RCI HOSPITALITY HOLDINGS, INC.

9. Debt

Debt consisted of the following (in thousands):

*These commercial bank debts are guaranteed by the Company’s former CEO. See Note 18.

Following is a summary of long-term debt at September 30 (in thousands):

(1)On May 8, 2017, in relation to the Scarlett’s acquisition, the Company executedtwo promissory notes with the sellers: (i) a 5% short-term note for $5.0 million payable in lump sum aftersix months from closing date and (ii) a 12-year amortizing 8% note for $15.6 million. The 12-year note is payable $168,343 per month, including interest. The Company has amended the $5.0 million short-term note payable several times, which has a remaining balance of $3.0 million, extending the maturity date and increasing the interest rate. Presently, the maturity date is October 1, 2027 and the interest rate is 8% for its remaining term.

(2)On December 7, 2017, the Company borrowed $7.1 million from a lender to purchase an aircraft at 5.99% interest. The transaction was partly funded by trading in an aircraft that the Company owned with a carrying value of $3.4 million, with an assumption of the old aircraft’s note payable liability of $2.0 million. The aircraft note is payable in 15 years with monthly payments of $59,869, which includes interest. In March 2020, this loan was extended to September 2033.

(3) On September 30, 2021, we entered into a $99.1 million term loan refinancing $85.7 million of existing bank and seller-financed real estate debt and to provide $12.3 million in cash that will be used to pay off existing high-interest unsecured debt (“September 2021 Refinancing Note”), enabling those creditors to provide financing for the acquisition of 11 clubs and related real estate in fiscal 2022. The $99.1 million note has a term of 10 years with an initial interest rate of 5.25% per annum for the first five years, then adjusted to a rate equal to the then weekly average yield of U.S. Treasury Securities plus 350 basis points, with a floor rate of 5.25%. The note is payable in monthly payments of principal and interest of $668,051, based on a 20-year amortization period, with the balance paid at maturity. In connection with the transaction, we wrote off to interest expense approximately $103,000 of unamortized debt issuance costs related to the paid-off debts. We also paid approximately $1.0 million in loan costs, approximately $567,000 of which is capitalized and will be amortized together with the remaining unamortized debt issuance costs of some of the existing refinanced debts for the term of the new note using the effective interest method. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(4) On October 12, 2021, the Company amended the $5.0 million short-term note payable related to the Scarlett’s acquisition in May 2017, which had a balance of $3.0 million as of the amendment date, extending the maturity date to October 1, 2027. The amendment did not have an impact in the Company’s results of operations and cash flows.

(5) On October 12, 2021, we closed on a debt financing transaction with 28 investors for unsecured promissory notes with a total principal amount of $17.0 million, all of which bear interest at a rate of 12% per annum. Of this amount, $9.5 million are promissory notes, payable interest only monthly (or quarterly) in arrears, with a final lump sum payment of principal and accrued and unpaid interest due on October 1, 2024. The remaining amount of the financing is $7.5 million in promissory notes, payable in monthly payments of principal and interest based on a 10-year amortization period, with the balance of the entire principal amount together with all accrued and unpaid interest due and payable in full on October 12, 2024. Included in the $17.0 million borrowing aretwo notes for $500,000 and $150,000 borrowed from related parties (see Note 18) andtwo notes for $500,000 and $300,000 borrowed fromtwo non-officer employees in which the terms of the notes are the same as the rest of the lender group. See the October 25, 2023 extension of the term of the promissory notes, below.

(6) On October 18, 2021, in relation to an acquisition in fiscal 2022, the Company executed four seller-financed promissory notes. The first promissory note was a 10-year $11.0 million 6% note payable in 120 equal monthly payments of $122,123 in principal and interest. The second promissory note was a 20-year $8.0 million 6% note payable in 240 equal monthly payments of $57,314 in principal and interest. The third promissory note was a 10-year $1.2 million 5.25% note payable in monthly payments of $8,086 in principal and interest based on a 20-year amortization period, with the balance payable at maturity date. The fourth note was a 20-year $1.0 million 6% note payable in 240 equal monthly payments of $7,215 in principal and interest.

(7) On November 8, 2021, in relation to an acquisition in fiscal 2022, the Company executed a $1.0 million 7-year promissory note with an interest rate of 4.0% per annum. The note is payable $13,669 per month, including principal and interest.

(8) On January 25, 2022, the Company borrowed $18.7 million from a bank lender for working capital purposes by executing a 10-year promissory note with an initial interest rate of 5.25% per annum to be adjusted after five years to a rate equal to the weekly average yield on U.S. Treasury securities plus 3.98% with a floor of 5.25%. The note is payable in monthly payments of $126,265 in principal and interest to be adjusted after five years. The promissory note is secured byeleven real estate properties and is personally guaranteed by the Company's former CEO, Eric Langan (see Note 18). After the 10-year term, the remaining balance of principal and interest are payable at maturity date. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(9) On March 1, 2022, the Company borrowed $2.6 million from a bank lender in relation to a purchase of real estate in fiscal 2022. The 21-year promissory note has an initial interest rate of 4.25% per annum, repriced after five years and then again annually to prime plus 1% with a floor rate of 4.25%. The note is payable interest only during the first 12 months; then the next 48 months with $16,338 equal monthly payments of principal and interest; then the next 191 months at an equal monthly payment based on a 20-year amortization; with the balance of principal and interest payable at the 252nd month.

(10) On May 2, 2022, in relation to a club acquisition in fiscal 2022, the Company executedtwo seller-financed notes totaling $11.0 million, comprised of (1) $6.0 million under a 10%three-year promissory note payable in 35 equal monthly payments of $79,290 in principal and interest based on aten-year amortization schedule, with a balloon payment for the remaining principal plus accrued interest due at maturity and (2) $5.0 million under a 10%ten-year interest-only promissory note payable in 119 equal monthly payments of $41,667 in interest, with a balloon payment of the total $5.0 million in principal plus accrued interest due at maturity.

(11) On July 21, 2022, the Company executed an $800,000 6% seller-financed promissory note in relation to an acquisition of a club in Odessa, Texas, in fiscal 2022. The promissory note matures in July 2029 and is payable in 84 equal monthly installments of $11,687 of principal and interest.

