the last three fiscal years (dollar amounts in thousands) Better (Worse) 2024 vs. 2023 2023 vs. 2022 Amount % Amount % Revenues Sales of alcoholic beverages $ 5,862 4.6 % $ 13,946 12.3 % Sales of food and merchandise 700 1.6 % (388) (0.9) % Service revenues (5,122) (4.9) % 9,689 10.3 % Other 374 2.0 % 2,923 18.1 % Total revenues 1,814 0.6 % 26,170 9.8 % Operating expenses Cost of goods sold Alcoholic beverages sold (937) (4.0) % (3,136) (15.6) % Food and merchandise sold (931) (6.0) % 108 0.7 % Service and other (115) (40.8) % 35 11.0 % Total cost of goods sold (exclusive of items shown separately below) (1,983) (5.1) % (2,993) (8.3) % Salaries and wages (4,677) (5.9) % (11,053) (16.1) % Selling, general and administrative (6,648) (7.1) % (14,177) (18.0) % Depreciation and amortization (244) (1.6) % (2,760) (22.3) % Impairments and other charges, net (20,941) (134.0) % (15,162) (3,246.7) % Total operating expenses (34,493) (14.2) % (46,145) (23.5) % Income from operations (32,679) (63.5) % (19,975) (28.0) % Other income/expenses Interest expense (753) (4.7) % (3,976) (33.3) % Interest income 94 24.2 % (23) (5.6) % Non-operating gains/losses, net — — % (211) (100.0) % Income/loss before income taxes (33,338) (92.7) % (24,185) (40.2) % Income tax expense/benefit 7,256 106.0 % 7,225 51.3 % Net income $ (26,082) (89.6) % $ (16,960) (36.8) % * Not meaningful.
Percentage of revenue for individual cost of goods sold items pertains to their respective revenue line. 36 Table of Contents Below is a table presenting the changes in each line item of the income statement for the last three fiscal years (dollar amounts in thousands): Better (Worse) 2025 vs. 2024 2024 vs. 2023 Amount % Amount % Revenues Sales of alcoholic beverages $ (11,000) (8.3) % $ 5,862 4.6 % Sales of food and merchandise (4,635) (10.4) % 700 1.6 % Service revenues (1,376) (1.4) % (5,122) (4.9) % Other 841 4.3 % 374 2.0 % Total revenues (16,170) (5.5) % 1,814 0.6 % Operating expenses Cost of goods sold Alcoholic beverages sold 2,085 8.6 % (937) (4.0) % Food and merchandise sold 2,242 13.7 % (931) (6.0) % Service and other 21 5.3 % (115) (40.8) % Total cost of goods sold (exclusive of items shown separately below) 4,348 10.6 % (1,983) (5.1) % Salaries and wages 512 0.6 % (4,677) (5.9) % Selling, general, and administrative (8,167) (8.2) % (6,648) (7.1) % Depreciation and amortization 317 2.1 % (244) (1.6) % Impairments and other charges, net 30,622 83.7 % (20,941) (134.0) % Total operating expenses 27,632 10.0 % (34,493) (14.2) % Income from operations 11,462 61.0 % (32,679) (63.5) % Other income/expenses Interest expense 327 2.0 % (753) (4.7) % Interest income 83 17.2 % 94 24.2 % Non-operating gains/losses, net 968 100.0 % — — % Income/loss before income taxes 12,840 492.3 % (33,338) (92.7) % Income tax expense/benefit (5,019) * 7,256 * Net income $ 7,821 259.1 % $ (26,082) (89.6) % * Not meaningful.
See Note 14 to our consolidated financial statements for details of our acquisition and disposition activities. 48 Table of Contents Following is a reconciliation of our additions to property and equipment for the years ended September 30, 2024, 2023, and 2022 (in thousands): 2024 2023 2022 New capital expenditures in new clubs and Bombshells units and equipment* $ 17,137 $ 34,430 $ 18,405 Maintenance capital expenditures 7,463 5,954 5,598 Total capital expenditures, excluding business acquisitions $ 24,600 $ 40,384 $ 24,003 * Includes real estate, except those acquired through business acquisitions.
Following is a reconciliation of our additions to property and equipment for the years ended September 30, 2025, 2024, and 2023 (in thousands): 2025 2024 2023 New capital expenditures in new clubs and Bombshells units and equipment* $ 10,507 $ 17,137 $ 34,430 Maintenance capital expenditures 4,020 7,463 5,954 Total capital expenditures, excluding business acquisitions $ 14,527 $ 24,600 $ 40,384 * Includes real estate, except those acquired through business acquisitions.
We did not have any business acquisition in 2024. We expect to generate adequate cash flows from operations for the next 12 months from the issuance of this report.
We expect to generate adequate cash flows from operations for the next 12 months from the issuance of this report.
The components of consolidated selling, general and administrative expenses are in the tables below (dollar amounts in thousands): 2024 2023 2022 Amount % Amount % Amount % Taxes and permits $ 16,177 5.5 % $ 11,966 4.1 % $ 9,468 3.5 % Advertising and marketing 12,461 4.2 % 11,928 4.1 % 9,860 3.7 % Supplies and services 10,896 3.7 % 10,724 3.7 % 8,614 3.2 % Insurance 13,059 4.4 % 10,268 3.5 % 10,152 3.8 % Lease 7,099 2.4 % 7,206 2.5 % 6,706 2.5 % Legal 4,155 1.4 % 3,742 1.3 % 1,995 0.7 % Utilities 6,075 2.1 % 5,760 2.0 % 4,585 1.7 % Charge card fees 6,968 2.4 % 7,090 2.4 % 6,292 2.4 % Security 5,080 1.7 % 5,618 1.9 % 4,404 1.6 % Accounting and professional fees 4,260 1.4 % 4,286 1.5 % 3,909 1.5 % Repairs and maintenance 4,690 1.6 % 4,924 1.7 % 3,754 1.4 % Stock-based compensation 1,882 0.6 % 2,588 0.9 % 2,353 0.9 % Other 6,870 2.3 % 6,924 2.4 % 6,755 2.5 % $ 99,672 33.7 % $ 93,024 31.7 % $ 78,847 29.5 % 39 Table of Contents By reportable segment, selling, general and administrative expenses are broken down as follows (dollar amounts in thousands): 2024 Inc (Dec) 2023 Inc (Dec) 2022 Nightclubs $ 68,546 11.7 % $ 61,350 19.6 % $ 51,285 Bombshells 18,475 (2.4) % 18,928 9.4 % 17,295 Other 709 17.8 % 602 44.0 % 418 Corporate 11,942 (1.7) % 12,144 23.3 % 9,849 $ 99,672 7.1 % $ 93,024 18.0 % $ 78,847 Selling, general and administrative expenses as a percentage of segment revenue (except Corporate, which is based on consolidated revenues): 2024 2023 2022 Nightclubs 28.1 % 25.9 % 24.9 % Bombshells 36.5 % 34.0 % 28.9 % Other 61.0 % 45.6 % 28.9 % Corporate 4.0 % 4.1 % 3.7 % 33.7 % 31.7 % 29.5 % The significant variances in selling, general and administrative expenses are as follows: As a percentage of revenues, relatively fixed expenses tend to be higher in rate due to lower sales, while more variable expenses tend to keep their rates even if dollar amounts are increasing.
