Allan Priaulx - Investor and Media Relations Eric Langan - President and CEO

Howard Rosencrans - Value Advisory Danielle McCoy - Brean Murray Igor Novgorodtsev - Lares Capital Steven Martin - Slater Capital Management

Greetings. And welcome to the Rick's Cabaret International Fourth Quarter 2013 and Year End Earnings Conference Call and Webcast. 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, Allan Priaulx, Investor and Media Relations for Rick's Cabaret International. Thank you, Mr. Priaulx. You may begin.

Thank you, Doug. I just want to remind everybody that our Safe Harbor statement is posted at the beginning of our PowerPoint presentation which is available at www.ricksinvestor.com or in Investor Calendar. This statement reminds you that you may hear or see forward-looking statements that involve a number of risks and uncertainties. I won't go into the entire document on this call, but I do urge you to read it, as well as the explanations of non-GAAP and adjusted EBITDA measurements that we use and that were included at the bottom of our PowerPoint. I’d also like to remind you that our press release and the 10-K. It’s the press release for the earnings and for our guidance for 2014. They are posted on our website at www.ricksinvestor.com as is the presentation that Eric Langan will give. Finally, I'd like to invite anyone who is in the New York City area to stop by Rick’s Cabaret tonight at 6 p.m. we are at 50 West 33rd Street between 5th and Broadway for our Due Diligence event. It's a great time to get to see first hand how we operate our club to get -- taken behind-the-scenes and see how our flagship club operates. Now it's my pleasure to present to you our President and CEO, Eric Langan. Eric?