(12) On July 27, 2022, in relation to an acquisition of a club in Hallandale Beach, Florida, in fiscal 2022, the Company executedtwo seller-financed promissory notes: (1) $10.0 million 6%ten-year promissory note payable in 120 equal monthly payments of $111,020 in principal and interest, and (2) $5.0 million 6%ten-year promissory note payable in 120 equal monthly payments of $55,510 in principal and interest.

(13) On August 18, 2022, in relation to a purchase of real estate for a future Bombshells location amounting to $2.1 million in fiscal 2022, the Company borrowed $1.6 million from a bank lender. The 5.25% mortgage note is payable interest-only foreleven months and on its August 18, 2023 maturity date payable with the entire principal balance plus accrued interest. This note has been amended in August 2024 to an amortizing 7.79% note with monthly installments of $14,959 of principal and interest and maturing in August 2039. The fixed 7.79% interest for the first five years will then be adjusted annually to Wall Street Journal prime plus 0.25%. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(14) On September 23, 2022, in connection with the purchase of an aircraft worth $3.5 million in fiscal 2022, the Company entered into a financing transaction for $2.8 million. The financing agreement bears an interest of 4.79% per annum and payable in 240 monthly installments of principal and interest amounting to $18,298.

(15) On October 10, 2022, in relation to a real estate purchase (see Note 16), the Company borrowed $2.3 million from a bank lender. The 18-month promissory note bore an initial interest rate of 6% per annum adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5% with a floor of 6%. The promissory note was payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. The Company paid approximately $26,000 in debt issuance cost at closing. This promissory note was secured by the purchased real estate property.

(16) On October 26, 2022, in relation to a club acquisition (see Note 16), the Company executed a promissory note for $5.0 million with the seller. The 6%15-year promissory note is payable in 180 equal monthly payments of $42,193 in principal and interest. This promissory note is secured by the purchased real estate property.

(17) On November 18, 2022, in relation to a real estate purchase on September 12, 2022 (see Note 16), the Company borrowed $1.5 million from a bank lender. The 18-month promissory note bears an initial interest rate of 6% per annum to be adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5% with a floor of 6%. The promissory note is payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. This promissory note is secured by the purchased real estate property. This note has been amended in August 2024 to an amortizing 7.79% note with monthly installments of $14,248 of principal and interest and maturing in August 2039. The fixed 7.79% interest for the first five years will then be adjusted annually to Wall Street Journal prime plus 0.25%. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(18) On December 20, 2022, the Company executed a promissory note for $3.3 million with a bank lender in relation to a purchase of a food hall property (see Note 16). The 6.67%five-year promissory note is payable in 59 equal monthly installments of $22,805 in principal and interest, with the balance of principal and accrued interest payable at maturity. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(19) On March 9, 2023, the Company closed a $10.0 million line-of-credit facility with a lender bank evidenced by a revolving promissory note, with an initial draw of $10.0 million at closing. The facility has an initial term of 24 months with a variable interest rate equal to the Wall Street Journal prime rate plus 1%. On such date that the principal balance is repaid to an amount less than $5.0 million, the facility's revolver feature is activated where the Company may draw from the remaining availability up to a maximum of $5.0 million. The Company shall also pay a non-usage fee of 0.5% based on the amount by which the average outstanding balance for the prior twelve months was less than $3.0 million or the amount by which the total aggregate advances during the prior twelve months totaled less than $3.0 million. The Company paid $115,000 in debt issuance costs, which is recorded as deferred charges to be amortized on a straight-line basis over 24 months. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan, including a compensating balance requirement of $3.0 million and a minimum tangible net worth requirement of $20.0 million. The compensating balance requirement does not contractually or legally restrict the withdrawal or use of cash.

(20) On March 16, 2023, in relation to the acquisition offive clubs with associated real estate, automated teller machines, and intellectual property (see Note 16), the Company executed nine secured promissory notes with a total principal amount of $25.5 million. Each of thenine promissory notes have an interest rate of 7% per annum with a term of 10 years, payable in arrears in 120 equal monthly payments of principal and interest amounting to $296,077 per month in the aggregate. The holder of the $5.0 million promissory note related to the real estate properties may call due from the Company a principal payment of $1.0 million once in every calendar year.

(21) On June 18, 2023, in relation to a purchase of a retail parcel in a condominium property (see Note 16), the Company executed a promissory note for $2.9 million with a bank lender. The 7.12%five-year promissory note is payable in monthly installments of $20,654 in principal and interest, with the balance of principal and accrued interest payable at maturity. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(22) On October 25, 2023, the Company entered into a debt modification transaction under which 26 investors holding a total principal amount of $15.7 million in unsecured promissory notes agreed to extend the maturity dates of such notes, with no other changes to the terms and conditions of the original promissory notes, which original promissory notes were issued in October 2021 and had original maturity dates in October 2024. The transaction was effected by the 26 investors returning for cancellation their original promissory notes, with us issuing new amended and restated promissory notes to such investors. The original promissory notes will be deemed cancelled as of the end of the day on October 31, 2023, and the new amended promissory notes will have an original issue date, and be deemed effective, as of November 1, 2023.

Other than the extension of the maturity dates, there were no other changes to the terms and conditions of the original promissory notes (except for the reduction in principal, as described below, and the corresponding reduction in monthly installments of principal and interest). The new amended notes will continue to bear interest at the rate of 12% per annum. Of the new amended promissory notes, $9.1 million are payable interest-only monthly (or quarterly) in arrears, with a final lump sum payment of principal and accrued and unpaid interest due on October 1, 2026. The remaining $6.6 million in promissory notes are payable in monthly payments of principal and interest based on a 10-year amortization period, with the balance of the entire principal amount together with all accrued and unpaid interest due and payable in full on November 1, 2027. The original promissory notes that were returned and cancelled as consideration for the issuance of the $6.6 million in new amended promissory notes had an original principal amount of $7.5 million in October 2021. One promissory note with principal amounting to $500,000 was paid off on September 30, 2025 (see Note 18). The remaining promissory notes were extended on October 1, 2025 (see Note 19).