The components of consolidated selling, general and administrative expenses are in the tables below (dollar amounts in thousands): 2025 2024 2023 Amount % Amount % Amount % Taxes and permits $ 14,186 5.1 % $ 16,177 5.5 % $ 11,966 4.1 % Advertising and marketing 11,512 4.1 % 12,461 4.2 % 11,928 4.1 % Supplies and services 10,230 3.7 % 10,896 3.7 % 10,724 3.7 % Insurance 15,024 5.4 % 13,059 4.4 % 10,268 3.5 % Lease 6,406 2.3 % 7,099 2.4 % 7,206 2.5 % Legal 14,476 5.2 % 4,155 1.4 % 3,742 1.3 % Utilities 6,086 2.2 % 6,075 2.1 % 5,760 2.0 % Charge card fees 6,976 2.5 % 6,968 2.4 % 7,090 2.4 % Security 4,205 1.5 % 5,080 1.7 % 5,618 1.9 % Accounting and professional fees 4,641 1.7 % 4,260 1.4 % 4,286 1.5 % Repairs and maintenance 5,090 1.8 % 4,690 1.6 % 4,924 1.7 % Stock-based compensation 1,373 0.5 % 1,882 0.6 % 2,588 0.9 % Other 7,634 2.7 % 6,870 2.3 % 6,924 2.4 % $ 107,839 38.6 % $ 99,672 33.7 % $ 93,024 31.7 % 40 Table of Contents By reportable segment, selling, general and administrative expenses are broken down as follows (dollar amounts in thousands): 2025 Inc (Dec) 2024 Inc (Dec) 2023 Nightclubs $ 69,994 1.8 % $ 68,728 12.0 % $ 61,363 Bombshells 13,621 (26.7) % 18,578 (1.8) % 18,928 Other 440 22.6 % 359 (33.4) % 539 Corporate 23,784 98.1 % 12,007 (1.5) % 12,194 $ 107,839 8.2 % $ 99,672 7.1 % $ 93,024 Selling, general and administrative expenses as a percentage of segment revenue (except Corporate, which is based on consolidated revenues): 2025 2024 2023 Nightclubs 28.9 % 28.2 % 25.9 % Bombshells 38.0 % 36.7 % 34.0 % Other 39.2 % 30.9 % 40.9 % Corporate 8.5 % 4.1 % 4.2 % 38.6 % 33.7 % 31.7 % The significant variances in selling, general and administrative expenses are as follows: As a percentage of revenues, relatively fixed expenses tend to be higher in rate due to lower sales, while more variable expenses tend to keep their rates even if dollar amounts are increasing.
Nightclubs revenues increased by 3.0% from 2023 to 2024 and by 14.8% from 2022 to 2023, as explained below. 2024 vs. 2023 2023 vs. 2022 Impact of 2.1% and 3.5% decrease in same-store sales, respectively, to total revenues (2.0) % (3.2) % Newly acquired units 7.6 % 18.4 % Closed units (1.4) % (0.4) % Other (1.3) % — % Net Nightclubs revenue increase 3.0 % 14.8 % Nightclubs segment sales mix for the three fiscal years, below: 2024 2023 2022 Sales of alcoholic beverages 43.3 % 40.7 % 38.8 % Sales of food and merchandise 9.1 % 8.4 % 8.9 % Service revenues 40.3 % 43.6 % 45.3 % Other 7.3 % 7.3 % 7.0 % 100.0 % 100.0 % 100.0 % The 2023 new units include six clubs, one of which was acquired in October 2022 and five acquired in March 2023.
Nightclubs revenues decreased by 0.6% from 2024 to 2025 and increased by 3.0% from 2023 to 2024, as detailed below. 2025 vs. 2024 2024 vs. 2023 Impact of 2.1% and 2.1% decrease in same-store sales, respectively, to total revenues (2.0) % (2.0) % New units 2.5 % 7.6 % Closed units (1.3) % (1.4) % Other 0.2 % (1.3) % Net Nightclubs revenue increase (decrease) (0.6) % 3.0 % Nightclubs segment sales mix for the three fiscal years, below: 2025 2024 2023 Sales of alcoholic beverages 42.7 % 43.3 % 40.7 % Sales of food and merchandise 9.5 % 9.1 % 8.4 % Service revenues 40.0 % 40.3 % 43.6 % Other 7.8 % 7.3 % 7.3 % 100.0 % 100.0 % 100.0 % The 2025 new units include three clubs, one of which was acquired in January 2025 and the other two in April 2025 (with one of the two transactions that did not close until June 2025 due to permitting delay).
Other revenues include Media Group revenues for the sale of advertising content and revenues from our annual Expo convention, and Drink Robust sales. Our fiscal year-end is September 30. 30 Table of Contents Same-Store Sales.
Other revenues include Media Group revenues for the sale of advertising content and revenues from our annual Expo convention, and Drink Robust sales.
For the year ended September 30, 2022, we identified one reporting unit that was impaired and recognized a goodwill impairment loss of $566,000. For indefinite- and definite-lived intangibles, specifically SOB licenses, we determine fair value by estimating the multiperiod excess earnings of the asset with key assumptions being similar to those used in the goodwill impairment valuation model.