Thank you, Allan, and thanks everyone for joining the call today. If you please turn to slide three, we will start with the quick review of our fourth quarter and full year results, including our income statement, balance sheet and cash flow. We will talk about our new projects status, review our shareholder value strategy. How we think we stand in the rollup of our industry and the discussion of the expansion the restaurants and our guidance for 2014, then we will have a question-and-answer session at the end for anything we don’t cover. If you turn to slide four, we will go over fourth quarter ’13 revenues. Overall, for the fourth quarter we generated double-digit year-over-year increases in revenues and EPS, as we continue to emerge from recession and the strong position in most of our markets around the country. Keep in mind the fourth quarter is typically one of our softer quarters during the year. During this fourth quarter ended September 30th total revenues increased 17.4% year-over-year to $28 million. New units acquired in the last two years and recently opened units during that time were the primary contributors to our increases that include the Jaguars chain, which primarily in Texas and our new restaurant concept that we opened in the Dallas, Fort Worth market. As a whole, our existing club revenues were down slightly, that reflects the purposeful and gradual move away from our recessionary strategies to recoveries strategies. I’m specifically talking about how we offered lower drink prices to attract customers in the past few years and now we are shifting back to more normalized pricing as our better spending customers are beginning return to our business. Overall, we are also benefiting from a significant presence in Texas where there has been strong job growth and population influx. We also see Minneapolis and New York as strong growth areas for the company. Turning to slide five, income from operation, during the fourth quarter, income from operation increased 19.2% year-over-year to $4.4 million. On the upside, operating margin expanded 224 basis points to 15.5% largely due to increase operating leverage. This more than offset cost associated with our restaurant rollouts, our opening of the Vivid Cabaret in Los Angeles and the Vivid Cabaret in New York, which is opening in the next quarter and our temporary high rent for the Rick's Cabaret in New York City during the quarter, which I’ll explain more about later. Turning to slide six, for the fourth quarter ’13 GAAP and non-GAAP net income, going further down the income statement, interest expense increased to $1.8 million versus $1.3 million. The year-over-year difference reflects the Jaguars debt for the full quarter versus a year ago, plus other acquisition related debt in 2013. As a percentage of revenue, interest expense increased to 6.4% versus 5.3% a year ago which is well within our range of acceptable interest expense ratio. The tax rate was 35% versus 39.8%. This reflects the permanent difference represented by the non-deductible stock-based compensation which was much higher in 2012. As a result, GAAP net income increased 10.3% to $1.6 million. On a per share base that equates to $0.17 compared to $0.15 a year ago. On a non-GAAP basis, net income was $2.5 million versus $3 million per share paid on net $0.27 versus $0.31. The main difference between the fourth quarters and last year’s non-GAAP basis was the ramp up in operating costs associated with new units. We do not have these costs back in as part of the non-GAAP. Excuse me, switching to slide seven. With our fourth quarter performance we generated another year of good growth in fiscal 2013. Highlights include, total revenue increased to 17.8% to a record $112.2 million. Income from operations increased 33.9% to $22.1 million. Operating margin expanded 19.7% -- to 19.7% from 17.3%. Non-GAAP net income increased 8.9% to $13.4 million and non-GAAP EPS increased 10.2% to $1.40 per share. Switching to slide eight, we will update our balance sheet, turning to September 30 balance sheet, cash nearly doubled to $10.7 million from a year ago. We ended the year with $78.6 million of long-term debt, of that $38.7 million is real estate related debt, $29.2 million is subsidiary level debt from club acquisitions, which is collateralized by the loans on the businesses that we actually acquired. Parent company level debt is $7.2 million. Current portion of long-term debt is $8.8 million, which we are paying off -- which means we are paying off approximately $2 million a quarter on our long-term debt. The two of this debt which are 14% debt is now stands at $5.3 million and we continue to work on accelerating and paying down that debt as quickly as possible, which would turn our overall debt reductions for 2014 to about $10.8 million. We are also continuing to explore ways to deleverage our real estate debt generally. We will discuss more of this in a more detail in a little bit later in the call. Switching to slide nine, let’s talk about our growth strategy and the key to our growth is maximizing our existing adult club licenses and properties, continuing to acquire new adult clubs and rolling out our restaurants. As of right now we have 41 locations opened, five in various stages of active development and three under active consideration, not including acquisitions. Switching to slide 10, we opened two new adult clubs during the fourth quarter. We opened Temptations in Beaumont in late September. We opened first of BYOB, but we now have a liquor license and though it’s early it seems to be getting better each month. We also opened the Vivid Cabaret in Los Angeles. We had a soft opening in Los Angeles late in the fourth quarter and then a hard opening in the first quarter of fiscal 2014. We are still in the process of building our customer base there, but we are working on some new marketing strategies such as adding major directional billboards to help people find the location and direct traffic to it. Our new locations that we have planned for the first quarter of -- opened in the 2000 -- first quarter of 2014 are the Jaguars in Houston. As we mentioned in last quarter call, we closed the original Rick’s Cabaret site there in Houston and reopened it in December as Jaguars. This location is part of an agreement that we reached with the City of Houston that basically grandfathers this location allowing the golf entertainment exemption from the 1997 ordinance. We also opened the newly acquired club in Dallas and renamed it to Black Orchid. We had our grand opening for this club in late November as DFW’s newest hip-hop party spot after it was acquired. We have two new locations that will open in the second quarter of 2014. We are currently on track to open these locations which is the Vivid Cabaret in New York. We are getting close to finishing construction at that -- at -- which will be our second Vivid location and we are planning a soft opening in early January with the grand opening during Super Bowl week. We are also going to open the Bombshells in Webster, which will be our second Bombshells location. We expect to also open that location on January 29th in time for Super Bowl weekend. We have three locations that are in the work, in works right now for either the second or third quarters, which include the Rick's Odessa, which we are basically waiting for at this point though as a public water supply permit, which allow us to dig the water well. We will be opening this location with full liquor kitchen and we suspect it will be very well at its location. The Odessa market is really booming right now with the growth in oil industry there. We will also open the Bombshells in Austin. Right now we are on track to have our permits sometime in this quarter and we expect to open it during the second or during the third quarter depending on how long those permits take to get. We are also looking at possible site at Beaumont which we purchase the real estate on and trying to decide whether it’s going to be economically viable for us to build the Bombshells on that location. Switching to slide 11, new locations for the balance of fiscal ’14, adult clubs, with regard to adult clubs, we continue to look several acquisition targets. We aren’t just looking to go out and acquire anything at this point. We want to make sure that we get a very good return on our cash. We also start trying to buy properties when we can. We are conservative and make sure that we are not getting ourselves into any long-term leases where we just going to have the rents jacked up at sometime in the future. We believe that there are 500 clubs within our acquisition universe and we own less than 10% of them, I mean, there is significant potential to grow in this market. With regard to our restaurant, we are looking at those to compliment not to requisite the acquisition of adult clubs and to leverage our existing skill set smooth out our growth trend. Our target is to have 10 Bombshells locations opened or in the work by the end of fiscal 2014. We’ve currently got the one opened in Dallas, the one in Webster opening in January, the Austin one coming online and we are seriously looking at three or four locations either in the Houston, Beaumont, Miami Gardens and San Diego. The restaurant benefits, the nice thing about this sports bar restaurant live music venue is that we can lease the building. If our landlords come in and increase our rent we can move down the street and move to another part of town, something we can’t do because of the strict zoning of our adult clubs. We can also open multiple locations in a market and better predict the revenue and earnings growth, most of venues we are working on and going to do around $3 million annualized revenue with profit margins between 15% and 25% depending on volumes. What we really like about the sports bar/restaurant/live music venue is the combination is proving very promising based on those that we have opened. The three-in-one concept allows us to keep the restaurant filled throughout the day, the night and in the early morning hours, serving different patient demographic and maximizing our liquor sales which has the highest margins for us. On the Slide 12, looking to unlock our real estate value. We continue to work hard on finding ways to unlock this value. In the adult club market, the licenses go with the properties because of the zoning. They can’t be moved. So the real estate is essential. Look at the New York transaction, we’re very excited that we’re able to enter into this property for 50 West 33rd Street, as that location generates strong revenue and is very profitable. In October, we entered in a contract to buy the land and building for $10 million to replace the original $23 million contract. Simultaneous, we sold our residential air rights for the property for $8 million to a third party. This enabled us to reduce our lease on the three-storey building from -- to $100,000 a month for the next five years rather than $180,000 per month called for in the original agreement. The transactions are part of the previously announced purchase of the land and building for $23 million. The terms of the new agreement are far more favorable to us, giving us more flexibility but also assuring us that we retain control over the property. We’re also very excited about our new REIT concept that we have began exploring to help monetize our real estate property. We’re still in the planning stages but we currently intend to form a privately-held REIT or similar investment vehicle that will own the real properties on which our venues operate. We anticipate that Rick’s will be a minority equity interest -- hold a minority equity interest in the REIT and the remaining interest will be held by private investors. A subsidiary of Rick’s will manage the REIT’s asset portfolio. It is intended that the REIT will acquire some properties that we currently hold as well as other properties of the new venues that we acquire in the future. We are continuing to analyze our options with the REIT but we hope to begin -- excuse me -- we hope to begin moving forward with the concept at the beginning of 2014 calendar year. The private REIT concept evolves from an earlier consideration of a public REIT which we eventually rejected because of property holdings weren’t quite extensive enough to merit a public REIT at this time. Moving to Slide 13, going to our fiscal ‘14 year guidance. Our revenue, we continue to look for 20% to perhaps 30% growth depending on circumstances. This will come from our existing clubs, new clubs and restaurant that we’ll open in fiscal 2013 and planned rollout of new clubs and restaurants in fiscal 2014. One great opportunity for us in the second and third quarter of this year is the number of major sporting event in our markets. They have the potential to drive significant traffic increase into our clubs and should help our same-store sales. In February, the Super Bowl is at the MetLife Stadium just outside of New York City where we have one of our biggest Rick’s cabaret and our new Vivid Cabaret opening before the Super Bowl this year. In March, the Big East tournament at Madison Square Garden in New York City will be the final Big East tournament. We expect a lot of alumni to attend and this will be a very big tournament this year for the Big East. And then in April, we have the final four in Dallas. Combined Dallas-Fort Worth is our single largest market with the 11 current locations open. In addition, unlike last year, we have the professional hockey, which started on time this year, which should benefit us in particular the New York, the Dallas-Fort Worth and the Minneapolis market. We expect our operating margins to continue to expand. We also expect greater operating efficiencies to improve purchasing as a result of our larger base, which would include our restaurant. The end result is that we expect non-GAAP EPS to be approximately $1.70 per share and GAAP EPS of $1.20 per share. If we switch to Slide 14, investor conferences. Because of our renewed growth been going out and leading with more investors, in early September, we were at the Rodman Investment conference in New York City. In early December, we were at the LD Micro Cap conference in Los Angeles and early January, we’ll be at the Noble Financial Equity Conference in Port St. Lucie, Florida. If any one has other suggestions of conferences that we should attend, please email IR at ricks.com and let them know of those conferences and we’ll look into those as well. We’re also proud of the fact that we’ve been attracting more institutional investors and our stock has outperformed the value year-to-date and for the last five years and the last 10 years. With that, I’d like to take question-and-answer session at this time.

