Allan Priaulx – IR Counsel Eric Langan – CEO Phil Marshall – CFO

Dave Fore – Montgomery Street Research Eric Wold – Merriman Curhan Ford Jamie Clement – Sidoti Scott Kolman – Credence Capital Ian Shaffer -- Galliant Capital [ph] Blair Sanford – Burlingame Asset Management Steven Martin – Slater Capital Management Ronald Wald, investor Scott Kolman – Credence Capital Philip Calderon, investor Chuck Lipson – CSL Associates

Greetings and welcome to the Rick’s Cabaret International third quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Allan Priaulx, Investor Relations Counsel for Rick’s Cabaret International. Thank you. Mr. Priaulx, you may begin

Thank you, Sean. I just want to welcome everybody to the call. We have a record number of people on the call today. In our presentation, which is posted to the web site and through Precision IR, you will see our Safe Harbor statement. Please read the Safe Harbor statement as it contains the normal disclosure information. I am now pleased to introduce to you our President and CEO, Eric Langan, who would take you through the conference for our third quarter 2008 earnings.

Thank you, Allan. We will begin with the overview of today’s presentation in which we will review the third quarter ’08 result with certain results. We’ll discuss the impact of certain events that affected earnings in this quarter. We will discuss our organic growth, the Las Vegas acquisition update to let everyone know where we’re at on that at this point, and update our guidance for 2008 and review our outlook for 2009. To begin with, the third quarter: revenues were a record $16.3 million, up 93% over the third quarter of 2007. Net income was $1.8 million, up 77% over the third quarter of 2007. Diluted earnings per share of $0.21 versus $0.16 in the second quarter of 2007. Operating cash flow for the nine months is $9.7 million versus $2.6 million for the year. As I actually said in the third quarter there; at the end of the third quarter is what it should be. Getting into the things that affected our net earnings. We’re very happy with our revenue. Our revenue growth is solid. We’re continuing to see visits to the clubs increase. However, the start-up costs in Dallas and Philadelphia were about $525,000. While we anticipated the start-up costs in Dallas and Philadelphia, what we didn’t anticipate was having to keep out-of-town entertainers in Philadelphia for about four extra weeks, which added to our costs, and continued additional marketing in that market as well. Also, originally, we only had one club in Dallas that we were buying. We actually bought two clubs. The third one closed around the 12th or 13th of June, which added to our start-up cost in Dallas. We also had $125,000 expense in the month of April due to the fact that a Federal Judge ruled the tax unconstitutional on March 28, so we stopped collecting it. However, towards April 20, we found out we had to still pay this tax because the state decided that they were going to make a state tax anyway and it took us a few days to adjust. So we had about 26 days of the pole tax that we had to pay that we didn’t recover from our customers. We also had timing losses due to our new media division and that its trade show is in August. We start collecting revenue but we can’t book any of that revenue under GAAP principles until after the trade show is over in August. More review of the third quarter, you’ll see that we nearly doubled our revenues. Those revenues were driven mainly by Tootsies in Miami and the new clubs in Dallas and Philadelphia that added $6.8 million to our revenues. Our same location increase of 8.45% also added an additional $630,000 in year-over-year revenues. We were also able to reduce our costs. As we are seeing in the media, food costs and other raw material costs were increasing, we went to our suppliers and negotiated discounts and pushed for volume discounts, especially at our Tootsies in Miami location, and we were able to achieve 11.68% versus 12.6% in the previous year. The current update for the Las Vegas acquisition: We are ready to close the transaction. We have raised the capital. Everything is in place to close the transaction. We have a current dispute between the landlord and the seller that is awaiting resolution. They have a hearing on August 21 that we hope we will resolve that. Once that is resolved, we anticipate closing the transaction. Now, there is a limited time that we are prepared to wait to close this transaction and currently that is September 30, before we consider moving on and investing that money some place else. That is one of the biggest things that affected us, as we issued 672,000 shares to do a capital raise in anticipation of closing an acquisition on June 25, and we haven’t been able to get that acquisition closed as yet. And that is what’s going to affect our guidance going forward in the next year: approximately 700,000 shares outstanding without any additional revenue in our guidance. Moving on to acquisition overview, we continue to look at potential acquisitions. There are several strong candidates. We will be at the Club Owners Expo (which we recently purchased and now own) from the 24th to 27th and we will be meeting with a lot of potential acquisition candidates at this Expo. We anticipate our next acquisition before the calendar year-end. Moving to guidance, which I know everyone is very concerned with, and I want to address these issues. This fiscal year, September 30, we are lowering our revenue to $60 million. A small decrease in our total revenue just due to what we consider some of our high-end customers spending down a little bit, net income to $8.6 million for earnings per share of $1.02. Now, the reason we are seeing this is we are seeing a margin squeeze. If you look at our current quarter, our net income margin dropped to about 11% versus over 16% in the last quarter. Recently, we anticipated a continued growth in our margins to about 19%. Now, we believe those margins are going to be closer to about 14% for the next quarter or two. For the calendar year, December 31, we are bringing our revenue to $67 million, down from the $68 million to $69 million that we originally anticipated and bringing our net income to $9.6 million due to that margin squeeze and due to the extra shares outstanding and that margins squeezes our earnings per share to $1.10 for the calendar year. Now, these numbers do not assume any additional acquisitions and any acquisitions that closed, including Las Vegas, would impact to these results. Our outlook for 2009: Our earnings per share of $2 to $2.20 with revenues that exceed $100 million. What I really want to address is our current run rate, which is about $0.30 to $0.35 a quarter. Now, our outlook for $2.00 to $2.20 assumes that we will continue with our acquisition strategy and continue to close acquisitions. On the next page, we wanted to add a basis for our 2009 outlook and how we plan to get from $1.20 to $1.40 in our annualized run rate to $2.00 to $2.20. A lot of concern from investors has been that we don’t have the currency with our stock and we agree; we will not be issuing stock and we don’t intend to issue stock in these price ranges. But we will remind you that we have $13 million in cash on hand. We can also leverage our existing cash flow from operations, which is over $1 million per month. We also have an estimated $15 million in net real estate equity than could be tapped for acquisitions, so we believe that we are still in position to continue with our acquisitions regardless of what our stock price is at this time. At this point, I would like to take any questions and invite everyone to come out to the Due Diligence Ball tonight. I will be at the club from 6 pm to 8 pm and we have free admission and free hors d’oeuvres, of course discounted drinks as always. I will be available to answer any questions in person that you might have or any concerns. I know that the Q was just recently filed with the SEC, so a lot of you may not have actually seen the entire 10-Q yet, but it is out at this time. At this time, I will take any questions.

