Allan Priaulx - Investor Relations Eric S. Langan - President, Chief Executive Officer

Chris Lage - Daily Trends Joe Giamichael - Rodman & Renshaw LLC Dennis McAlpine - McAlpine Associates

Thanks, Jen. Before we begin, I would like to remind you of our Safe Harbor statement.

In this conference call, you may hear or see forward-looking statements that involve a number of risks and uncertainties that could cause the company’s actual results to differ materially from those indicated in this call, including the risks and uncertainties associated with operating and managing an adult business, the business climates in New York City and elsewhere, the success or lack thereof in launching and building the company’s businesses in New York and elsewhere, the company’s ability to identify and secure suitable locations for new nightclubs on acceptable terms, open the anticipated number of new nightclubs on time and within budget, achieve anticipated rates of same-store sales, hire and train additional nightclub personnel and integrate new nightclubs into its operations. Also, unexpected increases in the cost of sales or employees, pre-opening or other expenses, the economic conditions in the new markets into which the company expands and possible uncertainties in the customer base in these areas.

Also, fluctuations in quarterly operating results, the impact of any negative publicity or public attitudes, competitive pressure from other national or regional nightclub chains, risks and uncertainties relevant to the operational and financial results of our websites, conditions relevant to real estate transactions and numerous other factors, such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. Rick's has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances and for information, please go to our website, www.ricks.com.

Now it is my pleasure to introduced Eric Langan, our President and CEO, who will discuss our first quarter results and other topics. Eric.

Thank you, Allan. Good afternoon.

I want to begin today with an overview of today’s presentation. We will be reviewing our first quarter ’07 results, drivers of our sales increases, effects of openings on our income, our acquisition strategy update, talking about Montgomery Street Research that we hired as a consultant, and review guidance for ’07 and ’08 fiscal years.

Starting with our first quarter 2007 highlights, revenue increased to $7 million, compared to $5.8 million in the first quarter of ’06, for a total revenue increase of 21.6%. Same club same period sales reached $6.1 million, up nearly 9.72% from 2006.

Net income of $353,000, or $0.07 per basic share, versus $525,396 in the previous year. Income was affected by costs associated with club openings and relaunches, estimated to be in excess of about $400,000.

Thus, if you do the math, you will realize our earnings excluding these club openings and relaunchings, were up approximately 40%. First quarter 2007 driving factors include: alcoholic beverage sales up 19.6% to $2.6 million; and service revenues up 29% to $3.35 million.

Our Rick's Cabaret in New York was our standout performer. First quarter revenues increased 63% year over year, operating profits increased 1250%, and the store unit contribution was in excess of 36% of total revenues.

We think the best is yet to come for this club. Several competitors in the New York market appear to be weakening.

Some of their best talent is now coming to work and applying at Rick’s location. We are very optimistic about the growth of our New York City club.

Our rationale for our Club Onyx moves: Rick's in Charlotte and Rick’s in South Houston were closed for several weeks during this quarter and relaunched under our Club Onyx concept. Closing of the existing clubs obviously cost us money in this quarter but we believe these clubs will do much better under our Club Onyx format.

The Charlotte club, for example, opened immediately with record sales and the strength has continued. With San Antonio and Houston, we now have four Club Onyx locations.

We believe Club Onyx fills a major unmet market niche. We are building it as a separate brand and one that we believe we can roll out in other cities around the United States.

Our new locations in this quarter: Charlotte opened extremely strong and continues to build as Club Onyx. Austin, South Houston, and our San Antonio are in early ramp-up stages but the business is building on a continuing basis.

When a new club opens or when an older club is repositioned, it normally takes a little time to build up the business, except of course in our Charlotte location. New customers have to know we are there and have to experience the new format for themselves.

We also have to spend additional money in advertising and hire new personnel to suit this format. Once these clubs have gone through their startup period, we expect them to continue to ramp up.

Thus far, we are comfortable with the progress being made in each of our new clubs. We have a planned acquisition in the Dallas-Fort Worth metropolitan area.