(Operator Instructions) Our first question comes from the line of Howard Rosencrans from Value Advisory. Please proceed with your question. Howard Rosencrans - Value Advisory: Hi guys.

Hi Howard, how are you? Howard Rosencrans - Value Advisory: Hi. In terms of -- I have a bunch of questions that I keep -- when do you expect the comps to start turning?

I think we’ll see in this quarter, the October to December quarter. We did have a little bit of iceberg, a week in Texas. Since there was cold so we lost a week -- I’d say a weekend, we lost about half of weekend, I guess in the Dallas market. So that will be a few hundred thousand off the gross revenues compared with what we normally do. But I think, we’ll make that up in this term with all the Christmas parties and what not. In October and November, we’re looking very good for comps. I think we’re there now. Howard Rosencrans - Value Advisory: What is the comp for Q4, I apologize, I don’t, I don’t ….

I know for the year, it was I think just under 2.4% negative.

Okay. I don’t have it in front of me. I’m sorry. Howard Rosencrans - Value Advisory: And you mentioned -- can you give us a ballpark on what start-up costs were since you don’t exclude them from non-GAAP. Give us the ballpark of what start-up costs were in Q4 and for the year?

It’s top of my head, probably in the $400,000 range? Howard Rosencrans - Value Advisory: For the fourth quarter or for the full year?

For the fourth quarter. Howard Rosencrans - Value Advisory: Okay.

With New York and L.A. opening and we opened of course the Ricky Bobby location in that quarter as well. Howard Rosencrans - Value Advisory: Okay. In terms of the -- where do you have maintenance CapEx. Where do you feel that runs now on the company?

Let me open up real quick. Howard Rosencrans - Value Advisory: Eric give me ….

You got that handy. Do you get it handy? You bet. I’ve got it here on this.

Approximately, every year runs between a million and million -- 4.5 million. Howard Rosencrans - Value Advisory: Okay. And in terms of the REIT, your -- what's your confidence level that we get it done in say the first six months of ‘14. You’ve certainly been, I mean, you’ve come from a public to private but you’ve been talking about it for long time?

Yeah. Well, we are trying to find a way to actually do it and raise the money and do it properly and we just weren’t big enough to do the public side of it. But looking at the private REIT with us, owing about 9.9% and with us having the management -- excuse me, it allow us to still control the company and control the real estate, which is of a concern. We don’t want to end up in a position where we lose control of our real estate which have enlightened this and hurt the operating company. So we believe this is the way to basically take our real estate and basically move it off balance sheet and put us into least position for the company. So we can grow faster, have faster growth rates for the company, move the depreciation expenses into the private REIT and allow the earnings per share of Rick’s operating company to grow much faster and it’s -- to capitalize, we’re about $40 million in cash. Howard Rosencrans - Value Advisory: It certainly makes a tremendous amount of sense, I’m just trying to understand your confidence level that is going to get downside in the first…?