Thank you. We will now be conducting a question-and-answer session. (Operator instructions) Our first question comes from the line of Dave Fore with Montgomery Street Research. Please go ahead. Dave Fore – Montgomery Street Research: Hey, guys. Did you guys jump in salary and wage from 2Q to fiscal 3Q, was that based on the start-up costs at Philly and Dallas?

I’m sorry. I didn’t get the first part of your question. Dave Fore – Montgomery Street Research: I’m sorry, Eric. The step-up in salary and wages between this quarter and the previous quarter, was that largely due to the start-up costs in Philly and Dallas?

Yes, and of course the media division, as well. Dave Fore – Montgomery Street Research: Okay. And another clarification question: is the Exotic Dancer revenue going to be located in the ‘Other’ bucket of revenue?

Phil, are you on the call? I don’t know.

I’m here, yes, it is. It is in Other right now. Until that gets larger, we’re going to break it out probably in the annual report. But, right now we just tuck it in Other. Dave Fore – Montgomery Street Research: Thank you. Do you have a sense on what the revenue is going to be, impact or contribution, in the fourth quarter from media?

We don’t have the exact numbers yet because this is our first conference. We’ve looked past ones. We have changed the format a little bit and we’re anticipating a larger turnout, especially among the general managers in the industry. I have talked with Don personally; some of the sponsorship revenue is down just a little bit but not a huge percentage and he anticipates making that up with the increased participation from general managers actually coming to the show. And the other show, the StoreErotica Show, is actually increasing in size. This is its second year. Dave Fore – Montgomery Street Research: Okay. Just one follow-up question and I’ll get back in the queue for others. On the acquisition funding side, how far are you going to go into leveraging the balance sheet on the debt side?

I think we’d keep it at less than three times EBITDA. At this point, probably closer to 2.5 would be the ideal maximum leverage. However, you’ve got to understand our leveraging – a lot of our debt is real estate debt. We do not really have any debt other than the $10 million for Tootsie’s that’s really what I consider business margin debt. The rest of it is in exchange for rent. We pay no rent because we pay the rent to ourselves basically, which covers those payments. So some of the real estate debt should kind of be stepped out from that percentage in my opinion. Dave Fore – Montgomery Street Research: Okay. Just one last question, sorry one more. It looks like in terms of your 2008 guidance, you’re implying about $17 million in top line revenue for 4Q, about $0.27 or so on the bottom line?

Yes, I think about $7.8 million, actually right. What we have right now – we are at – I don't have it in front of me. We estimated $16 million. I think we’re currently $17.3 million less than that, so we’re $47.6 million right now. Dave Fore – Montgomery Street Research: Okay, great.

Got it at the bottom of this press release. I’m sorry, should have had it right in front of me, but I did not. Dave Fore – Montgomery Street Research: Super. Thanks guys.

Thank you. Our next question is from the line of Eric Wold with Merriman Curhan Ford. Please go ahead. Eric Wold – Merriman Curhan Ford: Hey, good afternoon. Couple first, one on the $525,000. I know the last guy asked you if a lot of that was in salaries and wages, we assume that's kind of split between salaries, wages and other, and you know the breakout of how much of within each.

I don’t off-hand; obviously, we can dig into it and get it for you. The majority is probably the salary and wages increase, simply because we have three more clubs and people that we are paying. Eric Wold – Merriman Curhan Ford: Okay.

The revenue hasn’t really stepped up all the way. I think the advertising was stepped up quite a bit to in this quarter. Eric Wold – Merriman Curhan Ford: Correct. On the acquisition front, you mentioned you expect to get one more acquisition closed before year-end. Is that in addition to whatever happens with Vegas?

Yes, it is. Eric Wold – Merriman Curhan Ford: Okay. And then, can you give a little more color in terms of what's included in the ‘09 guidance, obviously continuing the acquisition program –

You realize I’m talking about calendar ’08 when I say in this calendar year. Eric Wold – Merriman Curhan Ford: Correct. What can we think about in the ’09 guidance, what you are assuming in there in terms of club acquisition, either number of clubs or revenue acquired that you want?

I think we are going to see a couple of things. I am hoping to see the margins increase back up into that 16%, 17% range that we were at, number one, as Dallas and Philadelphia start contributing to revenues instead of being a negative. And also, well, Vegas would be about $18 million, so if we don’t close Vegas we will definitely want to replace that with a similar transaction, and we are also looking at a couple of – $10 million to $12 million in additional revenue acquisitions, with margin ratio similar to our current operations. No more in 2009; I don’t believe we will do any other acquisitions that aren't immediately accretive. I think we did the two start-ups in March and April, and I think we are done with that for at least this year. Eric Wold – Merriman Curhan Ford: Okay. And then lastly on the existing clubs, can you give us a flavor -- kind of what you’re seeing from consumers, either in higher end clubs or lower end clubs, where are these things like –

Kind of across the board and it really started affecting us in June a little bit and July I think we are seeing a little bit of it. The guy who used to buy three bottles is buying two; the guy who was buying two is buying one; the guy who was buying one bottle is buying drinks by the glass, but we are seeing basically more people through the door spending a little less money is what I think we are seeing right now, And the other thing we are seeing this year, which we didn’t see last year, -- actually for the last two years we haven’t seen -- is that the summers have been very strong in the last two year but this year we are turning back to a normal trend, slower during the week and much, much busier on the weekend except in New York City. New York City is just the anomaly of everything. We’re continuing to see strong growth in this market – everyday is busy. The weekends are picking up and during the week is picking up, so a very strong growth in New York. Eric Wold – Merriman Curhan Ford: Are you seeing any impact of people in the clubs spending less on the girls, on the dancers. Is it not impacting the ability to retain workers in the club?

