RCI Hospitality (RICK) Financial Report Summaries

Risks

• 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 in 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.
• Our venture, expansion, and renovation projects may face significant inherent risks.
• Other risk factors may adversely affect our financial performance.
• 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. In addition, global economic conditions may make it more difficult to access new credit facilities.
• We have recorded impairment charges in current and past periods and may record additional impairment charges in future periods.
• Our business operations are subject to regulatory uncertainties which may affect our ability to continue operations of existing nightclubs, acquire additional nightclubs, or be profitable.
• The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. If federal or state law mandates that they be classified as employees, our business could be adversely impacted.
• Our revenues could be significantly affected by limitations relating to permits to sell alcoholic beverages.
• 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 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.