(23) On November 17, 2023, the Company closed on a construction loan agreement with a bank lender for a total amount of $7.2 million bearing an interest rate of 8.5% per annum for the construction of a Bombshells restaurant in Rowlett, Texas. The promissory note is payable in 120 monthly payments, the first 18 months of which will be interest-only. The succeeding 101 monthly payments will be payable in equal installments of $63,022 in principal and interest, and the remaining balance in principal and accrued interest payable on the 120th month. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(24) On April 30, 2024, the Company entered into a term loan with a bank lender for $20.0 million for additional working capital. The loan has a 10-year term and an interest rate of 8.25% per annum for the first five years, after which the interest rate is to be adjusted to a rate equal to the then weekly average yield on U.S. Treasury Securities plus 362 basis points, with a 6.5% floor. The promissory note is payable in equal monthly installments of $170,408 for principal and interest, based on a 20-year amortization period, during the first five years, after which the monthly payments shall adjust based on the new interest rate to continue until April 30, 2034, at which time the remaining principal amount and accrued interest shall be paid. The Company paid $356,000 in debt issuance costs at the time of closing. There are certain financial and non-financial covenants with which the Company is to be in compliance with related to this loan, including a minimum tangible net worth requirement of $25.0 million.

(25) On November 26, 2024, the Company converted a bank loan secured on October 10, 2022 to purchase real property into a construction loan with the same bank lender. The old loan had a remaining principal balance of $2.4 million. The new construction loan has maximum principal limit of $6.3 million and has a term of 204 months. The loan bears an interest rate of 6.99% per annum for the first five years after which it will adjust annually to a new rate equal to the then-current Wall Street Journal Prime Rate plus 0.25% per annum, with a floor of 6.99% per annum. The loan is payable interest-only during the first 24 months, then payable for the next 36 months in equal installments of $60,162 in principal and interest, after which will be payable based on the adjusted interest rate for the next 143 months, with the remaining principal and accrued interest payable at maturity. There are certain financial and non-financial covenants with which the Company is to be in compliance related to this loan.

(26) On January 21, 2025, in relation to a club acquisition (see Note 16), the Company executed a promissory note for $5.0 million with the seller. The 8% promissory note is payable in 59 monthly installments of $67,718 in principal and interest, with the balance of principal and accrued interest payable at maturity.

(27) On February 26, 2025, the Company extended its line-of-credit facility (see March 9, 2023, transaction above) with a lender bank for a maximum availability of $5.0 million to mature on March 9, 2027. All other terms and conditions in the original line-of-credit remain unchanged.

(28) On April 7, 2025, in relation to a club acquisition (see Note 16), the Company executed a seller-financed promissory note for $2.5 million bearing an interest of 7% per annum. The promissory note matures infive years and is payable in equal monthly installments of $49,503 in principal and interest. The promissory note is secured by the assets included in the club acquisition.

(29) On June 7, 2025, in relation to a club acquisition (see Note 16), the Company executed a seller-financed promissory note for $500,000 bearing an interest of 7% per annum. The promissory note matures infive years and is payable in equal monthly installments of $9,901 in principal and interest. The promissory note is secured by the assets included in the club acquisition.

Future maturities of debt obligations as of September 30, 2025, consist of the following (in thousands):

10. Income Taxes

Income tax expense consisted of the following (in thousands):

The Company and its subsidiaries do not operate in tax jurisdictions outside of the United States.

Income tax expense (benefit) differs from the “expected” income tax expense computed by applying the U.S. federal statutory rate to earnings before income taxes for the years ended September 30 as a result of the following (dollars in thousands):

(1) State taxes in New York, Florida, and Texas make up the majority of the tax effect in this category.

(2) For 2024, due to the low pretax income, insignificant dollar amounts appear to present greater than threshold percentages.

(3) Includes items that individually fail to meet the 5% of federal rate threshold.

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, nontaxable and nondeductible items, changes in the deferred tax asset valuation allowance, tax credits, and return-to-provision adjustments (which are included in the related reconciling items previously mentioned). 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.

Total income taxes paid, net of refunds, for the fiscal years ended September 30, in the following jurisdictions are presented below (in thousands):

• Includes tax jurisdictions that individually fail to meet the 5% threshold in all periods presented.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):

At September 30, 2025, we had net operating loss carryforwards of $137,000 for federal income tax and $13,000 for state income tax with indefinite carryforward periods. We also had net operating loss carryforwards of $912,000 for state and local income taxes with a 20-year carryforward period. The state and local tax net operating loss carryforwards will begin to expire in 2028 if unused prior to that time.

The Company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. We recognize accrued interest related to unrecognized tax benefits as a component of accrued liabilities. We recognize penalties related to unrecognized tax benefits as a component of selling, general and administrative expenses, and recognize interest accrued related to unrecognized tax benefits in interest expense.

The full balance of uncertain tax positions, if recognized, would affect the Company’s annual effective tax rate, net of any federal tax benefits. The Company does not have any uncertain tax position as of September 30, 2025, and 2024.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. The Company ordinarily goes through various federal and state reviews and examinations for various tax matters. Fiscal year ended September 30, 2022, and subsequent years remain open to federal tax examination.

On July 4, 2025, President Trump signed into law the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" (the "Act") and commonly referred to as the One Big Beautiful Bill Act. Among other things, the Act extends certain expiring, and in some cases expired, provisions of the 2017 Tax Cuts and Jobs Act. The Act also adjusted a number of provisions affecting businesses that were subject to sunsets, phase-outs, or phase-ins that would have taken effect in the absence of action by Congress or that have already taken effect. The Company has reviewed the changes from the Act and determined that any impact would be immaterial.

11. Commitments and Contingencies

Legal Matters

Indemnity Insurance Corporation

As previously reported, the Company and its subsidiaries were insured under a liability policy issued by Indemnity Insurance Corporation, RRG (“IIC”) through October 25, 2013. The Company and its subsidiaries changed insurance companies on that date.

On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.

On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must have been filed with the Receiver before the close of business on January 16, 2015, and that all pending lawsuits involving IIC as the insurer were further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer have insurance coverage under the liability policy with IIC. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100% of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As of September 30, 2025, we haveno remaining unresolved claims out of the original 71 claims.