For indefinite- and definite-lived intangibles, specifically SOB licenses, we determine fair value by estimating the multiperiod excess earnings of the asset with key assumptions being similar to those used in the goodwill impairment valuation model.
From 2022 to 2023, consolidated revenues increased by $26.2 million, or 9.8%, due mainly to newly acquired locations, partially offset by a decrease in same-store sales and a sales decrease from locations closed in 2023. 36 Table of Contents Segment contribution to total revenues was as follows (dollar amounts in thousands): 2024 Inc (Dec) 2023 Inc (Dec) 2022 Nightclubs Sales of alcoholic beverages $ 105,669 9.7 % $ 96,325 20.4 % $ 80,001 Sales of food and merchandise 22,129 10.7 % 19,995 9.3 % 18,289 Service revenues 98,233 (4.8) % 103,217 10.4 % 93,481 Other revenues 17,833 3.6 % 17,211 18.9 % 14,480 243,864 3.0 % 236,748 14.8 % 206,251 Bombshells Sales of alcoholic beverages 27,455 (11.3) % 30,937 (7.1) % 33,315 Sales of food and merchandise 22,477 (6.0) % 23,911 (8.1) % 26,005 Service revenues 222 (38.3) % 360 (11.5) % 407 Other revenues 424 (17.7) % 515 160.1 % 198 50,578 (9.2) % 55,723 (7.0) % 59,925 Other Other revenues 1,162 (11.9) % 1,319 (8.7) % 1,444 $ 295,604 0.6 % $ 293,790 9.8 % $ 267,620 Nightclubs segment revenues.
From 2023 to 2024, consolidated revenues increased by $1.8 million, or 0.6%, due mainly from recently acquired clubs and a newly opened Bombshells, partially offset by a decrease in same-store sales and a sales decrease from locations that were closed or rebranded in 2024. 37 Table of Contents Segment contribution to total revenues was as follows (dollar amounts in thousands): 2025 Inc (Dec) 2024 Inc (Dec) 2023 Nightclubs Sales of alcoholic beverages $ 103,495 (2.1) % $ 105,669 9.7 % $ 96,325 Sales of food and merchandise 22,955 3.7 % 22,129 10.7 % 19,995 Service revenues 97,024 (1.2) % 98,233 (4.8) % 103,217 Other revenues 19,027 6.7 % 17,833 3.6 % 17,211 242,501 (0.6) % 243,864 3.0 % 236,748 Bombshells Sales of alcoholic beverages 18,629 (32.1) % 27,455 (11.3) % 30,937 Sales of food and merchandise 17,016 (24.3) % 22,477 (6.0) % 23,911 Service revenues 55 (75.2) % 222 (38.3) % 360 Other revenues 110 (74.1) % 424 (17.7) % 515 35,810 (29.2) % 50,578 (9.2) % 55,723 Other Other revenues 1,123 (3.4) % 1,162 (11.9) % 1,319 $ 279,434 (5.5) % $ 295,604 0.6 % $ 293,790 Nightclubs segment revenues.
The 2022 new units include fifteen clubs, of which eleven were acquired in October 2021, one acquired in November 2021, one acquired in May 2022, and two acquired in July 2022. See Note 14 to our consolidated financial statements for more information on our club acquisitions. No new clubs were acquired in 2024.
There were no new club acquisitions in 2024. The 2023 new units include six clubs, one of which was acquired in October 2022 and five acquired in March 2023. See Note 16 to our consolidated financial statements for more information on our club acquisitions.
Nightclubs expenses increased as a percentage of segment revenue due to newly acquired clubs. Bombshells expenses increased as a percentage of segment revenue due to lower sales. Taxes and permits increased mainly due to the increase in the Texas patron tax. Insurance expense increased due to additional clubs and restaurants, with additional impact from insurance premium refunds received in 2023.
Nightclubs expenses increased as a percentage of segment revenue due to newly acquired clubs. Bombshells expenses increased as a percentage of segment revenue due to lower sales. Taxes and permits increased from 2023 to 2024 mainly due to the increase in the Texas patron tax but decreased from 2024 to 2025 due to closed locations.
Cash Flows from Investing Activities Following are our summarized cash flows from investing activities (in thousands): 2024 2023 2022 Proceeds from sale of businesses and assets $ 1,969 $ 4,245 $ 10,669 Proceeds from notes receivable 249 229 182 Proceeds from insurance 1,367 86 648 Payments for property and equipment and intangible assets (24,600) (40,384) (24,003) Acquisition of businesses, net of cash acquired — (29,000) (55,293) Net cash used in investing activities $ (21,015) $ (64,824) $ (67,797) In 2023, we acquired six clubs for a combined sum of $75.5 million (with an aggregate acquisition date fair value of $72.3 million), of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and 200,000 shares of our common stock in equity (with an acquisition date fair value of $12.8 million).
Cash Flows from Investing Activities Following are our summarized cash flows from investing activities (in thousands): 2025 2024 2023 Proceeds from sale of businesses and assets $ 1,093 $ 1,969 $ 4,245 Proceeds from notes receivable 292 249 229 Proceeds from insurance 2,101 1,367 86 Payments for property and equipment and intangible assets (14,527) (24,600) (40,384) Acquisition of businesses, net of cash acquired (13,000) — (29,000) Net cash used in investing activities $ (24,041) $ (21,015) $ (64,824) In 2025, we acquired three clubs for a combined sum of $21.0 million (with an aggregate acquisition date fair value of the same amount), of which $13.0 million was in cash and $8.0 million in debt (with an acquisition date fair value of the same amount).
Salaries and wages . Consolidated salaries and wages increased by $4.7 million, or 5.9%, from 2023 to 2024 and increased by $11.1 million, or 16.1%, from 2022 to 2023. The dollar increases are mostly from newly acquired or constructed locations.
Salaries and wages . Consolidated salaries and wages decreased by $512,000, or 0.6%, from 2024 to 2025 and increased by $4.7 million, or 5.9%, from 2023 to 2024. The dollar changes are mostly from newly acquired or constructed and closed locations.