We’re in the private, much simpler. We’re talking with several -- we're talking with several people to help us basically format, set it up and fund it, that’s the real case money. We’ve talked with a few -- basically family groups that managed money and they are very interested and looking at the dividend yield of it. So, I think probably in the first six months, we will have a good start on it where we do it all probably. It will probably take a year to 18 months to basically move all of the real estate. My goal is to get it done by the end of fiscal 2014, if we could with about six to nine months, would be great. So we can basically have $40 million in our war chest to go out here and acquire businesses with and that has to acquire the real estate side of it. If you looked at -- we looked at the classic of the [XCC] analysis that we bought where we paid $3 million for the club and $3.5 million for the real estate or $5.5 million for the real estate and the club is making a couple million dollars a year. But instead of making a couple million dollars here on $3.5 million investment, it is $8.5 million investment because we bought the real estate as well where we can take that real estate and just pay the rent on the $5.5 million. The return on our investment from the operating side is much, much bigger. Howard Rosencrans - Value Advisory: Thanks very much. I will get back in queue.

Our next question comes from the line of Danielle McCoy from Brean Murray. Please proceed with your question. Danielle McCoy - Brean Murray: Hi, guys.

Hi. Danielle McCoy - Brean Murray: Few questions. I know you are trying to get those two stores in New York City open for the Super Bowl, if there are any other things you guys would do to gear up for that?

I mean, promotion stuff, we are doing. We’ve just kind of billboard on the Long Island Expressway for the month of January, February and March for the Vivid. Of course, Vivid is going to -- Vivid super bowl is going to launch the radio station, so that will be done from a club. There is going to be a lot of Vivid growth in town, which I think will draw a lot of the super bowl attendees that week to our location. So, I think that’s going to be pretty positive launch of that location. Put it on the map a lot faster than we did the original, Rick. Danielle McCoy - Brean Murray: Okay. Great. And how is the Los Angeles club doing and is there any knowledge from that club that you have applied to the New York City Vivid?

New York and LA are totally different markets. We are still learning the L.A. market. The laws out there are little different. The site while it’s in a major freeway area, it is a little more difficult to get than we originally anticipated. So we are using -- we are starting to put some directional billboards that helps people with extra take and in the turn, right or left to get to our location. We were hoping that in Beaumont and pick up some of the confession from the location. Beaumont was a really large, long road that breaks up and goes all through L.A. So we can put it into, like a Google Maps about six different ones come up. So it’s been a little more difficult directing people directly to locations. So like I said, we are going to put some billboards and we are doing some other markings to help with that problem. But it is doing okay. It is not doing the numbers we think it will deal with. The New York location is a very much difficult location. We believe it will do very, very well from the very beginning. Danielle McCoy - Brean Murray: Okay. And then just lastly, I know you guys are switching from the promotional pricing that you guys did on your session, have you been seeing any of the big spenders returning?

Yeah. The big spenders have been backed a little bit, they come and go. But more consistently in the big spending, it’s the middle spender that we are really focused on right now. The guy that is going to come and he is not going to go board on VIP, but he is going to come on a regular basis. He’s not there for cheap doing sea fares for entertainment and therefore, he doesn’t really care what he pays for a drink. He carries more than we have a party entertainment that we have. And that with regard -- any one be at a price that has been busy, but it’s not such cragged wall, in fact when we do the -- we are more of a night club when we do this, the $2 drinks. In the discount, we fill up the bottle areas with discounted bottle for and can be happy discount. So it really stops a lot of bottle in the VIP discount as well where we really stop. Danielle McCoy - Brean Murray: Okay. Great. Thanks guys and good luck.

Our next question comes from the line of Igor Novogorodtsev from Lares Capital. Please proceed with your question. Igor Novgorodtsev - Lares Capital: Hello, Eric -- it’s actually Igor, how are you?

Yeah. Agor, I know it is alright. Igor Novgorodtsev - Lares Capital: Couple of questions. I know that there was a minor setback with the lawsuits in New York for the minimum wage. Were there any impacts from this quarter, or is there going to be an impact except for the next quarter.

No. It’s also pending -- the ruling changed a few things. But we had already changed things in our operation. So basically on a go-forward basis, it’s really whatever we work out in the liability of these law suits, there is still lot of open issues and I won’t comment too much on current pending litigation. But the reality is there is not a lot of change at this point. It is still going on. We also intend to appeal some of the rulings in this deal, but you’ve got to go through the trial, get to the end and then you can appeal. So we will see -- basically we are kind of in the same mode we’ve been in before is to hurry up and wait. We’ve got a -- like I said a few more rulings. There are some stay claims that are being dealt with right now and we have to see what the ruling is on those claims before we can move to the next step on that. Igor Novogorodtsev - Lares Capital: You said any additional liabilities because you may feel that it’s on your balance sheet because you may feel that it may not result in a ruling in your favor.

Not at this point, I don’t think there is --- nothing that’s been ruled is overly significant at this point. We are going to wait and see where it goes from here. If it looks at some point, the attorneys think that we need to address that then we will address potential liabilities and what not. But at this point, we are kind of just in a wait and see mode that we still we think we can prevail on a lot of our claims. Igor Novogorodtsev - Lares Capital: And offset some additional movement from SD from Saxton?

Nothing on the patron tax at this point. Igor Novogorodtsev - Lares Capital: Okay. Okay. My other question, in your guidance, which is very strong obviously, the U.S. (inaudible) just declare even at the opening this year you announced in your schedule or let’s assume that it’s going to get some additional acquisition for build outs in the next year?