New York Indictment and Related Matters

On or about May 29, 2024, search warrants were executed on the Company’s corporate headquarters in Houston, Texas, three separate clubs in New York, New York, and for the mobile phone ofthree individuals (includingtwo executive officers and a non-executive corporate employee) by the New York State Attorney General (“NY AG”) and the New York State Department of Taxation and Finance (“NY DTF”). On June 7, 2024, the Company received a subpoena from the NY AG requesting documents and other information with respect to certain clubs in New York and Florida. The Company cooperated with the NY AG during its investigation. As a result of this investigation, a non-executive corporate employee was placed on administrative leave during the pendency of an internal review process.

On or about September 16, 2025, the Company, three subsidiaries, andfive employees, includingtwo executive officers, were arraigned in connection with an indictment filed by the NY AG in which the defendants were variously charged with committing the crimes of Criminal Tax Fraud in the First Degree in violation of Tax Law §1806, a class B felony; Bribery in the Second Degree in violation of Penal Law §200.03, a class C felony; Criminal Tax Fraud in the Second Degree in violation of Tax Law §1805, a class C felony; Criminal Tax Fraud in the Third Degree in violation of Tax Law §1804, a class D felony; Criminal Tax Fraud in the Fourth Degree in violation of Tax Law §1803, a class E felony; Conspiracy in the Fourth Degree in violation of Penal Law §105.10, a class E felony; and Offering a False Instrument for Filing in the First Degree in violation of Penal Law §175.35(1). According to the NY AG, "an investigation by the Office of the Attorney General revealed that RCI executives bribed an auditor with the NY DTF to avoid paying over $8 million in sales taxes to New York City and the state from 2010 to 2024."

On November 25, 2025, the board of directors convened and approved a resolution for Eric Langan and Bradley Chhay to step down as CEO and CFO of the Company, respectively, effective November 28, 2025. In the same meeting, the board nominated and approved the appointment of Travis Reese and Albert Molina as Interim President and CEO and Interim CFO, respectively. Messrs. Langan and Chhay remain employed with the Company and will be focusing on operational improvement and strategic efforts as Head of M&A and Head of Corporate Development, respectively. On January 29, 2026, Mr. Langan stepped down as Chairman of the Company’s board of directors. Mr. Langan was replaced by Mr. Reese as Chairman. Mr. Langan remains a member of the board of directors. The non-executive corporate employee mentioned above continues to be on administrative leave during the pendency of the indictment. The defendants entered a plea of not guilty to all of the charges and are vigorously defending themselves against the charges in court. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the indictment.

On or about May 20, 2025, the Company received a subpoena from the U.S. Securities and Exchange Commission ("SEC") seeking certain documents and information related to the NY AG investigation and NY DTF issues. The Company is cooperating with the SEC and its investigation. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the SEC investigation.

Shareholder Class and Derivative Actions

In September 2025, a putative securities class action was filed against RCI Hospitality Holdings, Inc. and certain of its officers in the Southern District of Texas, Houston Division. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and 10b-5 promulgated thereunder based on alleged materially false and misleading statements made in the Company’s SEC filings and disclosures as they relate to the indictment filed by the NY AG and other related issues. The complaints seek unspecified damages, costs, and attorneys’ fees. This lawsuit is captioned Hernandez v. RCI Hospitality Holdings, Inc., et al. (filed September 21, 2025, naming the Company, Eric S. Langan, and Bradley Chhay). The various plaintiffs sought an order for the appointment of a lead plaintiff and to consolidate the purported class actions. An order has not yet been entered appointing a lead plaintiff or consolidating. The Company has not yet answered or otherwise responded to the complaint, but intends on moving to dismiss the operative pleading for failure to state a claim upon which relief can be granted. The Company intends to continue to vigorously defend against this action. This action is in its early stage, and a potential loss cannot yet be estimated.

On November 17, 2025, a shareholder derivative action was filed in Harris County District Court against officers and directors Eric S. Langan, Yura Barabash, Bradley Chhay, Luke Lirot, Elaine J. Martin, Arthur A. Priaulx, Travis Reese, and RCI Hospitality Holdings, Inc., as nominal defendant. The action alleges that the individual officers and directors made or caused the Company to make a series of materially false and/or misleading statements and omissions related to the indictment filed by the NY AG and other related issues and engaged in or caused the Company to, inter alia, fail to maintain internal controls over its business and financial reporting sufficient to ensure the accuracy of its public filings. The action asserts claims for breach of fiduciary duty and unjust enrichment. The complaint seeks injunctive relief, damages, restitution, costs, and attorneys’ fees. The case, Ayers v. Langan, et al., is in its early stage, and a potential loss cannot yet be estimated.

On March 2, 2026, a shareholder derivative action was filed in the Eleventh Division of the Texas Business Court against officers and directors Eric S. Langan, Yura Barabash, Bradley Chhay, Luke Lirot, Elaine J. Martin, Arthur A. Priaulx, Travis Reese, and Ahmed Anakar. The action alleges that the individual officers and directors breached their fiduciary duties by failing to adequately monitor issues related to the indictment filed by the NY AG and other related issues. The action asserts claims for breaches of fiduciary duties respectively owed by the directors and officers. The complaint seeks injunctive relief, damages, restitution, costs, and attorneys’ fees. The case, Taylor v. Langan, et al., is in its early stage, and a potential loss cannot yet be estimated.

Illinois BIPA Matter

On April 14, 2025, the Company's subsidiaries, RCI Management Services, Inc., Pooh Bah Enterprises, Inc., and RCI Dining Services (Harvey), Inc. (collectively, "Defendants") entered into a class action settlement agreement to resolve claims under the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seg., arising from the alleged collection of customer fingerprints at Rick's Cabaret in Chicago and Scarlett's Cabaret in Washington Park, Illinois. The settlement resolvestwo consolidated cases: Rapp et al. v. RCI Management Services, Inc. et al., Case No. 22LA0884 (St. Clair County, Illinois) and Loera v. Pooh Bah Enterprises, Inc., Case No. 2021CH04759 (Cook County, Illinois).

Under the terms of the agreement, and without admitting any liability, Defendants will provide a settlement fund valued at approximately $2.95 million, consisting of $1.25 million in cash and $1.7 million in VIP cards. The settlement includes payments to class members submitting valid claims, attorneys' fees of up to 40% of the fund, incentive awards to named plaintiffs, and administrative costs. Any unclaimed funds remaining after payment of valid claims, fees, and costs will revert to the Defendants. The Company denies all allegations of wrongdoing. The settlement remains subject to final court approval.