The following table presents a summary of such indicators (dollars in thousands): 2024 Inc (Dec) 2023 Inc (Dec) 2022 Sales of alcoholic beverages $ 133,124 4.6 % $ 127,262 12.3 % $ 113,316 Sales of food and merchandise 44,606 1.6 % 43,906 (0.9) % 44,294 Service revenues 98,455 (4.9) % 103,577 10.3 % 93,888 Other revenues 19,419 2.0 % 19,045 18.1 % 16,122 Total revenues $ 295,604 0.6 % $ 293,790 9.8 % $ 267,620 Net income attributable to RCIHH common stockholders $ 3,011 (89.7) % $ 29,246 (36.5) % $ 46,041 Net cash provided by operating activities $ 55,884 (5.5) % $ 59,130 (8.3) % $ 64,509 Adjusted EBITDA* $ 72,645 (14.5) % $ 84,998 (2.0) % $ 86,724 Free cash flow* $ 48,421 (8.9) % $ 53,176 (9.7) % $ 58,911 Debt (end of period) $ 238,197 (0.6) % $ 239,751 18.4 % $ 202,463 * See definition and calculation of Adjusted EBITDA and Free Cash Flow under Non-GAAP Financial Measures and Liquidity and Capital Resources above.
We continue to monitor the macro environment and will adjust our overall approach to capital allocation as events and trends unfold. 50 Table of Contents The following table presents a summary of such indicators (dollars in thousands): 2025 Inc (Dec) 2024 Inc (Dec) 2023 Sales of alcoholic beverages $ 122,124 (8.3) % $ 133,124 4.6 % $ 127,262 Sales of food and merchandise 39,971 (10.4) % 44,606 1.6 % 43,906 Service revenues 97,079 (1.4) % 98,455 (4.9) % 103,577 Other revenues 20,260 4.3 % 19,419 2.0 % 19,045 Total revenues $ 279,434 (5.5) % $ 295,604 0.6 % $ 293,790 Net income attributable to RCIHH common stockholders $ 10,811 259.1 % $ 3,011 (89.7) % $ 29,246 Net cash provided by operating activities $ 49,418 (11.6) % $ 55,884 (5.5) % $ 59,130 Adjusted EBITDA* $ 52,627 (27.6) % $ 72,645 (14.5) % $ 84,998 Free cash flow* $ 45,398 (6.2) % $ 48,421 (8.9) % $ 53,176 Debt (end of period) $ 235,781 (1.0) % $ 238,197 (0.6) % $ 239,751 * See definition and calculation of Adjusted EBITDA and Free Cash Flow under Non-GAAP Financial Measures and Liquidity and Capital Resources above.
The components of impairments and other charges, net are in the table below (dollars in thousands): 2024 Inc (Dec) 2023 Inc (Dec) 2022 Impairment of assets $ 38,517 205.0 % $ 12,629 568.9 % $ 1,888 Settlement of lawsuits 520 (86.2) % 3,759 165.3 % 1,417 Gain on sale of businesses and assets (2,140) 213.8 % (682) (71.3) % (2,375) Gain on insurance (327) 324.7 % (77) (83.4) % (463) $ 36,570 134.0 % $ 15,629 3,246.7 % $ 467 40 Table of Contents The significant variances in impairments and other charges, net are discussed below: During 2024, we recorded aggregate impairment charges amounting to $38.5 million related to goodwill of four clubs ($8.9 million), SOB licenses of seven clubs ($11.8 million), operating lease right-of-use assets of five Bombshells locations ($6.5 million), tradename of one club ($693,000), property and equipment of four clubs and nine Bombshells locations ($10.6 million).
The components of impairments and other charges, net are in the table below (dollars in thousands): 2025 Inc (Dec) 2024 Inc (Dec) 2023 Impairment of assets $ 5,340 (86.1) % $ 38,517 205.0 % $ 12,629 Settlement of lawsuits 3,948 659.2 % 520 (86.2) % 3,759 Gain on sale of businesses and assets (982) (54.1) % (2,140) 213.8 % (682) Gain on insurance (2,358) 621.1 % (327) 324.7 % (77) $ 5,948 (83.7) % $ 36,570 134.0 % $ 15,629 41 Table of Contents The significant variances in impairments and other charges, net are discussed below: During 2025, we recorded aggregate impairment charges amounting to $5.3 million related to SOB licenses of six clubs ($3.8 million) and property and equipment of one food hall ($1.6 million).
In 2022, we acquired fifteen clubs for a combined sum of $134.2 million (with an aggregate acquisition date fair value of $132.6 million), of which $55.3 million was in cash, $49.0 million in debt (with an acquisition date fair value of $47.4 million), and 500,000 shares of our common stock in equity (with an acquisition date fair value of $29.9 million).
In 2023, we acquired six clubs for a combined sum of $75.5 million (with an aggregate acquisition date fair value of $72.3 million), of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and 200,000 shares of our common stock in equity (with an acquisition date fair value of $12.8 million).
Cash Flows from Financing Activities Following are our summarized cash flows from financing activities (in thousands): 2024 2023 2022 Proceeds from debt obligations $ 22,657 $ 11,595 $ 35,820 Payments on debt obligations (23,001) (15,650) (14,894) Purchase of treasury stock (20,606) (2,223) (15,097) Payment of dividends (2,302) (2,146) (1,784) Payment of loan origination costs (290) (239) (463) Distribution to noncontrolling interests — (600) — Net cash provided by (used in) financing activities $ (23,542) $ (9,263) $ 3,582 See Note 8 to our consolidated financial statements for a detailed discussion of our debt obligations, including the future maturities of our debt obligations in the next five years and thereafter.
We expect capital expenditure payments in the range of $11.0 million to $16.0 million in 2026, $6.0 million to $8.0 million of which relate to maintenance capital expenditures to support our existing clubs and restaurants and our corporate office. 49 Table of Contents Cash Flows from Financing Activities Following are our summarized cash flows from financing activities (in thousands): 2025 2024 2023 Proceeds from debt obligations $ 10,888 $ 22,657 $ 11,595 Payments on debt obligations (20,502) (23,001) (15,650) Purchase of treasury stock (11,860) (20,606) (2,223) Payment of dividends (2,464) (2,302) (2,146) Payment of loan origination costs (80) (290) (239) Distribution to noncontrolling interests — — (600) Net cash used in financing activities $ (24,018) $ (23,542) $ (9,263) See Note 9 to our consolidated financial statements for a detailed discussion of our debt obligations, including the future maturities of our debt obligations in the next five years and thereafter.