No. Those are only the 41 existing and the five that are under construction that we mentioned in the call. So, basically the 46 existing locations that we are already working on are included in that guidance, nothing else is. Igor Novogorodtsev - Lares Capital: Just in general, as I was kind of projecting how many clubs do you look to acquire or to build out in the year like a long-term, adding expectations for the --?

I don’t really look it as a number of clubs. It’s more of an amount of revenue. We want to grow our revenue at about 20% to 30%. If we can buy or stay on the level, of course we buy our restaurants then we have to open. Typical restaurants growing about $3 million in annualized sales right now for the few locations that we have opened. We would like to see, have we opened the restaurants we think are going to be pretty much on those lines in that line in that $3 million plus range. So that gives a pretty steady idea of the growth from restaurants. As far as buying more night club revenue, we are really watching what’s out there. We are looking for some multi-club acquisitions where we can buy a three to five club chain, basically that’s in a demographical area is that we are already operating in or one we haven’t that we are not operating in of that size but where the club required cluster together is what we are looking for. So basically we want to buy -- right now, I think we do a $130 million pretty easily. For a 20% growth this year, we need to be about $134.8 million. So if we could buy at least another $5 million in revenue for this fiscal year and if we can buy more than that we certainly would. But we’re going to look to buy-- at least probably another $5 million in night club revenue, adult nightclub revenue, adult nightclub revenue, one club or three clubs. Igor Novogorodtsev - Lares Capital: And my last question, hopefully, very short. As far as the REIT, private REIT, at what stage are you in right now because you said that you are going to be -- you expected some movement earlier next year. We already have a sense just to look at private IRS letter for a minimum wage for it?

No, I think the way it works we do that after the first year you have to set it up, you have to have hundred investors who will go through all the sense. Right now, we're setting-up the management company. We are in the processes of setting-up the management company first and setting up the partnership agreement and putting all the partnership agreements together. So it’s not we are just working on that through January and, hopefully, we can get all of that together by the end of January. And then it's really a matter of who we chose to basically help us raise the money and put together the private placement from our end. At least from an IRS or from REIT, we have to send a private letter.

Yeah, like I said, the attorneys are handling all that. What we are paying them for, they know what they are doing here. Igor Novogorodtsev - Lares Capital: But you have a high confidence that IRS will allow you to do REIT, right?

Yeah, certainly, I mean there is no reason and also notice real estate. I don’t know why there would be any problem. It’s over 10%. Igor Novogorodtsev - Lares Capital: Right. There were a couple of companies which were denied their lease permits.

Yeah. But this is going to be a private, not actually its going to be publicly. Igor Novogorodtsev - Lares Capital: Okay. All right. All right. Thank you very much

You bet.

Our next question comes from the line of Steven Martin from Slater Capital Management. Please proceed with your question. Steven Martin - Slater Capital Management: Hi there, Eric.

Hey, Steve, how are you? Steven Martin - Slater Capital Management: Good. So what’s going on, talk about the holiday party environment this year versus last year?

In New York, it's been unbelievable. Especially with the garden, the garden events have been fantastic this year. Hockey has been great for us, Basketball has been really good, the Knicks have been -- I don't know what the big draw is, I don't know if they are winning a lot but they are drawing a lot people down to the garden at least. Steven Martin - Slater Capital Management: They’re not winning a whole lot of home games.

Yeah. But they are bringing the people and for us that’s what matters. As long as they are bringing the people, I think the renovation to Garden launch, people come and see renovations of the Gardens now that they are complete. So it's been good, same-store sales in the New York are fantastic, which gives me a lot of the hope that the Beaumont location is going to open up way ahead of our expectation. Originally, I expect it to open up around $6 million to $7 million, which is similar to what we opened it at the Rick location, but due to the timing of the Super bowl and the publicity and the Vivid name and Vivid Radio launching and some other things that are coming to play for us, I think that location is going to open up, maybe a lot stronger than that maybe even open up in the $10 million range for the first year. Steven Martin - Slater Capital Management: By the way, you didn’t mention it, but the NCAA divisionals or the regionals, one of the regionals is at the Gradens and one of the regionals is in California.

Yeah, and Indiana too. Steven Martin - Slater Capital Management: And Indiana too? Eric Langan

Yeah. Steven Martin - Slater Capital Management: Legal and professional fees were down a lot this quarter?

Probably, a year or two. Steven Martin - Slater Capital Management: You answered the year two. Can you talk about that and what is looking like for next year?

Sure. With the discovery work, we're through with the discovery phase in the New York case which depositions and lots and lots of motions and those types of things which clearly raise your cost of that suits. So, I’m hoping that this year we’ll see a similar percentage of revenues. I think we drop from about 6% of revenues down here it is right here. We got from about 4.0%, the last one -- four years we’ve been at about 4.8% of our revenue. And for this year, we got down to 1.90% of revenues just on legal fees, so that was good and then our total account and legal went from 6.2% to 3.95%. Steven Martin - Slater Capital Management: When you look at the rest of the country, the rest of your markets, what else is out there that you’re spending legal right now?

Well, of course, be in public are included in those, please? Steven Martin - Slater Capital Management: No, I mean, on the x, that’s going to be a recurring item always because I’m talking about the non-recurring sector.