Other

On June 23, 2014, Mark H. Dupray and Ashlee Dupray filed a lawsuit against Pedro Antonio Panameno and our subsidiary, JAI Dining Services (Phoenix), Inc. (“JAI Phoenix”), in the Superior Court of Arizona for Maricopa County. The complaint alleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix and asserted claims against JAI Phoenix under theories of common law dram shop negligence and dram shop negligence per se. Following a jury trial, in April 2017, the court entered judgment in favor of the plaintiffs and awarded compensatory and punitive damages, allocating approximately $1.4 million in compensatory damages and $4.0 million in punitive damages to JAI Phoenix. JAI Phoenix filed post-trial motions, which were denied in August 2017, and subsequently filed a notice of appeal in September 2017. In June 2018, the Arizona Court of Appeals heard the matter and, on November 15, 2018, issued a decision vacating the jury’s verdict and remanding the case for a new trial.

The retrial was held in June 2025. The jury found Mr. Panameno 94% responsible and JAI Phoenix 6% responsible. The jury awarded total damages of $5.1 million and punitive damages of $125,000. Based on the jury’s allocation of fault, JAI Phoenix is responsible for $332,884 of the total award. Under applicable law, plaintiffs retain the right to appeal; however, it is not known at this time whether an appeal will be filed, but if an appeal is filed, the Company will vigorously defend.

In March 2023, the New York State Department of Labor assessed a final judgment against one of our subsidiaries in a state unemployment tax matter for the years 2009-2022. The assessment of $2.8 million, which was recorded by the Company during the quarter ended March 31, 2023, was issued in final notice by the NY DOL after several appeals were denied by the Supreme Court of the State of New York, Appellate Division, Third Department (see Note 6). In September 2023, the NY DOL assessed another of our subsidiaries for approximately $280,000 on the same matter for the period January 2015 through June 2022. We recorded this latter assessment during the quarter ended September 30, 2023.

As set forth in the risk factors as disclosed in this report, the adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. While we take steps to ensure that our adult entertainers are deemed independent contractors, from time to time, we are named in lawsuits related to the alleged misclassification of entertainers. Claims are brought under both federal and where applicable, state law. Based on the industry standard, the manner in which the independent contractor entertainers are treated at the clubs, and the entertainer license agreements governing the entertainer’s work at the clubs, the Company believes that these lawsuits are without merit. Lawsuits are handled by attorneys with an expertise in the relevant law and are defended vigorously.

General

In the regular course of business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state, and local environmental, labor, health and safety laws and regulations. We assess the probability that we could incur liability in connection with certain of these lawsuits. Our assessments are made in accordance with generally accepted accounting principles, as codified in ASC 450-20, and is not an admission of any liability on the part of the Company or any of its subsidiaries. In certain cases that are in the early stages and in light of the uncertainties surrounding them, we do not currently possess sufficient information to determine a range of reasonably possible liability. In matters where there is insurance coverage, in the event we incur any liability, we believe it is unlikely we would incur losses in connection with these claims in excess of our insurance coverage.

Settlement of lawsuits for the years ended September 30, 2025, 2024, and 2023 total $3.9 million, $520,000, and $3.8 million, respectively. As of September 30, 2025 and 2024, the Company has accrued $4.2 million and $2.0 million in accrued liabilities, respectively, related to settlement of lawsuits.

Lease Commitments

See Note 12.

Self-insurance Liability

In fiscal 2025, the Company started self-insuring a significant portion of expected losses under its general liability and liquor insurance programs due to increasingly prohibitive costs of such coverage from third-party insurers. The Company continues to purchase insurance for workers' compensation, property, auto, and business interruption, as well as the minimum insurance coverage where it is required by law for licensing requirements.

We record a liability for unresolved claims and for an estimate of incurred but not reported claims including legal costs based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic conditions, the frequency and severity of claims development history, and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. We recorded estimated self-insurance expense amounting to $9.6 million during the fiscal year ended September 30, 2025. As of September 30, 2025, the Company has self-insurance liability amounting to $9.6 million.

12. Leases

The Company leases certain facilities and equipment under operating leases per ASC 842. These leases include renewal or termination options for varying periods which we deemed reasonably certain to exercise. This determination is based on our consideration of certain economic, strategic and other factors that we evaluate at lease commencement date and reevaluate throughout the lease term.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments and additional lease payments contingent on sales. The variable portion of lease payments is not included in our right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling, general and administrative expenses in our consolidated statement of income.

We have elected to apply the short-term lease exception for all underlying asset classes, which mainly includes equipment leases. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. We do not include significant restrictions or covenants in our lease agreements, and residual value guarantees are generally not included within our operating leases.

Future maturities of operating lease liabilities as of September 30, 2025 are as follows (in thousands):

12. Leases – continued

Total lease expense under ASC 842 is included in selling, general and administrative expenses in our consolidated statement of income, except for sublease income which is included in other revenue, for the years ended September 30, 2025, 2024, and 2023 as follows (in thousands, except years and percentages):

In relation to certain rent concessions that we received from certain of our lessors in view of the COVID-19 pandemic, we accounted for those rent concessions as deferral of payments as if the lease is unchanged. Any reduction in total lease expense during the period caused by either an extension of the lease term or a forgiveness of certain lease payments is accounted for as variable lease payment adjustments.

We recorded impairment charges of operating lease right-of-use assets amounting to $0, $6.5 million, and $1.0 million during fiscal years 2025, 2024, and 2023, respectively.

We recorded third-party operating lease revenue under ASC 842 amounting to $1.7 million, $1.7 million, and $1.8 million for fiscal 2025, 2024, and 2023, respectively. Minimum future base rentals are as follows: $1.5 million for 2026, $1.2 million for 2027, $1.0 million for 2028, $1.0 million for 2029, $423,000 for 2030, and $240,000 thereafter.

13. Stock-based Compensation

On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000. The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each tosix members of management subject to the approval of the 2022 Plan.

Stock-based compensation expense for fiscal 2025, 2024, and 2023, which is included in corporate segment selling, general and administrative expenses, amounted to $1.4 million, $1.9 million, and $2.6 million, respectively, with related tax benefit amounting to $121,000, $444,000, and $616,000, respectively. As of September 30, 2025, we had unrecognized compensation cost amounting to $589,000 related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of approximately four months.