We also utilize capital to repurchase our common stock as part of our share repurchase program, based on our capital allocation strategy guidelines, and to pay our quarterly dividends. 47 Table of Contents Cash Flows from Operating Activities Following are our summarized cash flows from operating activities (in thousands): 2024 2023 2022 Net income $ 3,018 $ 29,100 $ 46,060 Depreciation and amortization 15,395 15,151 12,391 Deferred tax expense (benefit) (6,450) (1,781) 3,080 Stock-based compensation expense 1,882 2,588 2,353 Impairment of assets 38,517 12,629 1,888 Gain on debt extinguishment — — (83) Net change in operating assets and liabilities 2,671 (1,203) (1,421) Other 851 2,646 241 Net cash provided by operating activities $ 55,884 $ 59,130 $ 64,509 Net cash flows from operating activities decreased from 2022 to 2023 and from 2023 to 2024 mainly due to the lower same-store sales and the higher interest expense paid, partially offset by the lower income taxes paid.
Cash Flows from Operating Activities Following are our summarized cash flows from operating activities (in thousands): 2025 2024 2023 Net income $ 10,839 $ 3,018 $ 29,100 Depreciation and amortization 15,078 15,395 15,151 Deferred tax benefit (1,004) (6,450) (1,781) Stock-based compensation expense 1,373 1,882 2,588 Impairment of assets 5,340 38,517 12,629 Net change in operating assets and liabilities 17,594 2,671 (1,203) Other 198 851 2,646 Net cash provided by operating activities $ 49,418 $ 55,884 $ 59,130 48 Table of Contents Net cash flows from operating activities decreased from 2023 to 2024 and from 2024 to 2025 mainly due to the lower same-store sales, partially offset by the lower income taxes paid.
Vendors and purveyors often remain flexible with payment terms, providing businesses in our industry with opportunities to adjust to short-term business downturns. We consider the primary indicators of financial status to be the long-term trend of revenue growth, the mix of sales revenues, overall cash flow, profitability from operations and the level of long-term debt.
We consider the primary indicators of financial status to be the long-term trend of revenue growth, the mix of sales revenues, overall cash flow, profitability from operations and the level of long-term debt.
Refer to discussion of Non-GAAP Financial Measures on page 41. 2024 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 58,094 $ (10,646) $ (523) $ (28,120) $ 18,805 Amortization of intangibles 2,334 137 — 23 2,494 Settlement of lawsuits 465 25 — 30 520 Impairment of assets 22,691 15,826 — — 38,517 Loss (gain) on sale of businesses and assets (56) (2,322) — 238 (2,140) Gain on insurance (327) — — — (327) Stock-based compensation — — — 1,882 1,882 Non-GAAP operating income (loss) $ 83,201 $ 3,020 $ (523) $ (25,947) $ 59,751 GAAP operating margin 23.8 % (21.0) % (45.0) % (9.5) % 6.4 % Non-GAAP operating margin 34.1 % 6.0 % (45.0) % (8.8) % 20.2 % 2023 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 73,187 $ 6,502 $ (1,446) $ (26,759) $ 51,484 Amortization of intangibles 2,497 530 484 17 3,528 Settlement of lawsuits 3,552 207 — — 3,759 Impairment of assets 11,815 — 814 — 12,629 Loss (gain) on sale of businesses and assets (734) 77 — (25) (682) Gain on insurance (48) — — (29) (77) Stock-based compensation — — — 2,588 2,588 Non-GAAP operating income (loss) $ 90,269 $ 7,316 $ (148) $ (24,208) $ 73,229 GAAP operating margin 30.9 % 11.7 % (109.6) % (9.1) % 17.5 % Non-GAAP operating margin 38.1 % 13.1 % (11.2) % (8.2) % 24.9 % 2022 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 82,798 $ 11,504 $ 57 $ (22,900) $ 71,459 Amortization of intangibles 2,042 6 61 9 2,118 Settlement of lawsuits 1,287 18 — 112 1,417 Impairment of assets 1,238 650 — — 1,888 Loss (gain) on sale of businesses and assets (2,010) 17 — (382) (2,375) Gain on insurance (463) — — — (463) Stock-based compensation — — — 2,353 2,353 Non-GAAP operating income (loss) $ 84,892 $ 12,195 $ 118 $ (20,808) $ 76,397 GAAP operating margin 40.1 % 19.2 % 3.9 % (8.6) % 26.7 % Non-GAAP operating margin 41.2 % 20.4 % 8.2 % (7.8) % 28.5 % 42 Table of Contents Other Income/Expenses Interest expense increased by approximately $753,000 from 2023 to 2024 and by approximately $4.0 million from 2022 to 2023.
Refer to discussion of Non-GAAP Financial Measures on page 45. 2025 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 69,569 $ 177 $ (169) $ (39,310) $ 30,267 Amortization of intangibles 2,345 3 — 14 2,362 Settlement of lawsuits 3,850 98 — — 3,948 Impairment of assets 3,790 1,550 — — 5,340 Loss (gain) on sale of businesses and assets 303 (1,188) — (97) (982) Gain on insurance (2,358) — — — (2,358) Stock-based compensation — — — 1,373 1,373 Non-GAAP operating income (loss) $ 77,499 $ 640 $ (169) $ (38,020) $ 39,950 GAAP operating margin 28.7 % 0.5 % (15.0) % (14.1) % 10.8 % Non-GAAP operating margin 32.0 % 1.8 % (15.0) % (13.6) % 14.3 % 2024 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 57,912 $ (10,783) $ (137) $ (28,187) $ 18,805 Amortization of intangibles 2,334 137 — 23 2,494 Settlement of lawsuits 465 25 — 30 520 Impairment of assets 22,691 15,826 — — 38,517 Loss (gain) on sale of businesses and assets (56) (2,322) — 238 (2,140) Gain on insurance (327) — — — (327) Stock-based compensation — — — 1,882 1,882 Non-GAAP operating income (loss) $ 83,019 $ 2,883 $ (137) $ (26,014) $ 59,751 GAAP operating margin 23.7 % (21.3) % (11.8) % (9.5) % 6.4 % Non-GAAP operating margin 34.0 % 5.7 % (11.8) % (8.8) % 20.2 % 2023 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 73,174 $ 6,502 $ (1,380) $ (26,812) $ 51,484 Amortization of intangibles 2,497 530 484 17 3,528 Settlement of lawsuits 3,552 207 — — 3,759 Impairment of assets 11,815 — 814 — 12,629 Loss (gain) on sale of businesses and assets (734) 77 — (25) (682) Gain on insurance (48) — — (29) (77) Stock-based compensation — — — 2,588 2,588 Non-GAAP operating income (loss) $ 90,256 $ 7,316 $ (82) $ (24,261) $ 73,229 GAAP operating margin 30.9 % 11.7 % (104.6) % (9.1) % 17.5 % Non-GAAP operating margin 38.1 % 13.1 % (6.2) % (8.3) % 24.9 % 43 Table of Contents Other Income/Expenses Interest expense decreased by approximately $327,000 from 2024 to 2025 and increased by approximately $753,000 from 2023 to 2024.
