The following discussion should be read in conjunction with our audited consolidated financial statements and related notes thereto included in this quarterly report.

FORWARD LOOKING STATEMENT AND INFORMATION

The Company is including the following cautionary statement in this Form 10-Q to make applicable and take advantage of the safe harbor provision of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Certain statements in this Form 10-Q are forward-looking statements. Words such as "expects," "believes," "anticipates," "may," and "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties are set forth below. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectation, beliefs or projections will result, be achieved, or be accomplished. In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in the view of the Company, could cause material adverse effects on the Company's financial condition and results of operations: the risks and uncertainties relating to our Internet operations, the impact and implementation of the sexually oriented business ordinances in the jurisdictions where our facilities operate, competitive factors, the timing of the openings of other clubs, the availability of acceptable financing to fund corporate expansion efforts, and the dependence on key personnel. The Company has no obligation to update or revise these forward-looking statements to reflect the occurrence of future events or circumstances.

GENERAL

We operate in three businesses in the adult entertainment industry:

1. We own and/or operate upscale adult nightclubs serving primarily businessmen and professionals. Our nightclubs offer live adult entertainment and restaurant and bar operations. Through our subsidiaries, we currently own and/or operate a total of eighteen adult nightclubs that offer live adult entertainment and restaurant and bar operations. Seven of our clubs operate under the name "Rick's Cabaret"; four operate under the name "Club Onyx", upscale venues that welcome all customers but cater especially to urban professionals, businessmen and professional athletes; five clubs operate under the name "XTC Cabaret"; one club that operated as "Encounters" closed in January 2009 and was sold in March 2009, one club operates as "Tootsie's" and one club operates as "Divas Latinas" (formerly an Onyx). Our nightclubs are in Houston, Austin, San Antonio, Dallas and Fort Worth, Texas; Charlotte, North Carolina; Minneapolis, Minnesota; New York, New York; Miami Gardens, Florida; Philadelphia, Pennsylvania and Las Vegas, Nevada. No sexual contact is permitted at any of our locations.

2. We have Internet activities.

a) We currently own two adult Internet membership Web sites at www.CoupleTouch.com and www.xxxpassword.com. We acquire xxxpassword.com site content from wholesalers.

b) We operate an online auction site www.NaughtyBids.com. This site provides our customers with the opportunity to purchase adult products and services in an auction format. We earn revenues by charging fees for each transaction conducted on the automated site.

3. In April 2008, we acquired a media division, including the leading trade magazine serving the multi-billion dollar adult nightclubs industry. As part of the transaction we also acquired two industry trade shows, two other industry trade publications and more than 25 industry websites.

Our nightclub revenues are derived from the sale of liquor, beer, wine, food, merchandise, cover charges, membership fees, independent contractors' fees, commissions from vending and ATM machines, valet parking and other products and services. Our Internet revenues are derived from subscriptions to adult content Internet websites, traffic/referral revenues, and commissions earned on the sale of products and services through Internet auction sites, and other activities. Media revenues include sale of advertising content and revenues from an annual Expo convention. Our fiscal year end is September 30.

For several years, we have greatly reduced our usage of promotional pricing for membership fees for our adult entertainment web sites. This reduced our revenues from these web sites.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts in the financial statements and accompanying notes. Estimates and assumptions are based on historical experience, forecasted future events and various other assumptions that we believe to be reasonable under the circumstances. Estimates and assumptions may vary under different assumptions or conditions. We evaluate our estimates and assumptions on an ongoing basis. We believe the accounting policies below are critical in the portrayal of our financial condition and results of operations.

Accounts and Notes Receivable

Trade accounts receivable for the nightclub operation is primarily comprised of credit card charges, which are generally converted to cash in two to five days after a purchase is made. The media division's accounts receivable is primarily comprised of receivables for advertising sales and Expo registration. The Company's accounts receivable, other is comprised of employee advances and other miscellaneous receivables. The long-term portion of notes receivable are included in other assets in the accompanying consolidated balance sheets. The Company recognizes interest income on notes receivable based on the terms of the agreement and based upon management's evaluation that the notes receivable and interest income will be collected. The Company recognizes allowances for doubtful accounts or notes when, based on management judgment, circumstances indicate that accounts or notes receivable will not be collected.

Inventories

Inventories include alcoholic beverages, food, and Company merchandise. Inventories are carried at the lower of cost, average cost, which approximates actual cost determined on a first-in, first-out ("FIFO") basis, or market.