This acquisition is a profitable and mature operation and should be immediately accretive to our earnings. To give you a few statistics for our quarter, our cash flow from operations grew strongly to $712,000 versus $427,000 in the previous year.

Our total assets at the end of December were $33.3 million. Cash was $1.45 million versus $561,000 on December 31, 2005.

We also have about $14 million in current debt. We have entered into an agreement with Montgomery Street Research to help us explore acquisitions and capital market opportunities.

Montgomery Street Research is skilled as a financial consultant to entertainment companies. Getting to our acquisition strategy, we believe our industry is highly fragmented.

There are about 3,000 clubs in the United States today. We own only 13.

We do not believe anyone has more than about a 2% market share. We believe that we are in a unique position to help consolidate the industry.

We are publicly traded, giving us access to capital, but perhaps equally important, we have developed two highly-recognized brands. Rick's Cabaret is one of the best known brands in the industry and Club Onyx is an emerging brand in a highly important market niche.

With these two brands, we believe we are in a unique position to expand and make acquisitions. Our acquisition strategy is to acquire profitable clubs in major metropolitan areas.

We are looking for high business traffic, convention locations and tourism. We want to acquire clubs that can be immediately accretive and do not require the ramp-up period as start-ups.

We plan to pay three to six times net earnings, depending on the growth opportunities of individual clubs and we intend to use a combination of cash and stock in making these purchases. Our immediate goals are: to keep Rick's Cabaret in New York City on track to optimum performance in 2007; we are going to continue to operate and grow our new clubs; grow our company through selective acquisitions, and we also expect to build our management team.

We are in discussion with several key industry executives who we believe will help us move our company to the next level and continue to start working with Montgomery Street Research on opportunities in capital markets. In our guidance update for 2007, the DFW club should add $4 million to revenue and $800,000 in net income for the first full year after acquisition closes.

Original guidance revenues of $32 million to $34 million, with net income of $2.6 million to $2.8 million, with earnings per share of $0.48. Management feels very comfortable at this time with the high-end of the revenues and earnings per share will exceed current guidance.

Further acquisitions could increase guidance further. Moving on to an outlook for 2008, based on our current business trends and projected acquisitions of $15 million in revenue, the company is comfortable with the following projections for the year ending September, 2008: expected revenues of $48 million to $50 million, with net income of $6 million, or earnings per share on a fully taxed basis of approximately $0.85.

These projections do not include any significant improvement in operations of our current clubs. In addition, they assume that we will only acquire clubs doing $15 million in annual revenue in the next seven quarters.

Obviously, if the capital market permits, we have the capacity for a more aggressive acquisition strategy. I would like to invite everyone out tonight to our New York City club for our Due Diligence Ball at 50 West 33rd in New York.

We have free admission for industry people, our shareholders. Just mention the conference call.

We will have $7 drinks until 9:00 p.m. Before we begin the question-and-answer session, I want to say that we are not going to be taking any questions regarding Anna Nicole Smith.

As many of you may know, Anna worked as a dancer at the original Rick’s location in Houston. She met Howard Marshall there in our VIP room at Rick’s and we are very sad to lose a member of the Rick’s family, but the entertainers of all of our clubs will blow her a kiss in a tribute tomorrow night at midnight, a tribute to her life on Valentine’s Day.

That will end the presentation. If we have some questions, we can get started on that.

I want to be the first to congratulate you guys. When I analyzed the company and bought shares, you guys were at $3.

You showcased the light upon me. Congratulations on all your success.

Everything is going as you planned and I think the best is yet to come.

Thank you very much. That is what we think as well.

My question, Eric, is I am still trying to figure this out. Say there is a slowdown in the economy; do strip clubs in general do better when the economy goes south, or is it one of those things that have a correlation with how the economy is doing?

Well, really we have to adjust. It really depends on how quickly you adjust to the slowdowns.

Our business changes a little bit in good times and bad times. Obviously when things are bad, people tend to drink more but we lose some of our higher-end customers because they are under hard times, they are out working trying to return their business back to the good times.