Actually as the unemployment rate goes up, we actually see more girls coming in and applying, so actually as times gets harder we are seeing more girls come in. So I think we’re seeing seeing the customers spending a little less money on the girls and I think we’re seeing more girls at the clubs because of the current economic condition and so the girls perceive it as being a little slower than it actually is, because they are getting hit twice, (a), with the customers spending less money and (b) more girls taking those dollars – dividing those dollars up. Eric Wold – Merriman Curhan Ford: All right. Thank you guys.

Thank you. Our next question is from the line of Jamie Clement with Sidoti. Please go ahead. Jamie Clement – Sidoti: Eric and Allan, good afternoon.

Good afternoon, hi. Jamie Clement – Sidoti: Eric, just a clarification, I think your calendar ‘08 EPS guidance is about $1.10?

Right. Jamie Clement – Sidoti: Okay. So going from the September quarter to the December quarter, you’re not including Vegas in that guidance?

No. Actually not. This is no additional acquisition. This is – we want to show you where we are right now. We’ve got nothing else. We just left that $13 million cash sitting in the bank earning 2% on the treasury – that it is earning. Jamie Clement – Sidoti: Okay. So in terms of going from a mid $0.20 type number in your September quarter to a $0.30 something number in the December quarter, are the primary drivers there a question of seasonality and of getting your newer clubs kind of up and running? Is that how you’re thinking about it over the next couple of quarters?

Absolutely. Jamie Clement – Sidoti: Okay.

And the fact that we have a trade show in September that we won’t have in the December quarter as well, so we figure that the seasonality in which October, November, and December is typically our best quarter almost every year in history. So, we know that sales are going to be up in those quarters as they always are and we also know that the Dallas and Philadelphia clubs are going to be six months old, so we are going to start seeing that six-month growth cycle, so we estimate they will both contribute in that quarter, as well as the trade show revenue coming down a little bit, otherwise, we may have been a little higher but the trade show revenue will not be included in the December quarter, so. Jamie Clement – Sidoti: Okay.

And keep in mind we will have three months of Tootsie's this year versus last year we didn't. That's a change year-over-year. Jamie Clement – Sidoti: In terms of how you’re looking at the business today versus three months ago, obviously the consumers are a little stretched but let me ask you this, I mean, do you think that opening new clubs, whether you want to talk the Dallas or whether you want to talk about Philly or both together, do you find that maybe the economy has sort of – may be prevented or impeded your ability to kind of drive new customers to the clubs, like in others words –

It definitely has done that. Jamie Clement – Sidoti: Okay.

And the reason we think that is what we are seeing now is customers – they aren’t going out as much, so when they go out they want to have a great time, so they are going to the place they know. So getting them to try something new has been more difficult. When we switch to the free passes and changted all of our ads to “get in free“ we started seeing an increase in the customer count. And that's the main point. They don’t have the money to pay two separate charges. Jamie Clement – Sidoti: Okay.

But we kind of have to let our (inaudible) while we build our business clubs. We are very confident that once the football preseason is here now, so we’re seeing some increase in that and once basketball season starts, we are very confident that both Philadelphia and Dallas will do very, very well. The Dallas club is within five miles of the football and the basketball stadiums and the Philly club is 1.5 miles from the football and the basketball and hockey and every stadium in Philadelphia, basically. Jamie Clement – Sidoti: Eric, let me just – about Philly as a market, I am wondering whether Philly is a market that’s going to be a seasonally weak over the summer kind of market? It seems like most high-end customers in Philly, I mean at least in my perspective, leave Philly on the weekends.

You know, it’s possible. There is a lot of blue collar that parties just on the weekends. Jamie Clement – Sidoti: Okay.

It’s just too new to tell. Jamie Clement – Sidoti: Okay.

One of the main problems is that in May when we did our guidance, we looked at everything, we were seeing a strong growth and we estimated that our growth continuing to about 19% and in reality we did not get that extra 3% margin growth in our existing clubs even though we had sales growth, but the margins got squeezed. We have higher costs related to different things and at the same time, we have the drag from the new locations, which brought it down to, I think, about 11% net income. We are aware of that. The other problem we had is our accounting had to take in four new businesses, and so while we were watching the top line revenues because it’s very easy to get in our top line revenues, some of the accounting stuff that were behind on getting delayed the bottom line numbers, so we didn’t realize the margins were being squeezed as much as they were. So that was a problem. But we are aware of that now. We are completely caught up in the accounting office now and we’re aware of what’s going on with that and obviously as we are more aware, we are able to make sure that those margins are climbing back to where they need to be. And we estimate that they are going to…we picked the low end of 14%. We estimate they will get back to that 14% to 16% range that we were at now that we’re aware and watching it much, much closer. Jamie Clement – Sidoti: Okay. What it sounds like is, you are comfortable with where things are. There are some costs that are unwinding here. You should be up sequentially in the September quarter and you think you’ll be up sequentially in December quarter even without an acquisition.

Right. The biggest thing that’s affecting earnings per share is that we have 700,000 additional shares outstanding that are not bringing in any revenues. It is not accretive right now. It is dilutive. We will invest that money and it will be accretive, and when that happens, we’ll update our guidance. As you can see from our outlook, we’re very confident that we’ll get back on course. This is just a blip and we’ve always said that for the last few quarters: “What can the economy do? It can cause a quarter blip or maybe even a two-quarter blip and then we have to make adjustments if customers' spending habits change. So far, we hadn’t seen any changes.” Well, in June, we started seeing some of those changes towards the end of June and in early July as well. So, we have had to make some additional adjustments. We started making the adjustments in June and increased some of our start up costs when we bought the new club in Dallas. So around mid June, we started making a few adjustments, but, I think overall, it will be very strong. Jamie Clement – Sidoti: Okay. Thanks very much for your time.

Thank you. Our next question is from the line of Scott Kolman with Credence Capital. Please go ahead. Scott Coleman – Credence Capital: Hi, thanks. Hey, guys. I just wanted to get some clarification on some of the numbers. You said for ’09 without any acquisitions, we’re looking at $1.20 or a run rate of $1.20 to $1.40. Was that calendar or fiscal?