Property and Equipment

Property and equipment are stated at cost. Provisions for depreciation and amortization are made using straight-line rates over the estimated useful lives of the related assets and the shorter of useful lives or terms of the applicable leases for leasehold improvements. Buildings have estimated useful lives ranging from 31 to 40 years. Furniture, equipment and leasehold improvements have estimated useful lives between five and ten years. Expenditures for major renewals and betterments that extend the useful lives are capitalized. Expenditures for normal maintenance and repairs are expensed as incurred. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are charged or credited in the accompanying consolidated statement of income of the respective period.

Goodwill and Intangible Assets

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangibles Assets, which addresses the accounting for goodwill and other intangible assets. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, but reviewed on an annual basis for impairment. All of the Company's goodwill and intangible assets relate to the nightclub segment, except for $567,000 related to the media segment. Definite lived intangible assets are amortized on a straight-line basis over their estimated lives. Fully amortized assets are written-off against accumulated amortization.

Impairment of Long-Lived Assets

The Company reviews property and equipment and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of its carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment and intangible assets with definite lives are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value. Assets are grouped at the lowest level for which there are identifiable cash flows when assessing impairment. Cash flows for our club assets are identified at the individual club level. The Company's annual evaluation was performed as of September 30, 2008, based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. The Company determined that there is no goodwill impairment at September 30, 2008.

Revenue Recognition

The Company recognizes revenue from the sale of alcoholic beverages, food and merchandise, other revenues and services at the point-of-sale upon receipt of cash, check, or credit card charge.

The Company recognizes revenue for VIP memberships in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, by deferring membership revenue and recognizing over the estimated membership usage period. Management estimates that the weighted average useful lives for memberships are 12 and 24 months for annual and lifetime memberships, respectively. The Company does not track membership usage by type of membership, however it believes these lives are appropriate and conservative, based on management's knowledge of its client base and membership usage at the clubs.

The Company recognizes Internet revenue from monthly subscriptions to its online entertainment sites when notification of a new or existing subscription and its related fee are received from the third party hosting company or from the credit card company, usually two to three days after the transaction has occurred. The monthly fee is not refundable. The Company recognizes Internet auction revenue when payment is received from the credit card as revenues are not deemed estimable nor collection deemed probable prior to that point.

Revenues from the sale of magazines and advertising content are recognized when the issue is published and shipped. Revenues and external expenses related to the Company's annual Expo convention are recognized upon the completion of the convention in August.

Sales and Liquor Taxes

The Company recognizes sales and liquor taxes paid as revenues and an equal expense in accordance with EITF 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement. Total sales and liquor taxes aggregated $2,147,290 and $1,680,187 for the six months ended March 31, 2009 and 2008, respectively.

Advertising and Marketing

Advertising and marketing expenses are primarily comprised of costs related to public advertisements and giveaways, which are used for promotional purposes. Advertising and marketing expenses are expensed as incurred and are included in operating expenses in the accompanying consolidated statements of income.

Income Taxes

Deferred income taxes are determined using the liability method in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company has adopted FIN 48 as of October 1, 2007, as required. The adoption of FIN 48 has had no effect on the Company's consolidated financial position, results of operations or cash flows. There are no unrecognized tax benefits to disclose in the notes to the consolidated financial statements.

Put Options

In certain situations, the Company issues restricted common shares as partial consideration for acquisitions of certain businesses or assets. Pursuant to the terms and conditions of the governing acquisition agreements, the holder of such shares has the right, but not the obligation, to put a fixed number of the shares on a monthly basis back to the Company at a fixed price per share. The Company may elect during any given month to either buy the monthly shares or, if management elects not to do so, the holder can sell the monthly shares in the open market, and any deficiency between the amount which the holder receives from the sale of the monthly shares and the value of shares will be paid by the Company. The Company has accounted for these shares in accordance with the guidance established by EITF Topic D-98 as a reclassification of the value of the shares from permanent to temporary equity. As the shares become due, the Company transfers the value of the shares back to permanent equity, less any amount paid to the holder.

Stock Options

Effective October 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, Share-Based Payments, using the modified prospective application method.

The compensation cost recognized for the six months ended March 31, 2009 and 2008 was $40,088 and $78,540, respectively. There were no stock options exercises for the six months ended March 31, 2009.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2008

For the three months ended March 31, 2009, we had consolidated total revenues of $18,360,361 compared to consolidated total revenues of $15,093,032 for the three months ended March 31, 2008, an increase of $3,267,329 or 21.6%. The increase in total revenues was primarily attributable to the increase in revenues generated by our new media division and new clubs in Dallas, Texas (2), Philadelphia, Pennsylvania, and Las Vegas, Nevada, in the amount of $4 million. Total revenues for same-location-same-period of club continuing operations decreased 6.9% to $13,883,987 for the three months ended March 31, 2009 from $14,905,545 for the same period ended March 31, 2008.