But we pick up a huge volume influx of just standard people through the door. So while our per ticket goes down during the slower times, the number of tickets go up.

So as long as we adjust to that, and we have to run specials. People look for specials in hard times, so as long as you are running the proper drink specials and happy hours and the kinds of things that it takes to motivate those, it is basically just a matter of us noticing the change in the economy and people’s way of thinking and adapting to it.

We have gotten pretty good at it. Most of the time, our slowdowns are a few weeks and then we have adapted and adjusted and run right along with it.

I have one more question. I know in specific with the New York club, you guys are trying to reach a higher-end clientele.

What type of distinctive mechanisms do you have that can’t be replicated in the strip club industry, in the sense that what are you guys doing to get a higher-end customer that is different than other competitors?

Well, unfortunately everybody can do what we do if they were to get out there and do it properly. It is all about customer service and customer service is about people.

We try to hire the proper staff and train them and basically keep them happy. That is one of the things I think Rick’s does better than any of our competitors, is we are able to bring our employees in and sell them on our entire concept.

That concept is customer service.

Excellent. Thank you so much, Eric, and best wishes moving forward.

Good afternoon, Eric. Congratulations on the quarter and recent performance in stock.

You talked about acquiring $15 million in revenues. Could you just give us some idea of what the typical net margins are of the clubs that you are looking at?

Basically what I am trying to get to is what is that $15 million in revenue likely to cost?

Basically what we are looking at is somewhere between three and six times net earnings. So if you take $15 million, if you did the whole $15 million at six times, we would be putting about $2.5 million net to the bottom line.

Got it. And then also, with your currency now, do you have any intention to deleverage?

If so, what do you think is an appropriate capital structure?

We are exploring that with Montgomery Street Research right now on what we think some of our best moves are. Obviously we have just recently hired them.

We are talking about all of our options right now and we will probably be exploring those in more detail over the next few weeks.

Got it. Congratulations on the quarter.

Thank you, and good afternoon. I noticed in the first quarter there was a big jump in the alcohol revenue versus food and merchandise, but it seemed to be in line with the increase in service revenue.

Is there a reason behind this or was that planned to happen? How do you see that going forward?

Then, would you also talk about your experience at Club Onyx in Charlotte as far as turning that around and what that has done for that operation?

Certainly. We generally see in the holidays a big increase in alcoholic beverages due to the fact that you have a lot of parties and a lot of champagne goes out, which in turn increases our service revenues from the number of entertainers -- we end up having more entertainers working and we have more dance dollars sold, which increases our service revenue.

That is why you see the big increase in those. You also see that in -- we have added more Rick’s locations versus our XTC locations, which do not sell alcoholic beverages, so you will see a bigger percentage increase in our alcoholic beverage and service revenues from those locations as well.

And the Club Onyx?

And the Club Onyx in Charlotte, you know, we were very lucky down there. There is a lot of competition in the Rick’s brand market.

However, in the Club Onyx, there was barely any competition whatsoever. We were able to get both of the hip-hop radio stations to do some fantastic advertising promotions for us and got some really good rates, and the market was just very, very hungry for that type of entertainment.

We were very fortunate in that. We had that club for sale and had thought about selling that location and we started studying some of the demographics and went down there, took a couple of our Club Onyx people to the Charlotte area and they decided immediately that they thought it would be a success if we converted it, so we decided to give it a try.

You commented that somebody had, you thought had a 2% share. That would be about 60 locations.

Can you say who that is?

Well, it is basically the Déjà Vu chain was probably the largest chain. They are privately held.

It is Déjà Vu and they own the Hustler clubs as well. They have I think about 85 locations but a lot of their locations are rather small locations.

I figure it is probably about 2% of the total market.

Thank you.

Everybody is quiet today.

I guess we will thank everyone for calling and hopefully we will see a bunch of you at our Due Diligence Ball tonight. I know we had a lot of RSVPs this time.

Thank you very much for calling in and see you in about three months.