13. Stock-based Compensation – continued

The February 9, 2022 stock options vest over four years with the first 20% having vested on the approval of the 2022 Plan at the 2022 annual stockholders' meeting on August 23, 2022, and 20% vesting on February 9 of each year thereafter, provided however that the options will be subject to earlier vesting under certain events set forth in the Plan, including without limitation a change in control. All of the options will expire, if not vested, at the end offive years. The weighted average grant-date fair value of the stock options was $31.37. No stock options were exercised in fiscal 2025, 2024, and 2023.

The following table summarizes information about stock option activity during fiscal 2025 under the 2022 Plan:

14. Employee Retirement Plan

The Company sponsors a Simple IRA plan (the “Plan”), which covers all of the Company’s corporate employees. The Plan allows corporate employees to contribute up to the maximum amount allowed by law, with the Company making a matching contribution of up to 3% of the employee’s salary. Expenses related to matching contributions to the Plan approximated $280,000, $280,000, and $287,000 for the years ended September 30, 2025, 2024, and 2023, respectively.

15. Insurance Recoveries

We 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. We wrote off the net carrying value of the assets destroyed in the said events and recorded corresponding recovery of losses or gains in as much as the insurers have paid us or where contingencies relating to the insurance claims have been resolved.

In relation to these casualty events, we recorded the following in our consolidated financial statements (in thousands):

14. Insurance Recoveries – continued

The net property insurance gain/loss amount in fiscal 2025, 2024, and 2023 was net of assets written off and expenses amounting to $14,000, $845,000, and $9,000, respectively.

16. Acquisitions and Dispositions

2023 Acquisitions

Lubbock Property

On October 10, 2022, the Company purchased real estate in Lubbock, Texas amounting to $3.4 million for a future Bombshells location. The Company paid $1.2 million in cash at closing and obtained bank financing for the $2.3 million remainder (see Note 9). The site includes extra land that will be listed for sale once the Bombshells unit is completed.

Heartbreakers Gentlemen's Club

On October 26, 2022, the Company completed the acquisition of a club in Dickinson, Texas for a total agreed acquisition price of $9.0 million (with an acquisition date fair value of $8.9 million based on certain legal contingencies that existed pre-acquisition). The acquisition includes (1) $2.5 million for the adult entertainment business covered in a stock purchase agreement paid fully in cash at closing and (2) $6.5 million for the real estate property covered in a real estate purchase agreement paid $1.5 million in cash at closing and $5.0 million under a 6%15-year promissory note (see Note 9). In the stock purchase agreement, the Company acquired 100% of the capital stock of the company which owned the adult entertainment business. The acquisition gives the Company its first adult club in the Galveston, Texas area market.

The following is our allocation of the fair value of the acquisition price (in thousands) as of October 26, 2022:

We believe that in this acquisition goodwill represents the existing customer base of the club in the area and the added synergy profitability expansion when we implement the Company's processes into the club. Goodwill, licenses, and tradename will not be amortized but will be tested at least annually for impairment. Approximately $1.5 million of the recognized goodwill will be deductible for tax purposes.

In connection with this acquisition, we incurred approximately $23,000 in acquisition-related expenses during 2023, which is included in selling, general and administrative expenses in our consolidated statement of income. From the date of acquisition until September 30, 2023, the club contributed revenues $2.0 million and loss from operations of $3.1 million, which are included in our consolidated statement of income. The Company is not providing supplemental pro forma disclosures for this acquisition as it does not materially contribute to the consolidated operations of the Company.

Aurora CO Property

On November 8, 2022, the Company purchased real estate in Aurora, Colorado amounting to $850,000 in cash for a future Bombshells location.

Central City CO Casino Properties

On December 5, 2022, the Company purchased real estate in Central City, Colorado amounting to $2.5 million in cash for the development of a Rick's Cabaret Steakhouse and Casino business.

On February 6, 2023, the Company purchased real estate in Central City, Colorado amounting to $2.2 million in cash for the development of another casino business.

Mark IV Property

On December 16, 2022, the Company purchased real estate in Fort Worth, Texas amounting to $2.4 million in cash. The property hastwo buildings, one of which the Company is leasing out to an existing tenant and the other building the Company is remodeling for future adult club operations.

Grange Food Hall

On December 20, 2022, the Company purchased a food hall property in Greenwood Village, Colorado for $5.3 million, including direct transaction costs and net of certain accrued taxes amounting to $102,000. The purchase price was paid $1.9 million in cash at closing and $3.3 million under a 6.67%five-year promissory note (see Note 9). The Company allocated $2.1 million to land, $2.6 million to building improvements, $98,000 to furniture, fixtures and equipment, and $565,000 to in-place leases based on their relative fair values. The in-place lease intangible has a weighted average amortization period of 1.7 years.

Bombshells San Antonio

On February 7, 2023, the Company completed the acquisition of a previously franchised Bombshells location in San Antonio, Texas for a total acquisition price of $3.2 million. The transaction was effected through a membership interest purchase agreement under which a subsidiary of the Company purchased 100% of the issued and outstanding membership interests of the target limited liability company that owns and operates the Bombshells location from thesix previous owners of the entity (the "Sellers"). At acquisition date, the Sellers were paid $1.2 million in cash and were issuedsix seller-financed promissory notes totaling $2.0 million (see Note 9). The Company allocated the acquisition price $61,000 to inventory, $2.7 million to property and equipment, and $480,000 to favorable lease intangible and right-of-use assets (which both have amortizable life of 13.4 years), net of lease liability.

Baby Dolls-Chicas Locas

On March 16, 2023, the Company and certain of its subsidiaries completed the acquisition offive gentlemen's clubs, five related real estate properties, associated intellectual properties, and certain automated teller machines for a total agreed acquisition price of $66.5 million, payable with a total of $25.0 million in cash, a total of $25.5 million in 10-year 7% seller financing promissory notes, and 200,000 restricted shares of common stock based on an $80 per share price, subject to lock-up, leak out restrictions. Thefive clubs, which are all located in Texas, were purchased through four different asset purchase agreements andone stock purchase agreement, under each of which a newly formed wholly-owned subsidiary of the Company acquired from each club-owning entity all of the tangible and intangible assets and personal property used in the business of that club, except for certain excluded assets. The fair value of the common stock consideration was discounted due to lack of marketability during the lock-up period. The cash consideration at closing was partially funded by the $10.0 million line of credit secured by the Company on March 9, 2023 (see Note 9).