This is because, based on our capital allocation strategy, acquisitions and development of our own clubs and restaurants are our primary uses of free cash flow. 49 Table of Contents Other than the impact of uncertainties caused by near-term macro environment, including supply chain challenges, and commodity and labor inflation, and the contractual obligations described above, we are not aware of any event or trend that would adversely impact our liquidity.
Other than the impact of uncertainties caused by near-term macro environment, including supply chain challenges, and commodity and labor inflation, and the contractual obligations described above, we are not aware of any event or trend that would adversely impact our liquidity. In our opinion, working capital is not a true indicator of our financial status.
Because of the large volume of cash we handle, we have very stringent cash controls. As of September 30, 2024, we had negative working capital of $793,000 compared to a negative working capital of $10.5 million as of September 30, 2023.
Due to the large volume of cash that we handle, we have very stringent cash controls. As of September 30, 2025, and 2024, we had negative working capital balances.
Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. During the third quarter of 2024, we impaired six properties for $4.8 million in property and equipment and $5.7 million in operating lease right-of-use assets.
Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated.
GROWTH STRATEGY We believe that we can continue to grow organically and through careful entry into markets with high growth potential. Our growth strategy includes acquiring existing clubs, opening new clubs after market analysis and developing new club concepts that are consistent with our management and marketing skills as our capital and manpower allow.
Our growth strategy includes acquiring existing clubs, opening new clubs after market analysis and developing new club concepts that are consistent with our management and marketing skills as our capital and manpower allow. We also strive to enter into businesses that complement our own, such as gaming, if they can enhance shareholder value.
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. 33 Table of Contents OPERATIONS REVIEW Highlights of operations from fiscal 2024, 2023, and 2022 are as follows (in thousands, except percentages and per share amounts): 2024 Inc (Dec) 2023 Inc (Dec) 2022 Revenues Consolidated $ 295,604 0.6 % $ 293,790 9.8 % $ 267,620 Nightclubs $ 243,864 3.0 % $ 236,748 14.8 % $ 206,251 Bombshells $ 50,578 (9.2) % $ 55,723 (7.0) % $ 59,925 Same-store sales Consolidated -5.1 % -6.0 % Nightclubs -2.1 % -3.5 % Bombshells -18.4 % -14.6 % Income (loss) from operations Consolidated $ 18,805 (63.5) % $ 51,484 (28.0) % $ 71,459 Nightclubs $ 58,094 (20.6) % $ 73,187 (11.6) % $ 82,798 Bombshells $ (10,646) (263.7) % $ 6,502 (43.5) % $ 11,504 Diluted earnings per share $ 0.33 (89.5) % $ 3.13 (36.3) % $ 4.91 Non-GAAP diluted earnings per share* $ 4.72 (3.6) % $ 4.90 (8.9) % $ 5.38 Net cash provided by operating activities $ 55,884 (5.5) % $ 59,130 (8.3) % $ 64,509 Free cash flow* $ 48,421 (8.9) % $ 53,176 (9.7) % $ 58,911 * Reconciliation and discussion of non-GAAP financial measures are included under the “Non-GAAP Financial Measures” section of this Item.
Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. 34 Table of Contents OPERATIONS REVIEW Highlights of operations from fiscal 2025, 2024, and 2023 are as follows (in thousands, except percentages and per share amounts): 2025 Inc (Dec) 2024 Inc (Dec) 2023 Revenues Consolidated $ 279,434 (5.5) % $ 295,604 0.6 % $ 293,790 Nightclubs $ 242,501 (0.6) % $ 243,864 3.0 % $ 236,748 Bombshells $ 35,810 (29.2) % $ 50,578 (9.2) % $ 55,723 Same-store sales Consolidated (3.5) % (5.1) % Nightclubs (2.1) % (2.1) % Bombshells (13.6) % (18.4) % Income (loss) from operations Consolidated $ 30,267 61.0 % $ 18,805 (63.5) % $ 51,484 Nightclubs $ 69,569 20.1 % $ 57,912 (20.9) % $ 73,174 Bombshells $ 177 101.6 % $ (10,783) (265.8) % $ 6,502 Diluted earnings per share $ 1.23 272.7 % $ 0.33 (89.5) % $ 3.13 Non-GAAP diluted earnings per share* $ 2.12 (55.1) % $ 4.72 (3.6) % $ 4.90 Net cash provided by operating activities $ 49,418 (11.6) % $ 55,884 (5.5) % $ 59,130 Free cash flow* $ 45,398 (6.2) % $ 48,421 (8.9) % $ 53,176 * Reconciliation and discussion of non-GAAP financial measures are included under the “Non-GAAP Financial Measures” section of this Item.
Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters). Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.
However, there can be no assurance that we will be able to do so in the future. SEASONALITY Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters).
The components of our annual effective income tax rate are the following: 2024 2023 2022 Federal statutory income tax expense/benefit 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 8.6 % 4.5 % 3.0 % Permanent differences 18.7 % 1.7 % 0.2 % Change in tax rates (4.2) % (0.7) % 1.5 % Change in valuation allowance 5.5 % (0.5) % 0.6 % Tax credits (87.8) % (5.9) % (3.0) % Other 22.6 % (1.0) % 0.2 % Total effective income tax rate (15.7) % 19.0 % 23.4 % The effective income tax rate difference from the statutory federal corporate tax rate of 21% comes from offsetting impact of state income tax, net of federal benefit, changes in the deferred tax asset valuation allowance, and tax credits that are mostly FICA tip credits.