Income taxes, as a percentage of income before taxes was 36.3% and 30.3% for the quarters ended March 31, 2009 and 2008, respectively. The increase in 2009 is due to the lack of significant permanent difference deductions in 2009 compared to 2008, principally related to exercised stock options and also to the increased significance of state taxes in 2009.

The decrease in net income was primarily due to the increase in expenses detailed above and losses in our new operations in Las Vegas. Income before income taxes (exclusive of corporate overhead) for same-location-same-period of club continuing operations decreased to $3,796,594 for the three months ended March 31, 2009 from $5,505,632 for same period ended March 31, 2008, or by 31.0%.

Following is a comparison of the Company's income statement for the quarters ended March 31, 2009 and 2008 with percentages compared to total revenue:

                                               2009             %             2008             %

Sales of alcoholic beverages               $  6,955,904          37.9 %   $  5,503,529          36.5 %
Sales of food and merchandise                 1,566,828           8.5 %      1,296,197           8.6 %
Service Revenues                              8,758,735          47.7 %      7,615,581          50.5 %
Internet Revenues                               164,631           0.9 %        172,712           1.1 %
Media                                           285,331           1.6 %              -           0.0 %
Other                                           628,932           3.4 %        505,013           3.3 %
  Total Revenues                             18,360,361         100.0 %     15,093,032         100.0 %

Cost of Goods Sold                            2,216,457          12.1 %      1,543,941          10.2 %
Salaries & Wages                              3,986,476          21.7 %      3,127,219          20.7 %
Stock Base Compensation                          20,044           0.1 %         39,270           0.3 %

Taxes and permits                             2,367,248          12.9 %      1,900,759          12.6 %
Credit card fees                                446,947           2.4 %        250,565           1.7 %
Rent                                            845,823           4.6 %        516,677           3.4 %
Legal & professional                            810,501           4.4 %        337,991           2.2 %
Advertising and marketing                     1,677,196           9.1 %        471,874           3.1 %
Insurance                                       265,906           1.4 %        161,365           1.1 %
Utilities                                       371,126           2.0 %        265,244           1.8 %
Depreciation and amortization                   814,279           4.4 %        578,281           3.8 %
Other                                         1,295,474           7.1 %      1,171,567           7.8 %

Total operating expenses                     15,117,477          82.3 %     10,364,753          68.7 %
  Income from continuing operations           3,242,884          17.7 %      4,728,279          31.3 %

Interest income                                   1,659           0.0 %         26,403           0.2 %
Interest expense                               (808,831 )        -4.4 %       (658,673 )        -4.4 %
Minority interests                              (73,500 )        -0.4 %              -           0.0 %
Income from continuing operations before
income taxes                               $  2,362,212          12.9 %   $  4,096,009          27.1 %

Following is an explanation of significant variances in the above amounts.

Other revenues include ATM commissions earned, video games and other vending and certain promotion fees charged to our entertainers. The Company recognizes revenue from other revenues and services at the point-of-sale upon receipt of cash, check, or credit card charge.

Cost of goods sold includes cost of alcoholic and non-alcoholic beverages, food, cigars and cigarettes, merchandise, media printing/binding, media postage and internet traffic purchases and webmaster payouts. The increase in the cost of goods sold as a percentage of revenues for the three months ended March 31, 2009 was due primarily to two factors: (1) the addition of several new alcohol-selling clubs and their related cost of goods which is significantly higher as a percentage of revenues compared to the cost of sales of the XTC clubs which are BYOB, and (2) the addition of the media division which has a higher cost of sales than club operations. The cost of goods sold for the club operations for the three months ended March 31, 2009 was 12.4% compared to 10.3% for the three months ended March 31, 2008. The cost of goods sold from our internet operations for the three months ended March 31, 2009 was 1.6% compared to 1.5% for the three months ended March 31, 2008. The cost of goods sold from our media operations for the three months ended March 31, 2009 was 28.6%. The cost of goods sold for same-location-same-period of club continuing operations for the three months ended March 31, 2009 was 12.3%, compared to 10.3% for the same period ended March 31, 2008.