That’s fiscal ’09. Scott Kolman – Credence Capital: Fiscal. Wish you guys switched to a calendar because it gets so confusing.

I know. I know. Scott Coleman – Credence Capital: Just kidding.

It’s a lot cheaper for us when we get our audit done and everything, because everybody else is fighting for resources on December 31st. . Scott Kolman – Credence Capital: Remember, when we were talking about run rates, I think it was last conference call, we had – this is with Vegas -- we have $92 million to $94 million and $1.70, and I think that was fiscal right?

Right. I think if we close the Vegas transaction, I‘m saying we will be a little lower than that because the margins are being squeezed a little a bit. We are going to have a hard time squeaking out that 19% margin. But I think we can – I do strongly believe we will get back to that 15%, 16% margin rate. At our current run rate, I guess we’re about $72 million annualized. So depending on where the percentage of that margin comes in at, we will figure where we will be. We are going to have about 9.5 million shares outstanding, fully diluted in this next quarter. Unless we buy something else, I think that is fully diluted. That's like almost every share we can possibly have outstanding. Scott Kolman – Credence Capital: Got you. So if you could just give us a little color on what costs kind of got out a little out of control because you weren’t looking at the bottom line enough and what adjustments you can make? Just some color on that.

Sure. I think our marketing and advertising increased dramatically and year over year. Our marketing is up about $665,000; it was about $300,000 last year. Our legal and accounting have gone up considerably and so are other professional fees in that. So we are working on lowering some of that stuff and talking with some of our legal counsel. We did have two lawsuits that popped up – we did some depositions and stuff -- and I believe most of that will go away after this quarter. Scott Kolman – Credence Capital: Okay.

We will get some finality on some of that. Scott Kolman – Credence Capital: What about regional management?

Our salary and wages, they increased. Scott Kolman – Credence Capital: What about regional managers, did you start to have too many people around as the acquisitions didn’t materialize?

We have cut a couple of management, high-level management personnel in the last few months. We believe we have got stronger people coming up, and they just weren't performing to the standards that we wanted them to. Scott Kolman – Credence Capital: Okay. And the marketing, was that because you had some overlapping as you had new clubs and you had some overlapping marketing…

Well, a lot of that was in those start-up costs, obviously. Scott Kolman – Credence Capital: Okay.

On the 525,000 start-up costs, a lot of those start-up costs were for marketing expenses. We did a lot of radio in Philadelphia when we first went in there, and we have added considerable marketing in Dallas as well. And some of our existing locations, I think we are doing some new stuff in New York and trying some new stuff in Miami as well. Scott Kolman – Credence Capital: And you plan on bringing that back down.

Yes, definitely. Scott Kolman – Credence Capital: Okay. All right. That’s it from me for now, thanks,

All right. Thank you.

Thank you. Our next question comes from Ian Schaeffer with Galleon [ph] Capital. Please go ahead. Ian Shaffer – Galliant Capital: Hey guys, how are you doing? A couple of questions, maybe some comments to begin and let me preface this up by sayingI am long, I do own shares in RICK and I do like the story a lot. I followed you guys for a long time but, Eric, there has been some issues that – I spoke with Allan today and I told him I would bring this up on the call and I just think there might be some level of frustration going on with some of the investors. There seems to be some sidebar conversations or assumed conversations that people at RICK who are aware of current trends in the business and market conditions are having with reporters and I could cite, remember the July 1st date when a discussion you were having I believe with a reporter may be got misconstrued, and I am sitting at my Bloomberg desk and comments were streaming about how things have changed and all that and how the Las Vegas acquisition maybe delayed and then later on in the day, a press release comes out from you guys, at around one o’clock addressing that situation.

The reason why is that she took everything out of context. She – in other words, we were having a conversation and she asked me something specific about acquisitions and I answered an unanswer that was about three paragraphs and she took one sentence out of those three paragraphs and used it in her story. If you look, they changed it – they updated the Bloomberg story afterward, after of course Allan got hold of them, and clarified and told them that you've taken it out of context. They did re-issue a different release. Unfortunately the damage had already been done. Ian Shaffer - Galliant Capital: Right and the point is that the damage is done, but the bigger issue that I’m having and I think other people are having is, it is – there is only so much news flow coming out of the company but there are individuals who seem to have more information than others. So wouldn’t it be more fair or a good idea to have discussions with reporters maybe being web cast, so that all investors can have that information at the same time rather than the situation that happened here? And I also have to say, some of the analysts on Wall Street that you may have spoken with had some idea that the Philadelphia and other clubs may have higher start-up expenses and that we weren’t privy to.

I think Eric visited a lot of those clubs. Ian Shaffer - Galliant Capital: Okay, that’s fair. But I’m just letting you know that there is an assumption out there that there have been discussions from people with RICK hinting to that effect and if there are investors who believe in the long-term -- and I do, okay -- I’m not looking to get out of the company, I like the company. But this is something that I have felt and I heard it from other people that there are some side discussions occurring or there is believed to be and it would be fair if everyone had the information at the same time. If you felt that maybe if you knew a month ago that expenses would be high, then you don’t have to hold it til earnings day, but you could put out a press release say you know a month ago, maybe give the short sellers some reason to…

If you will notice, the 10-Q didn't get filed until 4:25 or 4:30 today. There were last minute changes from the auditors even up to the last literally minute of the bell – before the bell went of. Ian Shaffer - Galliant Capital: But an updated guidance would come out?

We struggled to get this 10-Q out on time today simply because we just made a lot of acquisitions in this quarter and there were a lot things the accounting people got behind on as they tried to assimilate the new clubs into our accounting systems, especially with the media division and the rule on booking the revenue from the media division, which was on a cash basis before we took it over. So we had to go and create all of the accrual accounting and whatnot to get it in. If we had talked to people, I mean I know that both the analysts lowered the estimate, but I think that was just based on our revenues were down, I think they both had us at $16.6 million of revenues, I don't know what the core assumption on that rev was in their mind, but we went and reported $15.8 million revenue, so I think don’t know exactly why and how they came to their numbers but I don’t think that they got any inside information from someone in the company. Ian Shaffer - Galliant Capital: I am not saying they did, but it's just there is a thought out there that there are some aggressive short sellers on the company and this may be because they are naked short selling but that someone didn’t know of something. I'm just letting it be out there and I am not saying it is fact. But I’m just saying maybe be a little more cognizant that if you are going to talk to someone make it public, make it a web cast or have a press release, whatever you are going to do but before the fact. So that's just one thing. The second question I have for you though is, and I know you guys want to continue acquisitions as the key part of the story, right? But there are a lot of naysayers on the name, a lot of people want to lump you with VCG, and you’ve made great leaps in the past to talk about how you’re different companies – just wouldn’t it make sense, okay, you guys are trading at $12, $13 let’s say, right now.