The components of our annual effective income tax rate are the following: 2025 2024 2023 Federal statutory income tax expense/benefit 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 10.2 % 8.0 % 3.3 % Nontaxable or nondeductible items Goodwill impairment — % 7.8 % 0.8 % Section 162(m) excess compensation 1.3 % 6.5 % 0.5 % Meals and entertainment 0.6 % 3.8 % 0.3 % Loss (gain) on sale of subsidiary stock 0.8 % — % — % Other nontaxable or nondeductible items 0.1 % 0.5 % 0.1 % Change in valuation allowance 0.6 % 1.8 % — % Tax credits FICA tip credit (10.4) % (63.3) % (4.9) % Work Opportunity Tax credits (1.2) % (24.5) % (1.0) % Expiration of capital loss carryforwards 3.0 % — % — % Stock-based compensation forfeiture 1.3 % — % — % Return-to-provision and prior-period adjustments 1.9 % 22.7 % (1.0) % Other 0.5 % — % — % Total effective income tax rate 29.8 % (15.7) % 19.0 % The effective income tax rate difference from the statutory federal corporate tax rate of 21% comes from offsetting impact of state income tax, net of federal benefit, changes in the deferred tax asset valuation allowance, and tax credits that are mostly FICA tip credits.
In our opinion, working capital is not a true indicator of our financial status. Typically, businesses in our industry carry current liabilities in excess of current assets because businesses in our industry receive substantially immediate payment for sales, with nominal receivables, while inventories and other current liabilities normally carry longer payment terms.
Typically, businesses in our industry carry current liabilities in excess of current assets because businesses in our industry receive substantially immediate payment for sales, with nominal receivables, while inventories and other current liabilities normally carry longer payment terms. Vendors and purveyors often remain flexible with payment terms, providing businesses in our industry with opportunities to adjust to short-term business downturns.
Below is a table which reflects segment contribution to income from operations (in thousands): 2024 2023 2022 Nightclubs $ 58,094 $ 73,187 $ 82,798 Bombshells (10,646) 6,502 11,504 Other (523) (1,446) 57 Corporate (28,120) (26,759) (22,900) $ 18,805 $ 51,484 $ 71,459 Nightclubs operating margin was 23.8%, 30.9%, and 40.1% in 2024, 2023, and 2022.
Below is a table which reflects segment contribution to income from operations (in thousands): 2025 2024 2023 Nightclubs $ 69,569 $ 57,912 $ 73,174 Bombshells 177 (10,783) 6,502 Other (169) (137) (1,380) Corporate (39,310) (28,187) (26,812) $ 30,267 $ 18,805 $ 51,484 Nightclubs operating margin was 28.7%, 23.7%, and 30.9% in 2025, 2024, and 2023.
Bombshells Our wholly-owned subsidiaries own and operate restaurants and sports bars in Houston, Dallas, Austin, Spring, Pearland, Tomball, Katy, Arlington, and Stafford, Texas under the brand name Bombshells Restaurant & Bar. Bombshells also operates a food hall in Denver, Colorado.
Bombshells Our wholly-owned subsidiaries own and operate restaurants and sports bars in Houston, Dallas, Pearland, Tomball, Katy, Arlington, Stafford, and Lubbock, Texas, and Denver, Colorado, under the brand name Bombshells Restaurant & Bar. Other Our wholly-owned subsidiaries own a media division (“Media Group”), including the leading trade magazine serving the multibillion-dollar adult nightclubs industry and the adult retail products industry.
The acquisition of additional clubs may require us to take on additional debt or issue our common stock, or both. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise.
There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise. An inability to obtain such additional financing could have an adverse effect on our growth strategy.
Bombshells revenues decreased by 9.2% from 2023 to 2024 and decreased by 7.0% from 2022 to 2023, as explained below. 2024 vs. 2023 2023 vs. 2022 Impact of 18.4% and 14.6% decrease in same-store sales, respectively, to total revenues (16.9) % (13.5) % New units 9.0 % 6.5 % Closed units (1.1) % — % Other (0.2) % — % Net Bombshells revenue decrease (9.2) % (7.0) % Bombshells segment sales mix for the three fiscal years is as follows: 2024 2023 2022 Sales of alcoholic beverages 54.3 % 55.5 % 55.6 % Sales of food and merchandise 44.4 % 42.9 % 43.4 % Service and other revenues 1.3 % 1.6 % 1.0 % 100.0 % 100.0 % 100.0 % Bombshells Arlington was opened in the first quarter of 2022.
Bombshells segment sales mix for the three fiscal years is as follows: 2025 2024 2023 Sales of alcoholic beverages 52.0 % 54.3 % 55.5 % Sales of food and merchandise 47.5 % 44.4 % 42.9 % Service and other revenues 0.5 % 1.3 % 1.6 % 100.0 % 100.0 % 100.0 % Bombshells San Antonio was acquired from our franchisee in the second quarter of 2023.
In 2023, we recognized settlements with the New York Department of Labor amounting to $3.1 million related to the assessment by the New York Department of Labor for state unemployment insurance. In 2022, we settled several cases including the image infringement lawsuit and the securities class actions part of which was paid by insurance.
In 2023, we recognized settlements with the New York Department of Labor amounting to $3.1 million related to the assessment by the New York Department of Labor for state unemployment insurance. See Note 11 to our consolidated financial statements.
We have approximately $21.0 million remaining to purchase additional shares as of September 30, 2024. For additional details regarding our board approved share repurchase plans, please refer to Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
For additional details regarding our board approved share repurchase plans, please refer to Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. IMPACT OF INFLATION To the extent permitted by competition, we have managed to recover increased costs through price increases and may continue to do so.
The increase from 2022 to 2023 was mainly from newly acquired clubs, while the smaller increase from 2023 to 2024 was mainly caused by a decrease in the amortization of intangibles due to previous impairment. Impairments and other charges, net .