We got some -- we have some discrimination cases from wait for season and what not around the country here and there. And then I think that’s really about it. We’ve got a one lawsuit on an acquisition that we did that’s very minor. We are not spending much money on it and I don’t see any significant risks on that deal. That’s really about it. Of course, we have that telecommunications case, a couple of years ago that pretty high and later as well. But that's all settled. We have got most of that kind of stuff behind us I think. We did change our interest up in October. And with a self insured risk premium on some of our liabilities start to give us more control over cases and help keep our insurance cost down because insurance costs in the industry are deep enough. But I don't see much that all of other costs are pretty much staying pretty steady. Steven Martin - Slater Capital Management: And since you have been doing a whole lot of acquisition, you haven’t had a lot of legal and professional related to those.

Exactly, we’ve done more new stuff in buildings, so there’s been very little legal on those. Steven Martin - Slater Capital Management: And on the slide and maybe I missed it. You talked about the temporarily higher rents at the rich New York City.

Correct. Steven Martin - Slater Capital Management: So when is that and was that, when does it come?

I believe it went into affect June 1st. It might have been July, because I think with June, I think we pay a pro forma. And then starting October, it drop back down to a 100,000. Steven Martin - Slater Capital Management: Okay. I think that’s it, so I appreciate it. Thank you very much.

Yeah, Steven.

Our next question comes from the line of Alex Hardman, a private investor. Please proceed with your question.

I had a question about the New York location out. Previously in 10-Ks, when you used to report you recently announced it was a fixed rate up until like 24 by 40,000 increasing up by 3% a year. What happened there that it got you guys up to 180,000 I guess provoked new deals for the large part in the property?

Yeah, there is the clause in the lease that allowed the landlord to get an offer for someone to build rent controlled housing to buy the property that he could terminate the lease with six months notice. He received an offer. We have that right of first receivable which we exercised, which is how we got into the contract for the $23 million to begin with. We had -- forget how many days of closing. We had certain amount of time to close at which point we -- originally, the owner was going to finance the property for us. But when you finance property in New York City, there is a 2.4% mortgage tax, which cost us another quarter of million dollars. And so the lawyers basically came up with a way to structure it as a lease and continue to lease, so we basically changed the lease over and agreed to lease for $180,000. While we were in those negotiations, we got an offer from a third-party to purchase the air rights for $8 million and it’s only the residential air rights. We still control the commercial air right. We still have the rights to add about 10,000, just under 10,000 feet, I believe we can add. I have to go look at the documents. We can add on to the building still at this point for the commercial space. But we sold the SAR for the residential air rights and we sold those for $8 million, about $200 per square foot.

Is it actually feasible for you guys to actually add onto that little thing with the …

No. Because we are (inaudible) adding on the billing which is why we sold the air rights. We take a risk. If we're close for two consecutive years without operations, we lose the license right. And so therefore it did make sense that we talk some hotel developers, we originally talked about building a hotel there and trying to figure out a way to do without closing the club and most our things at the end of the day when we have somebody coming to buy the air rights from us, we realized that there was a lot of less risk in the selling of air right paying basically 15 for our random building, our five FAR commercial and moving on. We are making $7.5 million a year out of the location so, yeah.

You don't want to lose it?

Exactly.

Then a follow-up on the, I guess, the labor lawsuit out there. I mean in the press you have done a lot of kind of -- once they thought they got a lot of potential, once they saw you follow on lawsuit (inaudible) that and overall…

Well we have changed the way we operated back in February of 2010 and updated our contracts as well at that time. We’ve already had a couple of additional lawsuits in the Dallas market in Texas.

Yeah.

Those lawsuits were basically dismissed and sent to arbitration for our new agreements with our entertainers. And sure from time to time, we'll probably be in arbitration in different markets but it will be within the visuals, I think, instead of an opt-out class. And that's really what we are concerned with staying out of these opt-out class action lawsuit.

Okay. Can you also update, do you think even with these liabilities, other clubs down the road -- or it’s just New York?

Well, I think with the New York class that the judge already ruled the New York class ended I believe October of this year. So that class is done. That class is basically like a closed class I think at this point. I am not 100% familiar with all the ins and outs of it but that's my understanding of it at this time. And you know we're not overly worried about any more lawsuits. Its getting through this one that we are limiting liability to this particular club which we’ve already successfully done, we believe and you know getting to the end of it. Probably it would take another year or two years to get to that point before we know enough about well really liable for or not liable for whether the stake case is the big case. There is motions and briefings on all that right now that are under consideration. And so until those are done, it's really hard to see. Otherwise it's the federal cases and also (inaudible) case and there is 40 sum girls in that case. The other case that have up to 1,900 girls in the case. But we don't know how many will make claims. It's very difficult and we don't even know at this point -- what we don't know or what we would or would know, all that, none of that has really been decided. That will go to jury and jury will have to decide most of those things. So, like I said, we're probably I would get at least a year to know anything from that.

And then my last question is basically I was wondering if you can expand upon I mean in the last couple of months, you have done a lot of convertibles to raise cash and considering the fact basically in terms of these convertibles. You feel a lot with companies that are kind of on the verge of bankruptcy or illiquidity issues and stuff like that whereas you guys don't have those issues. What's the logic and I know you have issues going in to market that getting to upgrading that, why do you do this versus...?