Right. Ian Shaffer - Galliant Capital: Maybe six times your next year’s earning, there’s a thought out there. Is there a feeling out there that -- and again, I believe in the company -- but how can you give investors confidence that you won’t make other acquisitions something like the Scores in Las Vegas won’t happen again or higher start-up costs in Philly may occur that you won’t hit the guidance? How do you keep investors…I personally think that if investors actually see you hitting that $2.00, $2.10 number, they would be happy and they'd support the stock. There is just a lot of naysayers out there saying, you know what, you guys are too acquisitive. You don’t necessarily always know what you’re acquiring and then there is going to be some issues that will arise as we saw this quarter that's going to force you to bring down the guidance. So why do you have to be so aggressive with the acquisitions, why can’t you just slowly digest them? You’ve done a lot and actually proved to the Street and Main Street that you can hit the numbers that you put out?

I think we have done that in the past. I think we had a glitch this quarter, there is no doubt and I’m not trying to make excuses. I’m trying to explain what happened. Ian Shaffer -- Galliant Capital: Right.

And what I’m going to do about making sure it doesn’t happen again. And that is – we brought the estimated down to about 14% profit margin, which is a little less than we did two quarters ago, but more in line with where we believe the economy has us at today. We did miss this quarter but we beat every quarter for the past four or maybe even six quarters. I looked back more quarters before (inaudible) exactly where I was at and what we had done in the past to see how bad this miss was versus some of our overages and this is a bad miss. I agree. The margins got squeezed, we were anticipating growth that didn’t happen and at the same time we had expenses that we didn’t account for in our guidance. We have reevaluated everything. We have set down and we, I mean, we are focused getting this Q out. A lot of our time for the last four days has gone solidly into getting this guidance down and making sure that we regain the market's credibility and explain these are numbers we are going to do, and doing those numbers like we've done in the past. Ian Shaffer -- Galliant Capital: Okay. Fair enough. Just last point is just any thought out there as to, maybe do a share buyback? You are flush with the cash right now. I know you are saving some money on the side for future acquisitions but…

We did our capital raise. I don’t think that the people that put their month with us didn’t anticipate us taking their money and buying the stock back at a cheaper price. They anticipate us taking that money and doing accretive acquisitions and that is what we intend to do with that $13 million. Now there may come a point where – if the stock falls off to some ridiculous amount of money then we will take some of our weekly cash flow and start supporting the stock. But I think the long-term benefit for our shareholders and the long-term – to make a long-term gain -- we have got to do these accretive acquisitions and one of the mistakes we made was buying one location in Dallas, one location in Philadelphia, that were a little different than our business model and then kind of an old model, buying some startup acquisitions. Now, originally we did intend to buy a few at one time. The original Dallas location was going to be converted to Club Onyx. Then after we closed the transaction, (inaudible) competitors that we don’t want to compete with you (inaudible) $14.5 million and we couldn't tell them no. So we had to re-concept what was really going to be a Club Onyx into a Rick’s Cabaret which increased in our costs none of that was anticipated in May, of course, that is just the way it ended up working out for us. When we originally brought the original Rick’s location in April, that was going to be converted into a Club Onyx. We are going to wait till, basically till the end of May and convert that into a Club Onyx, and during that time we were able to buy the only the competitor that Club Onyx would have had in the marketplace at a ridiculously cheap price. Ian Shaffer -- Galliant Capital: Just to acquire though, but aren’t those possibilities that can occur when a company is acquiring a new entity. You guys are quick when put a press release to say, okay, we’re buying this company and you up your guidance, but before the deal is closed and before you know every little thing of what might happen, wouldn't it be safer going forward to wait till you fully close the acquisition, wait till you’ve seen a month or two of operations and then give that update on guidance because you don’t want to seem too optimistic either.

I don’t think we’ve updated our guidance based on an unclosed acquisition. Our guidance is snapshots of where we are today. Only the outlook that we’ve given for 2009 has been based on any type of acquisition. Ian Shaffer -- Galliant Capital: Yes, that’s what I mean, though.

Right. The guidance we gave was – the reason that went in our guidance is the margin squeeze. We thought our margins were going to grow to that 19% and now we believe that we’re going to be closer to 14% to 16%. Ian Shaffer – Galliant Capital: Okay. All I’m saying is conservatism can’t hurt and Street stands by firms that hit their guidance. I’m supporting you, guys. I think you guys are – I think hopefully this is a one-time glitch. But it’s hard to watch the stock everyday react the way it has, and I’m just trying to express may be what some investors are feeling.

Yes. I was shocked when I saw that but our shorts position went up in the first 15 days of July about 0.5 million shares. Ian Shaffer -- Galliant Capital: Right, right.

I was like, "Where did this come from? What’s going on?" Ian Shaffer -- Galliant Capital: Anyway, good luck, guys.

Thank you.

Thank you. Our next question is from the line of Blair Sanford with Burlingame Asset Management. Please go ahead. Blair Sanford – Burlingame Asset Management: Hey, Eric.

Hey, how are you? Blair Sanford – Burlingame Asset Management: Getting to those start-up acquisitions you made earlier in the year. I understand, I can see what it’s done for you in the quarter, but can you quantify for us or give us a framework for thinking about up and coming acquisitions like Philadelphia or Dallas versus an existing business that’s actually already up and running and you pay what I think might be a pretty attractive valuation for that. But it seems that you’ve got these other clubs for really good valuations and the only cost that you incurred was some extraordinary expenses with regard to grand opening and marketing.