Depreciation and amortization decreased by $317,000, or 2.1%, from 2024 to 2025 and increased by $244,000, or 1.6%, from 2023 to 2024. The increase from 2023 to 2024 was mainly caused by a decrease in the amortization of intangibles due to previous impairment, while the decrease from 2024 to 2025 was mainly caused by closed locations.
We also acquired several real estate properties for club and Bombshells sites totaling $19.7 million, and invested $7.5 million for future casino locations.
We also acquired several real estate properties for club and Bombshells sites totaling $19.7 million, and invested $7.5 million for future casino locations. As of September 30, 2025, 2024, and 2023, we had $7.9 million, $15.0 million, and $7.7 million in construction-in-progress related mostly to Bombshells units that open in subsequent periods.
Included here is Drink Robust, which is licensed to sell Robust Energy Drink in the United States.
We also own an industry trade show, an industry trade publication and more than a dozen industry and social media websites. Included here is Drink Robust, which is licensed to sell Robust Energy Drink in the United States.
During fiscal years 2024, 2023, and 2022, we paid for treasury stock amounting to $20.6 million, $2.2 million, and $15.1 million, representing 442,639 shares, 34,086 shares, and 268,185 shares, respectively. On each of May 24, 2022 and July 9, 2024, the board of directors approved a $25.0 million increase in the Company's share repurchase program.
Share Repurchase As part of our capital allocation strategy, we buy back shares in the open market or through negotiated purchases, as authorized by our board of directors. During fiscal years 2025, 2024, and 2023, we paid for treasury stock amounting to $11.9 million, $20.6 million, and $2.2 million, representing 270,939 shares, 442,639 shares, and 34,086 shares, respectively.
The rest of the claims for the Sulphur club were received in 2022. Gains related to insurance recoveries are recognized when the contingencies related to the insurance claims have been resolved, which may be in a subsequent reporting period.
Gains related to insurance recoveries are recognized when the contingencies related to the insurance claims have been resolved, which may be in a subsequent reporting period. We also partially recovered and recognized a $327,000 gain related to a fire in one of our clubs in Fort Worth, Texas, during 2024 and $2.3 million in 2025.
See Note 10 to our consolidated financial statements. Going forward, settlements might be more volatile and higher in value due to self-insurance. Refer to dispositions in Note 14 to our consolidated financial statement for details on gains or losses on sale of businesses and assets.
Refer to dispositions in Note 16 to our consolidated financial statement for details on gains or losses on sale of businesses and assets. In relation to insurance claims and recoveries, we recognized a $77,000 gain in 2023.
We also partially recovered and recognized a $327,000 gain related to a fire in one of our clubs in Fort Worth, Texas, during the fourth quarter of 2024. See Note 13 to our consolidated financial statements. Income from Operations During fiscal 2024, 2023, and 2022, our consolidated operating margin was 6.4%, 17.5%, and 26.7%, respectively.
See Note 15 to our consolidated financial statements. Income from Operations During fiscal 2025, 2024, and 2023, our consolidated operating margin was 10.8%, 6.4%, and 17.5%, respectively.
We have not established financing other than the notes payable discussed in Note 8 to the consolidated financial statements.
We have not established financing other than the notes payable discussed in Note 9 to the consolidated financial statements. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise.
In fiscal 2024, we did not have any club business acquisitions but opened a new Bombshells location in Stafford, Texas in November 2023. See Note 14 to our consolidated financial statements. We continue to evaluate opportunities to acquire new nightclubs and anticipate acquiring new locations that fit our business model as we have done in the past.
In fiscal 2024, we did not have any club business acquisitions but opened a new Bombshells location in Stafford, Texas in November 2023. In fiscal 2025, we acquired three clubs with an aggregate acquisition date fair value of $21.0 million, of which $13.0 million was in cash and $8.0 million in debt. See Note 16 to our consolidated financial statements.
Revenues Consolidated revenues increased by $1.8 million, or 0.6%, from 2023 to 2024 due mainly from recently acquired clubs and a newly opened Bombshells, partially offset by a decrease in same-store sales and a sales decrease from locations that were closed or rebranded in 2024.
Revenues Consolidated revenues decreased by $16.2 million, or 5.5%, from 2024 to 2025 due mainly from closed units and the decrease in same-store sales, partially offset by sales from new units.
During 2022, we recorded aggregate impairment charges amounting to $1.9 million related to goodwill of one club ($566,000), SOB license of one club ($293,000), and property and equipment of one club and one Bombshells unit ($1.0 million).
During 2024, we recorded aggregate impairment charges amounting to $38.5 million related to goodwill of four clubs ($8.9 million), SOB licenses of seven clubs ($11.8 million), operating lease right-of-use assets of five Bombshells locations ($6.5 million), tradename of one club ($693,000), property and equipment of four clubs and nine Bombshells locations ($10.6 million).
During 2022, we acquired fifteen clubs at an aggregate acquisition date fair value of $132.6 million, of which $55.3 million was in cash, $49.0 million in debt (with an acquisition date fair value of $47.4 million) and $30.0 million in equity (500,000 shares of our common stock with an acquisition date fair value of $29.9 million, discounted for lack of marketability due to the lock-up period).
We did not have any business acquisition in 2024. During 2025, we acquired three clubs at an aggregate acquisition date fair value of $21.0 million, of which $13.0 million was in cash and $8.0 million in debt (with the same acquisition date fair value).
Removed
Other Our wholly-owned subsidiaries own a media division (“Media Group”), including the leading trade magazine serving the multibillion-dollar adult nightclubs industry and the adult retail products industry. We also own an industry trade show, an industry trade publication and more than a dozen industry and social media websites.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The items in our financial statements subject to market risk are potential debt instruments with variable interest rates. We have certain debts that have variable interest rates in effect as of September 30, 2024.
Biggest changeItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The items in our financial statements subject to market risk are potential debt instruments with variable interest rates. We have certain debts that have variable interest rates in effect as of September 30, 2025.
An increase in interest rates in the future may have a negative impact on our results of operations and cash flows. A hypothetical 10% change in interest rates would have had a $45,000 impact on the Company's annual results of operations and cash flows.
An increase in interest rates in the future may have a negative impact on our results of operations and cash flows. A hypothetical 10% change in interest rates would have had a $28,000 impact on the Company's annual results of operations and cash flows.

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