I actually thought our converts were pretty decent. The last one was 9%. So we lowered the interest rates a little bit, convertible almost 20% above market. This is the way planning was done before 2006, 2007, all of our deals in early 2007 were all done that way. While you may see companies like GE that can go out and borrow 3% money, they are not going to a small cap company to borrow money. I mean I think our rates are great. We thought to -- hard money lenders are running at 14% or 16% right now as you have seen, we have actually got one with lowest of money, at 13% with no collateral or a very little collateral. There is not of much liquidity out there as people want everyone to believe, the big banks don't loan to adult clubs.

I understand that. I was just wondering what versus this …

The reason we borrowed the money is we had to close on this New York real estate and we have the construction going on, that's the $4 million project in New York that we did. We did the restaurant projects which we totaled about $5 million investment in and then of course, the Black Orchid acquisition which was very small but still there. And the Jaguars acquisition which we spent $4 million cash on in September plus another million or so in upgrading all those properties and bringing them up to our standards of how they enter into next year.

More of a concern is just using license and cash flow through that versus maybe …

I think which is that point now, we were just -- it was just close. We had a big IRS payment due. So we paid the IRS which some of our cash went out on. And like I said the New York location you have $5 million, $4 million for the Jaguars acquisition last September. If you look over the course of the year, we had a quite a bit of money go out -- some part of some other real estate especially with our acquisitions, the L.A. club and the restaurant. So I think right now at this point, I don't see us doing anymore capital raises in the near future. And we're hoping right now if you look we have stock of above $10. We have about $5 million in convertibles that will convert out that we won't have to pay back. So that would give us a lot more, lot stronger cash flow. We paid off the convertible last year. The first convertible that we did, those convertible were paid off as $7.4 million convertible. All those was paid back, none of them converted. So $7.4 million of our cash went out there. This year we’re at $8.8 million in debt that we’ll be paying off, probably an additional $2 million on the Tootsie's debt as well.

Okay. Appreciate it. Thank you very much. See you back.

Yeah.

(Operator Instructions) Our next question comes from the line of Howard Rosencrans from Value Advisory. Please proceed with your question. Howard Rosencrans - Value Advisory: Hi. Just a couple of follow-ups. I didn't entirely -- I think what you provided, sorry Eric, I think you provided a range of guidance for '14 and...

Well, we'll put a chart on that’s required that gives the range. And I'll tell you where I am there with it. I am at $1.20 on GAAP and I am on $1.70 on the non-GAAP. Let me tell you a reason why such a big difference in there is, when we do the SEC required, chart that you are seeing there, we're not allowed to take into any one time expenses. The one time expenses do not affect the GAAP, I mean the non-GAAP number because they get added back in. However, those one time expenses hit our GAAP number. And so that's why it chose the lower range of the GAAP number and the upper range of the non-GAAP number because I think without any one time expenses, we will be at the upper range of the GAAP numbers as well. However, knowing our history and some of the things that we have out there we can settle a lawsuit and get out of it at the right price. We probably consider doing that, so... Howard Rosencrans - Value Advisory: What sort of legal do you have in your -- are you assuming in your guidance?

Are you talking about legal expenses? Howard Rosencrans - Value Advisory: Yes.

Very similar to what we have this year. I think our legal will stay in this area. Our legal people say in the $2 million to $3 million range. Howard Rosencrans - Value Advisory: I didn’t do the math, hopefully, you guys did in terms of what you can payoff? Is it fair to assume even a little average is 14% dept and I see you got a little 13% debt due in March of ’16, do I have to do -- already to get rid of both ‘14 and ‘13 this year as opposed to being so aggressive…

Well, where we’ll be at with that really depends on what on our stock prices at. If our stock price stays high enough and we convert out, so we don’t have to pay the cash out on the converts then we will more than likely take that cash and use it to pay off the high interest debt. And last of course, we have a big acquisition that comes up or something that we can do. We are not really actively searching for large acquisitions right now. I mean, we won’t find one, when we will find out but we are not out there really caught them, chasing them at this point for this year. I think we have got our growth open for this year, I’d like to see if I can just by at least another $5 million in revenue, which I think we can do out of cash flow or owner financing. Excuse me, I am sorry, and I’d like to see us kind of absorbed and settled this year, build out some of the restaurants, we will build the restaurants out of cash flow right now. We can build the restaurant, take about four months to build, it takes about $1 million or $2 million, couple of hundred thousand a month, $300,000 a month to lead a restaurant. We can get those open and get them going without too much problem right out of our own cash flow. We won't need to raise money through restaurants. Howard Rosencrans - Value Advisory: On the Vivid property in New York that you are opening, when did you start paying -- I am a little confused the $23 million has to do with the current Rick’s property or is that on the Vivid?

Well, the $23 is on the currently Rick’s property and that’s what other people -- that’s the other thing, I would, I should point out. If you look at our interest expense, the interest expense is a pretty much in here running about 6.3% for the year 2013, we bought a lot of that money early in the year, but I thought it came in later, most of it earlier in the year and you had no New York City revenues. So as the New York City club opens we had all that revenue, that as a percentage of revenue is going to go down, so we have already borrowed all that money, we have already spent it all… Howard Rosencrans - Value Advisory: Right.

… but we don’t have any other coming back in yet, so… Howard Rosencrans - Value Advisory: And is that going to start paying -- when did you start paying rent or have you on the…

I believe we start paying rent in February of… Howard Rosencrans - Value Advisory: Okay.