I think we take a hit for three to six months when we buy something like Philadelphia. But we turn into a business that we would normally pay $7 million or $8 million when we buy it for $2 million or $3 million. That’s the real difference. And for long term, it pays off for us, but unfortunately we’re feeling the short-term pain. If our margins had continued to grow, the pain would have been very minimal. However, when the margins didn't grow to what we anticipated them to, at the same time that we have either costs, you get a quarter like this, where we do $0.21 when the market is expecting $0.26 to $0.32. Blair Sanford – Burlingame Asset Management: Yes, right. So it’s just– it seems like it is this expectation, short-term expectations, whereas in my view, you allocated money fairly adroitly buying these start-up clubs.

And we believe that too. I guess the big struggle with the market right now is the value investor versus the momentum investor in the stock. The value investors have been like you’re saying, our business is one of those things that – temporarily, I’m going grow a little pain but I’m going to get paid off big for it six months, twelve months down the road which is the outlook we took when we bought these locations plus they are very strategic and extending the Rick’s Cabaret brand to a more national level and the best thing we took on. In 2009, I think we are going to stay with very strategic, immediately accretive acquisitions. Blair Sanford – Burlingame Asset Management: On that front, I had few more questions and one of them was just on that same topic. Have you seen a change in the number of opportunities out there, and have you seen a change in the evaluation of those opportunities?

Business has been very steady to be honest with you. Lots of people call in, lots of people out there. We are expecting to be very inundated at the trade show. I’ve been talking to a lot of different club owners. What – we are seeing some of the larger chain operators definitely considering their options and seeing evaluations that we get versus the private market evaluation, it is very attractive to them and I think we are going to continue to see that. There are a lot of opportunities out there. Unfortunately for us, we really thought this Vegas thing was going to close already and so we kind of stood on the side lines a little bit waiting to close it, absorb it and move on to the next one. We are not standing on the side lines right now. We are out actively looking for our next acquisition and intend to close our next acquisition before the end of the calendar year, regardless of what Vegas does, whether we close Vegas or not. We talked to some different debt lenders to make sure that we, whatever we negotiate with the next party, that we are covered and prepared to make the acquisition without using equity. Blair Sanford – Burlingame Asset Management: Yes, last question, back in June when you thought you said you made some adjustments in terms of marketing, cover charge, etcetera, give me an example or give us an idea of what you have in your toolkit, and what you did in June and what you have in your toolkit, what you have done before when you were in slow markets?

A lot of it is extending happy hours, what was really amazing, what does tell the story is that we have lowered our cost of goods sold at the same time that we extended happy hours and price discounting. We have continued with the pricing in the past terms of the happy hours and stuff, I think we would have seen an even better cost of goods sold. And those are the kind of things that we do. It is basically extended happy hours, more discounts, and different types of specials – maybe more shot specials throughout the night and those types of things to really get the numbers up. Every now and then, we have the girls doing more promotions, going out to different places and basically bringing customers to the club. Because right now we want it to continue – when the markets are weaker and clubs are slower, we don’t want the impression that our clubs are slow. And if we are considered the busy place, our competitors lose market share to us, and that is what we want to see happen during the summer, so that when we hit October, November, and December, we got the chance to get back on course of maybe just about 18% or 19% margins that we expect because we put so many more customers to the doors during those peak spending months. Blair Sanford – Burlingame Asset Management: I just had one more thing. You have had many acquisitions in the past couple of years and tell me about how you have been able to build up your management team or sustain your management team during this phase of growth. How are you set up if you buy another club in Dallas? What does that mean for your regional folks? Do they get stretched a little bit?

We have actually made one of our regionalmanagers more of a director of operations now. That is Ed Anakar – I know a lot of you guys know Ed. So Ed has really stepped up. He is leading the regionals and the GMs are reporting directly to him now, which has strengthened the team a little bit in that they get 100% of his attention versus half the attention that I was giving the regionals. So that helped us. We are attracting some decent guys. We have brought in a couple guys from outside of our industry that have been in the regular night club business, that are bringing a lot of fresh ideas, and are helping increased the customer count. And I think the trade show is going to give us another chance with the GM thing -- the trade show this year -- to see some of the talent around the industry and get a chance to meet, talk with some of the talent. And we will continue to attract good talent to the company. Blair Sanford – Burlingame Asset Management: Okay, thanks a lot.

Thank you. Our next question is from the line of Steven Martin with Slater Capital Management. Please go ahead. Steven Martin – Slater Capital Management: Hi there guys. Eric, when I know you said this before and I will echo the sentiment to the preceding callers, I think the market wants to reward you for buying clubs that are profitable and accretive and the market doesn’t want to reward you albeit maybe short-sighted for starting them up from scratch.

I agree with you 100% and we’re working on it – our thing is getting aligned with the market. Steven Martin – Slater Capital Management: Okay.

I think one of the biggest – one of the biggest things that affected us was when we brought that club in Dallas, originally we are going to make it a Club Onyx. And another deal popped up that was we’re buying a competitor, so we will have no competition for the Onyx concept in that market and the price was just unbelievable for us. We talked with the landlord; we were able to buy the property at a great price with bank financing. It was just one of our deals where, okay, we can just go with the concept we have or we can re-concept this and move to the other one and I think, we just kind of missed what the cost would be in doing that in the quarter. And part of the miss is that miscalculation. Steven Martin – Slater Capital Management: So when do you expect Dallas to start contributing?

The Onyx location contributed in June. We had net income in June from the new Onyx location. Steven Martin – Slater Capital Management: And what about the other one? The start-up?

The Dallas location still has some cost. I’m hoping that in this quarter, they will probably get back to breakeven and then in October, November, December, start seeing some solid profits from that location. Once again I think it has to do with the football and basketball seasons and entering our prime season as well. Steven Martin – Slater Capital Management: Okay. And Philadelphia, how do you expect that to progress?