The fair value of the consideration transferred is as follows:

We recognized the assets and liabilities for this acquisition based on our estimates of their acquisition date fair values, all in our Nightclub reportable segment. Upon finalization of our valuation of the assets acquired in this transaction, we reallocated certain amounts from goodwill to indefinite-lived intangible assets. Based on the allocation of the fair value of the acquisition price, measurement period adjustments, and subject to any working capital adjustments, the amount of goodwill is estimated at $4.3 million. Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed, which is essentially the forward earnings potential of the acquired entities. This acquisition also gives the Company a bigger market share in the Hispanic demographic in the Texas metropolitan areas. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $4.3 million of the recognized goodwill will be deductible for tax purposes.

The following is our allocation of the fair value of the acquisition price (in thousands) as of March 16, 2023:

Licenses and tradenames will not be amortized but will be tested at least annually for impairment.

In connection with this acquisition, we incurred approximately $304,000 in acquisition-related expenses during 2023, which is included in selling, general and administrative expenses in our consolidated statement of income. During fiscal 2025, 2024, and 2023 (from the date of acquisition), thefive acquired clubs contributed the following, which are included in our consolidated statements of income (in thousands):

The following table presents the unaudited pro forma combined results of operations of the Company and thefive acquired clubs and related assets in the March 16, 2023 acquisition transaction above as though the acquisition occurred at the beginning of fiscal 2022 (in thousands, except per share amount and number of shares):

The above unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2022. The unaudited pro forma financial information reflects material, nonrecurring adjustments directly attributable to the acquisition including acquisition-related expenses, interest expense, and any related tax effects. The unaudited pro forma financial information includes adjustments related to changes in recognized expenses caused by the fair value of assets acquired, such as depreciation and amortization and related tax effects. Pro forma net income and pro forma earnings per share include the impact of acquisition-related expenses and interest expense related to the $10.0 million line-of-credit facility (see Note 9) and thenine seller-financed notes in the acquisition as if they were incurred as of the first day of fiscal 2022. Pro forma weighted average number of common shares outstanding includes the impact of 200,000 shares of our common stock issued as partial consideration for the acquisition. Since the results of operations during fiscal 2025 and 2024 were subsequent to the fiscal year of acquisition and that fiscal 2024 fully includes the results of operations of thefive acquired clubs, the amounts presented for fiscal 2025 and 2024 above do not reflect any pro forma adjustments.

Arapahoe Street, Denver CO Property

On June 20, 2023, the Company purchased a restaurant parcel located in a condominium building in Denver, Colorado amounting to $4.6 million for a future Bombshells location. The purchase price was paid $1.7 million in cash and $2.9 million under a 7.12%five-year promissory note (see Note 9).

Non-Income-Producing Properties

•On October 11, 2022, the Company purchased a hangar in Arcola, Texas amounting to $754,000 in cash.

•On February 6, 2023, in view of the increasing business presence of the Company in the Denver, Colorado area, the Company acquired a non-income-producing corporate property for $458,000 in cash, to be used for office space and employee housing.

•On August 3, 2023, the Company purchased real estate and office space in Central City, Colorado amounting to $2.9 million in cash to house administrative operations in the region.

2023 Dispositions

On November 4, 2022, the Company received $1.0 million from the Texas Department of Transportation forone of the Company's club properties in Lubbock, Texas due to eminent domain.

On June 29, 2023, the Company sold a property with a carrying value of $1.1 million for $1.5 million in cash. The Company used $904,000 of the proceeds to pay off a loan related to the property.

2024 Acquisitions

Non-Income-Producing Properties

•On October 24, 2023, the Company purchased an administrative building in Central City, Colorado for $1.0 million in cash.

•On October 24, 2023, the Company purchased a vacant lot in Central City, Colorado for $65,000 in cash.

2024 Dispositions

South Houston Property

On May 31, 2024, the Company sold parking lot properties with a combined carrying value of $74,000 related to a previously owned club in South Houston, Texas for $160,000 in cash. The Company paid approximately $9,500 in closing costs related to the transaction.

Airplane

On June 6, 2024, the Company sold an aircraft with a carrying value of approximately $2.0 million for $1.8 million in cash. The Company paid approximately $53,000 in closing costs related to the transaction. The proceeds of the sale were used to pay off related debt.

Bombshells San Antonio

Effective September 1, 2024, the Company sold Bombshells San Antonio to members of its former franchisee group for a noncash exchange of the Company's membership interest in the owner-subsidiary for the forgiveness of notes payable to the former franchisee group members. The transaction resulted in a $2.3 million gain, which is included in impairments and other charges, net in our consolidated statements of income.

2025 Acquisitions

Flight Club

On January 21, 2025, the Company completed the acquisition of a club in the Detroit, Michigan, market for a total agreed acquisition price of $11.0 million, consisting of $3.0 million in cash and $5.0 million in a seller-financed 8.0% promissory note (see Note 9) for the club, and $3.0 million in cash for the associated real estate through asset purchase agreements.

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

We recognized the assets and liabilities for this acquisition based on our estimates of their acquisition date fair values in our Nightclubs reportable segment. We have not finalized our valuation of the tangible and identifiable intangible assets acquired in this transaction. As of the release of this report, the fair value of the acquired tangible and identifiable intangible assets are provisional pending the completion of the final valuations for those assets. Based on the allocation of the preliminary fair value of the acquisition price and subject to any working capital adjustments, the amount of goodwill is estimated at $613,000. Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired, which is essentially the forward earnings potential of the acquired club and our entry into a new market. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $613,000 of the recognized goodwill will be deductible for income tax purposes.

The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of January 21, 2025:

Licenses and tradename will not be amortized but will be tested at least annually for impairment.

In connection with this acquisition, we incurred approximately $141,000 in acquisition-related expenses in fiscal 2025, which are included in selling, general and administrative expenses in our consolidated statements of income.

From the date of acquisition until September 30, 2025, the acquired club contributed the following, which are included in our consolidated statements of income (in thousands):

The seller has not provided the fiscal 2024 financial statements, therefore, we could not provide supplemental pro forma information for the combined entities.