We start paying rent, that rent is raised about $35,000 a month. Howard Rosencrans - Value Advisory: That’s $35,000 a month. And how much do you think you will have in -- it seems like the New York -- the New York property, the Vivid property has gotten off to a little bit of a late start, right?

Well, we really thought we could open in November. We had the steel issues and then we had an issue with the front façade of the building. We had an issue with that. We had to make some changes, some artifact changes, which will -- which took a little bit longer. And then we could probably open, we originally were going to open on December 19th and then we started six days before Christmas, hire new staff. We decided whether our staff going to spend the holidays with their families and push the opening to the first week of January. Howard Rosencrans - Value Advisory: Okay. But that’s hard, right, that’s really going to happen in the first week of January, right?

Yeah. Yeah. Well, the final inspections I believe are on -- for the temporary CEO, I don’t know if its final, but the temporary CEO inspection, basically the license to open, inspection is on the 20th, we moved it to the 20th of this month, so this Friday. Howard Rosencrans - Value Advisory: Okay.

They will be in. So, we have anything major we will have get us in, if we have some minor things, they got to fix, they’ll fix real quick and we still expect to have it, we -- right open well before January definitely. Howard Rosencrans - Value Advisory: And so have you been absorbing start-up expenses associated with that facility and how much are they run?

Not really start up -- this basically rent, of course, the construction, cash-wise, we put out about $3.8 million I think so far that we still owe a couple of hundred thousand more. Howard Rosencrans - Value Advisory: Right. But that’s capitalized. What about your…

It is capitalized but I am talking from the cash basis. From an expense basis the rent, of course, insurance, those types of things are being expense, so record bills, water bills, that types… Howard Rosencrans - Value Advisory: Okay. So there is nothing really?

Probably $50,000 a month would be my guess. Howard Rosencrans - Value Advisory: Okay. And…

In February, so I mean, I want to acknowledge, few hundred thousand bucks, 300… Howard Rosencrans - Value Advisory: Okay. So that includes all the rent $35 a month?

Yes. Exactly. Howard Rosencrans - Value Advisory: Okay. I will second the prior quarters both for staying away from the converts and let’s also get all that…

Yeah. The last convert we basically said look, we were going to do the first convert, the stock price went up in the middle of converts we only raised $2.5 million with (inaudible), so basically what we did we waited, the stock stabilized at a price, we went out and raised the rest of that that original -- that original raise -- at better prices and better interest rates. So that actually worked out okay for us. But, yeah, we are -- I think, at this point, I think, we are pretty much taken on debt, other than what we buy something or to finance, we are -- paying with the cash flow from the business that we purchased. At this point, I think we have got -- like we got growth built in. These numbers are easily achievable for us for ’14 which is a pretty significant growth for us. Now as we convert to the REITs and we -- if we start pulling off the real estate out and pulling that large amount of cash into the company, which will clean up our balance sheet, I will take $30 some million, $38.7 million in real estate debt off of our balance sheet and put about $40 million cash into the company in the conversion of moving that real estate into that REIT and borrowing that cash in, at that point then we will look for a much more aggressive growth and look at for much larger purchase of adult clubs. Howard Rosencrans - Value Advisory: Will be a high class problem, look forward to it.

Exactly. Exactly. Yeah. I love those high class problems myself. So and that’s the real point. Just to get that, the market for some reason at lease, when we started looking at the restaurants and the people started compare the restaurant, we started to get a lot of people calling us, restaurant people calling us, what is all this [shit], what is all this [shit]. And so we started looking real hard, how could we move it off, we thought we could it through public REIT, which I thought was a easiest way to do it, but it’s just not economically viable to do it that way and now we -- like we, as we continue to expand it, it basically let’s us move all the balance sheet -- all the finance and the real estate the all balance sheet finance we don’t demand as a company. We get a management feed back on it. We get some of our rents back and really what I hope to do with the REIT at some point is move other adult club operators, real estate into the REITs as well, where Rick’s would continue to get a management fee off of adult club real estate all around the country, we would help capitalize and monetize other club owners real estate. So they don’t have any way to finance or do anything with their real estate either. And we can interim show them our long-term leases and show them how we do it with Rick’s and do the same thing for other adult clubs. Howard Rosencrans - Value Advisory: Great. Thanks.

You bet.

There are no further questions in the queue. I’d like to hand the call back over to Allan Priaulx for closing comments.

Thanks, Doug, and thank you, Eric. We just want to remind everybody that we do have a Due Diligence event at Rick’s Cabaret this afternoon from 6 to 8 at 50 West 33rd Street. And I’d also like to take a moment just to tell everybody that after 12 years with Rick’s, I am going to retire from Investor Relations and I’ll be turning my duties over to Gary Fishman and Steve Anreder of Anreder & Company. Gary has significance experience in the niche entertainment area. Steve is a former columnist for Barren’s. They are both first class guys and you will enjoy working with them. I will continue to work with Eric, Gary and Steve on a consulting basis for the near future. And I want to take a moment to thank all of our investors, our portfolio managers, the analysts with whom I worked for the past 12 years on your professionalism and of course, stoutness in choosing Rick’s as an investment. Thanks.

Ladies and gentlemen, this does conclude today’s teleconference and webcast. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.