About the same as Dallas. I think Philly and Dallas are both very, very similar clubs in that they are both close to the stadiums, we are drawing from the convention business and whatnot in Dallas, we are drawing from some of the business travelers and the airport there in Philadelphia. I think their progression is following very, very closely. I know the sales are following very closely. The costs in Dallas are a little bit higher than the costs in Philly for us right now but we’ve made some changes there recently that I expect that we'll get the cost in Dallas back in line. Steven Martin – Slater Capital Management: Okay. You started to talk about the long-term debt and I‘ve got the Q and it’s an absurdly long footnote. Can you break out the long-term debt for us in baskets? Is it all – 100% of it now are real estate?

No, $10 million is business debt. Steven Martin – Slater Capital Management: Okay, so $10 million of the long-term debt.

Right. Steven Martin – Slater Capital Management: (inaudible).

And about $2.2 million is other – the airplane that we bought and some other converts that we have that is not backed by the real estate. Steven Martin – Slater Capital Management: Okay and therefore if I take the current portion, which is $1.6 million and $28.9 million?

I think we are at about $30 million total. About $18 million of our debt is real estate debt. Steven Martin – Slater Capital Management: Okay. And the long-term debt related parties?

Those are convertible debentures. One of those – 660,000 of that converted this month I believe. I think that's probably footnote and there are some more updates. Steven Martin – Slater Capital Management: Right. It's covered in the long footnote.

And then the rest of it converts in November, so that will all be gone. The rest of the converts, I believe the original note is about two years ago, I think it’s 7.50 a share that it converts like another 100,000 share or so. Steven Martin – Slater Capital Management: Okay.

That’s in the footnote. Steven Martin – Slater Capital Management: All right. Let’s talk about the Pole Tax. What did the Pole Tax cost you in the June quarter?

I believe around $480,000. We have got about $1 million out there that should come back to us eventually. Steven Martin – Slater Capital Management: Okay. And so should we assume that the Pole Tax will run about $500,000 a quarter or will that be higher because you’ll have the new clubs in Dallas?

We have converted the clubs in Houston to what we consider – what the definition of a law says is Ok. We put on shorts and latex in Houston. So we have three clubs in Houston that are not paying the Pole Tax now. However, we have a new clubs (inaudible). It will probably increase a little bit but I think it’s going to stay pretty close to $500,000 a quarter. When the legislature meets their stock and the legislature is going to redo the law and try to make it constitutional, or some type of new deal, and maybe we’ll see some relief at that time. If not, we’re waiting on the appeals court. Steven Martin – Slater Capital Management: Okay. So it is roughly $500,000 a quarter which may or may not be recoverable at some point in the future.

Right. We believe – we paid the tax under the protest, we have filed the lawsuit (inaudible) to retrieve that money and we do strongly believe that at some point we will get that back. It was the one thing if the lower court had ruled on unconstitutional on some little stuff but I they ruled it unconstitutional on every ground and they could possibly have ruled unconstitutional. So we don’t believe that it will stand over time. I don’t think the state believes it either. I think they just thought as an easy opportunity to collect some revenues from an industry that isn’t really politically correct. Steven Martin – Slater Capital Management: All right. Thank you very much.

Thank you. Our next question comes from Ronald Wald, a Private Investor. Please go ahead.

How are you, Eric? A quick question for you. With the unexpected increase in spending, as far as the marketing with the new acquisitions in Philadelphia and Dallas, I know you had said that you anticipate them to start contributing this quarter and definitely the next. Are there any plans to keep the cost where they are or possibly increasing them in the marketing field and advertising field?

Well, we are going to watch and see what the market requires us to do. We are going to spend the money that we need to spend to create a Rick’s Cabaret out of those locations and make it the number one, number two location in the marketplace. Right now, with the summer, it is very difficult to judge exactly what we are going to have to do or not do two to three months from now. We are reviewing every month on a month-by-month basis. The costs have come down dramatically in the recent month and I anticipate that we’ll probably lower. In some markets, we are going to raise the cost a little bit, in other markets we are going to lower the cost a little bit. I believe that we will return back to normal. By October, November, December, everything will be back to our normal percentages.

Great.

Once football season starts, it is very easy to market. We can take a bunch of girls outside of the stadium; they pass out a bunch of free passes and the club goes up.

Okay. And you think Dallas is struggling a little bit because of the new laws passed and as well do you think Philly is just a tougher market than anticipated?

I really think Philly effect is gas is $4 a gallon and other stuff, and guys are holding steady versus trying new things. We are seeing that change a little bit in July and I think especially the first couple of weeks of August and I think we are going to continue to see that and as the football season starts, they are right down the street from us. They are going to drive past our location to go into one of the other clubs. So I think we are going to be able to get them to stop. I think once we get them in the building, we are seeing a nice return of repeat business. What we have got to continue to do is see the new business come in as well and I think we will see that once the stadiums start going up.

You were saying that Dallas is five or six miles away from stadium and the Philly location is two miles away from the stadium, are there any plans during these seasons to increase the amount of out of town girls as you were saying, as one of the input costs...

I think we are going to need to. I think we are getting solid base of local girls now. We definitely don’t need to in Dallas. We can send girls from the Forth Worth location if we need to in Dallas but our girls are now from Dallas and the quality of our staff in Dallas has improved remarkably. We brought a new local manager in at the beginning of June – end of May and beginning of June who is really, really turning the place around. We are very happy with what he has been able to do up there. I think the biggest problem with Dallas was we bought in April, we thought we were going to do one concept but then we were going to do another concept so we kind of just left it in limbo. So it kind of set there in limbo for about 2 to 2.5 months until we closed on the Onyx deal. Once we closed Onyx deal in mid-June, we have gotten very serious about it and we are seeing a steady increase July, August and I think going forward, we are going to see increases now we are committed to the Rick’s concept. I think the biggest problem we had is we didn’t commit to a concept because we wanted for sure the deal was going to close and what not. Once we close that transaction, we became committed to the new concept and we spent money in the Dallas market not only Rick’s but on the Onyx as well. So two clubs with start-up costs in Dallas when originally we had anticipated only one location there.

Thank you.

Thank you. Our next question is from Scott Kolman with Credence Capital. Please go ahead. Scott Kolman – Credence Capital: Hi guys, I had another question. It was written up that it was in the last quarterly filing about, you have a number of locations that are not making money and I just wanted you to comment on that and what are you doing about those locations?