Platinum West and Platinum Plus

On April 7, 2025, the Company completed the acquisition of a club in West Columbia, South Carolina, for a total purchase price of $8.0 million, consisting of $3.75 million cash and $2.5 million in a seller-financed 7% promissory note (see Note 9) for the club, and $1.75 million cash for the associated real estate. On June 13, 2025, the Company completed the acquisition of a club in Allentown, Pennsylvania, for a total purchase price of $2.0 million, consisting of $1.5 million cash and $500,000 in seller-financed 7% promissory note (see Note 9). The acquisitions were completed through asset purchase agreements. The Allentown club transaction was completed several weeks after the West Columbia club due to delays in the issuance of licenses.

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

We recognized the assets and liabilities for this combined acquisition based on our estimates of their acquisition date fair values in our Nightclubs reportable segment. We have not finalized our valuation of the tangible and identifiable intangible assets acquired in this transaction. As of the release of this report, the fair value of the acquired tangible and identifiable intangible assets are provisional pending the completion of the final valuations for those assets. Based on the allocation of the preliminary fair value of the acquisition price and subject to any working capital adjustments, the amount of goodwill is estimated at $201,000. Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired, which is essentially the forward earnings potential of the acquired club and our entry into a new market. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $201,000 of the recognized goodwill will be deductible for income tax purposes.

The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of acquisition date:

Licenses and tradename will not be amortized but will be tested at least annually for impairment.

In connection with this combined acquisition, we incurred approximately $103,000 in acquisition-related expenses in fiscal 2025, which are included in selling, general and administrative expenses in our consolidated statements of income.

From the date of acquisition until September 30, 2025, the acquired clubs contributed the following, which are included in our consolidated statements of income (in thousands):

The seller has not provided the fiscal 2024 financial statements, therefore, we could not provide supplemental pro forma information for the combined entities.

2025 Dispositions

Sale of Bombshells Austin

On November 14, 2024, the Company sold Bombshells Austin for $70,000 in cash and $60,000 in a 6%12-month promissory note (see Note 9). The Company recognized a $1.3 million gain on the sale due in part to an impairment of its operating lease right-of-use asset in a prior year.

Sale of Aurora CO Property

On March 31, 2025, the Company sold a real estate property in Aurora, Colorado, for $825,000. The Company recognized a loss of $153,000 on the sale, net of closing costs.

17. Quarterly Results of Operations (Unaudited)

The following tables summarize unaudited quarterly data for fiscal 2025, 2024, and 2023 (in thousands, except share and per share data):

17. Quarterly Results of Operations (Unaudited) – continued

Our nightclub operations are normally 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). Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.

18. Related Party Transactions

Presently, our director and former Chairman, President, and CEO, Eric Langan, personally guarantees all of the commercial bank indebtedness of the Company. Mr. Langan receives no compensation or other direct financial benefit for any of the guarantees. The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of September 30, 2025 and 2024 was $139.6 million and $135.3 million, respectively.

Included in the $17.0 million borrowing on October 12, 2021 (see Note 9) are notes borrowed from related parties—one note for $500,000 (Ed Anakar, President of RCI Management Services, Inc. and our Director of Operations) and another note for $150,000 (from a brother of the Company's former CFO, Bradley Chhay, see above) in which the terms of the notes are the same as the rest of the lender group. Refer to Note 9 for October 2023 extension of term of promissory notes. As of September 30, 2025, the amount borrowed from Ed Anakar has been fully paid.

18. Related Party Transactions – continued

We used the services of Tall Oak Custom Furniture and Nottingham Barrels and Furniture, previously Nottingham Creations, all furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Tall Oak Custom Furniture and Nottingham Barrels and Furniture are owned by a brother of Eric Langan (as was Nottingham Creations). Amounts billed to us for goods and services provided by Tall Oak Custom Furniture, Nottingham Barrels and Furniture, and Nottingham Creations were approximately $19,477 in fiscal 2025, $350,000 in fiscal 2024, and $195,000 in fiscal 2023. As of September 30, 2025, 2024, and 2023, we owed Tall Oak Custom Furniture, Nottingham Barrels and Furniture, and Nottingham Creations $3,312, $18,700, and $10,700 respectively, in unpaid billings.

TW Mechanical LLC (“TW Mechanical”) provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 2025, 2024, and 2023. A son-in-law of Eric Langan owns a 50% interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were approximately $555, $16,491, and $443,295 for the fiscal years 2025, 2024, and 2023, respectively. Amounts billed directly to the Company were approximately $4,615, $3,160, and $9,430 for the fiscal years 2025, 2024, and 2023, respectively. As of September 30, 2025, 2024, and 2023, the Company owed TW Mechanical approximately $0, $0, and $0 respectively, in unpaid direct billings.

19. Subsequent Events

Share Repurchase

Subsequent to September 30, 2025, through March 13, 2026, we purchased 153,061 shares of the Company's common stock pursuant to our share repurchase plan, excluding the November 21, 2025, repurchase below, at a cost of $3.7 million. These shares were subsequently retired.

On November 21, 2025, the Company repurchased 821,000 shares of its own common stock from a single stockholder for $30.0 million, paid $8.0 million in cash and $22.0 million under atwo-year 12% unsecured promissory note.

Debt

On October 1, 2025, the Company entered into a debt modification transaction with 22 investors by extending their promissory notes' maturity date to October 2028. Two new investors joined with a combined $2.1 million andtwo existing investors increased their participation by a combined $250,000. The promissory notes continue to bear a 12% annual interest rate with interest-only monthly installments until full balance at maturity.

Dispositions

On October 7, 2025, the Company sold 100% of the common stock of a club subsidiary located in Harlingen, Texas, for $600,000. The sale did not include the real estate where the club is located. The Company recognized a loss of approximately $17,000 on the sale.

On February 6, 2026, the Company sold a club located in Edinburg, Texas, for $1.1 million recognizing a $219,000 loss on the sale. Proceeds from the sale were used to pay down certain related debt.

Investment

On November 17, 2025, the Company entered into a strategic partnership with an adult club entrepreneur by accepting a 49% interest in one of our clubs in Austin, Texas, for $1.8 million in cash. This partnership will strengthen our Austin club with more local management and marketing expertise.

Schedule of Valuation and Qualifying Accounts

(Amounts in Thousands)