The increase in payroll and related costs, stated as "Salaries & Wages" above, was primarily due to the addition of the new clubs. The increase in percentage to total revenues is principally due to the new clubs in Dallas and Philadelphia which had significantly higher manager payrolls and also the addition of a general manager and a manager in Miami and the change to salaried personnel for maintenance and landscaping in Miami from an outsourced company. Payroll for same-location-same-period of club continuing operations decreased to $2,530,276 for the three months ended March 31, 2009 from $2,607,026 for the same period ended March 31, 2008. Management currently believes that its labor and management staff levels are appropriate.

Taxes and permits consists principally of payroll taxes, property taxes, sales and alcohol taxes, licenses and permits and the patron tax in our nightclubs in Texas.

The increase in the percentage of advertising and marketing to total revenue is principally due to the addition of our new club in Las Vegas and its marketing campaign.

The increase in the percentage to revenues of credit card fees relates to increased chargebacks from certain credit card companies in 2009.

Rent expense increased principally due to significant new leases in Las Vegas and Philadelphia.

The increase in legal and professional expense is principally due to contesting of labor lawsuits in Minnesota and New York.

The increase in interest expense was attributable to our obtaining new debt during the year ended September 30, 2008 to finance the purchase of the new clubs and related real estate. As of March 31, 2009, the balance of long-term debt was $32,022,198 compared to $24,737,135 a year earlier.

The significant change in minority interests is due to the purchase, effective March 31, 2008, of the remaining 49% of our Austin Rick's Cabaret location and the purchase, effective the same day, of 51% of the partnership owning the real estate for our Philadelphia location.

Losses, before income taxes, at clubs losing money during the quarter ended March 31, 2009 exceeded $900,000, compared to $1.9 million for the quarter ended December 31, 2008. The significant losing club was Rick's Cabaret in Las Vegas. During the quarter ended December 31, 2008, the significant losing clubs included Rick's in Las Vegas, Dallas, Philadelphia and Club Onyx in Dallas. Subsequent to December 31, 2008, the Company took the following steps to remedy losses in certain clubs:

The Rick's Cabaret in Dallas lost $323,000 before income taxes during the quarter ended December 31, 2008. In January 2009, we converted the location to XTC Cabaret Dallas. Early results are very encouraging. This location, as XTC Dallas, made a $46,000 profit for the quarter ended March 31, 2009 and we expect ongoing profits in this location although there can be no assurance.

The Rick's Cabaret in Austin lost $240,000 before income taxes during the quarter ended December 31, 2008. This location is currently scheduled to close its sale and is included in discontinued operations in the accompanying consolidated statements of income.

The Rick's Cabaret in Philadelphia lost $276,000 before income taxes during the quarter ended December 31, 2008. We have converted the location to Club Onyx Philadelphia in January 2009 and the club made a profit of $216,000 for the quarter ended March 31, 2009. We expect continued profitability in 2009 going forward although there can be no assurance.

Club Onyx Dallas did not have a liquor license during the quarter ended December 31, 2008 until December 5, 2008 and lost $188,000 before income taxes during the quarter. This location made a profit of $66,000 for the quarter ended March 31, 2009, and we expect ongoing profits in this location, of which there can be no assurance.

Rick's Cabaret Las Vegas lost approximately $633,000 before income taxes for the quarter ended March 31, 2009. Due to the economy in Las Vegas, we expect to continue to lose money at this location until the Las Vegas economy improves, but we have made expense reductions and modifications to our marketing campaign in this location subsequent to March 31, 2009 and we have seen a large improvement in operations in March and April.

The accompanying financial statements reflect the following as discontinued operations as of and for the period ended March 31, 2009.

The Company sold one of its nightclubs, Encounters in San Antonio, on March 1, 2009 for $40,000, including $5,000 in cash and a $35,000 note payable monthly for one year. The Company recognized an impairment of $221,563 for this club during the quarter ended December 31, 2008. The actual loss at date of sale was $226,175.

The Company also has put its Rick's Cabaret nightclub in Austin, Texas up for sale and currently has a contract for sale of the club for $2,000,000, including $700,000 in cash and a ten-year $1.3 million note. The sale has not closed as of the filing of this report. The Company recognized an impairment of the net assets of the club of $823,090 as of March 31, 2009, recognized in the consolidated statement of income as loss from sale of discontinued operations.

Following is summarized information regarding these discontinued operations:

                                                  Three Months Ended             Six Months Ended
                                                       March 31,                     March 31,
                                                  2009           2008           2009           2008
Rick's Austin:
Loss from discontinued operations              $ (177,964 )   $ (336,666 )   $ (426,902 )   $ (699,751 )
Loss on sale of discontinued operations        $ (823,090 )   $        -     $ (823,090 )   $        -
. . .