We are continuing to monitor and make sure that they are get better. We have been working out new management deals, we are lowering costs, we changed a lot of our kitchen and food items to more profitable and lower-cost and easy to prepare food items to lower those costs. Basically we are really monitoring the costs, trying to get the costs down. As we get to mid-September, after the Labor Day, then we will really look at what's the best way to bringing more and more people into those. Scott Kolman – Credence Capital: How long have you run most of those locations?

It varies. Some of them are small that we keep around. Some of the locations that we keep around because we don’t want anybody else to open those locations and we lock those locations down because we have a very profitable location a mile down the street or 3 miles down the street, so this location could compete with it if somebody else had the license.. Scott Kolman – Credence Capital: If somebody else had the license, right.

Right, so we keep those licenses. We are losing $10,000 or something. The losses are recovered by one weekend at Tootsie's for the loss of those corporations other than the newer ones like Philly and Dallas actually contributed to about (inaudible). Those two locations but I think going forward we are going to see that tighten up. In Austin has still been a pain. We are going to run it through the end of December 31. We are going to see if we get the growth this year, as we reach that two-year point and if we don’t see some growth there, we may consider reconcepting or doing something different at that location. Scott Kolman – Credence Capital: All right, thanks.

Thank you. Our next question is from Philip Calderon, a private investor. Please go ahead.

Hey guys. Last call, you basically said that Vegas was being held up because of I think you said it was very strenuous loss that you had to basically fix. Now you are saying that it is basically difference between the land owner and the seller. Have the loss – go ahead.

Once we get the landlord to sign the assignment, we will turn it into the city and the gaming commission. We have been issued our health permits. We have been issued our fire permits. Most of our permits are issued. They cannot issue the liquor license or the occupancy permit until we have a right to possess the property, and that is what we are waiting for right now.

Thank you.

We don’t have that right, so once that is done we believe that those licenses will be issued right away. I know there has been a lot of talk on different message boards about going before the commission. We do not have to go before the commission. The business is already licensed, it is just a transfer. So those things – whatever the commission needs -- has no bearing on when our license will be issued.

Thank you.

Thanks. Your next question is from Chuck Lipson from CSL Associates. Please go ahead. Chuck Lipson – CSL Associates: Hi Eric. Since you considered the Scores acquisition, has their business changed , the economy certainly changed in the last four or five months?

Yes, we have talked about that at our last get-together. We’ve decided that until we know – we don’t have a trailing 12 months number until we know we can close. And what we have decided to do is get everything ready so we can close, get the trailing 12 months number and then just what adjustments are going to be made. Chuck Lipson – CSL Associates: Okay.

But we do believe that there will be adjustments made in that – they’re probably not going to be at $4 million EBITDA. Their April was off, their May was great. Their June was off. I haven’t bothered looking at July numbers because we have already agreed to some type of adjustment once the numbers are in. So whatever they are, they are, and we will sit down and work it out. Chuck Lipson – CSL Associates: Okay. So this topic has been broached?

Absolutely. There is no sense in trying to figure out what it is until we know exactly what it is. Chuck Lipson – CSL Associates: Right.

In the long run, the fact they are taking so long is going to benefit us because we would have closed it after the May numbers and everything was great and then June was off, so that brought it down. I think we’ll see some type of negotiations in that. I don’t know exactly what it’s going to be at this point but it will be in the best interest of our shareholders and something that makes business sense for us. Chuck Lipson – CSL Associates: Okay. Also I don’t have the Q in front of me, but the tax rate, was there a change there?

I believe the tax rate is about 37%. Phil, are you on?

Yes. It's full effective 37%.

Okay. It's definitely increased. Chuck Lipson – CSL Associates: Was that in your budget in this quarter when you gave us the guidance?

Yes. I think we anticipated that. Correct, Phil?

Yes. We did. Chuck Lipson – CSL Associates: Okay. That’s what it will be going forward. Also, going forward, I don’t know when the window opens but a little insider buying would certainly go a long way to convince the people.

No, I would love to -- especially at these prices -- and I talk to my attorney everyday. I call him up and ask him, and he tells me everyday, I can’t buy, I have too much information until this Vegas transaction is done; and now we are starting to work on a couple of other acquisitions. But believe me, I would love to be buying at $13 a share. Chuck Lipson – CSL Associates: Okay. It certainly has not hurt you not buying it the last few weeks.

I know what’s going on in the long run. But I’ve been blacked out for a long time. So I’ve actually been ready to buy. I do have some options that I will exercise here and I think in February about $75,000. You will see those exercised. I don’t anticipate at this time that I really have to sell any shares to exercise, but that could change (inaudible) I definitely won't at these prices. Below $13 I’ll spend the cash out of my own pocket at that price. Chuck Lipson – CSL Associates: As far as the huge short positions in the stock, is your feeling that it is all closure or is this –

But we have been on the Reg SHO list several times. I don’t think it’s closure. I think that, if they borrow the shares to short, ok, but; I’m not buying with that, to print shares out of thin air. I do not think that is fair to the company. I do not think it is fair to our shareholders and I wish it would stop. The SEC has been working on this with the banking stocks; whether they will all get to all the other companies, especially to the small cap companies, who knows? But we look forward to the day they do. Chuck Lipson – CSL Associates: Okay. Thanks.

I definitely believe it has taken few bucks off of our stock price. Chuck Lipson – CSL Associates: Well, thank you and hopefully in the next quarter, you will raise guidance.

Hopefully, we'll get this Vegas deal done. That's what I'm looking forward to and get moved on to the next one and keep things rolling. Chuck Lipson – CSL Associates: Thanks.

Thanks, Chuck.

There are no further questions in the queue at this time.

Okay. Thanks guys.

I will turn the floor back to over to management for any closing comments.

Thank you everybody for participating in the call. I just want to remind everyone that there is a Due Diligence Ball tonight at Rick’s Cabaret, New York City, 50 West 33rd Street. Also, the transcript of this conference call will be posted as of tomorrow on seekingalpha.com. And finally, if you happen to be in the Las Vegas area, please come out to the Noble Financial Conference at Loews Lake Las Vegas Hotel, Monday. We are presenting at 8:30 am. Thank you very much everyone for participating.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.